It appears Nigerians are in for good times in the new year, as the price of bags of local and foreign rice, onions, pepper, tomatoes, amongst others recorded a significant drop in price.

This is according to the latest market survey, carried out by Nairalytics Research – the research arm of Nairametrics.

The survey revealed that the price of a 50kg bag of locally produced rice dipped by 6.4% from an average of N25,375 recorded in December to an average of N23,750 while a bag of foreign rice of the same size now sells for an average of N24,500 as against an initial average of N26,125.

READ: Quality of local rice improves as food prices drop across major markets 

Also, the price of a bag of dry onions dropped by 77.5% to sell for an average of N21,500 compared to an initial average of N95,500 while the price of new onions crashed by 74.6% to sell for an average of 16,500.

This report contains information on items that witnessed price increase, price decrease, as well as information on special markets and insights.

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Items that witnessed price increase

• A big bag of melon that was sold for an average of N43,500 in December now sells for an average of N45,000. This represents an increase of 3.45% in three weeks.
• A nylon of crayfish now sells for an average of N14,250, representing an increase of 9.6% compared to an initial average of N13,000.
• The price of a big tuber of yam spiked by 31.2% to sell for an average of N1,000 as against an initial average of N763.
• Also, a medium-sized tuber of yam now sells for an average of N588, indicating an increase of 11.9% compared to an initial average of N525.
• A big basket of sweet potatoes that was sold for an initial average of N5,500, witnessed an increase of 9.1% to sell for an average of N6,000.
• The price of a small-sized basket increased by 3.6% to sell for an average of N727 from an initial average of N700.
• Also, a big basket of Irish potatoes now sells for an average of 25,000 as against an initial average of N20,000. This represents an increase of 25% in three weeks.

READ: FG warns local rice dealers to desist from price hike

Items that witnessed price decrease

• A big basket of round shaped tomatoes that was sold for an average of N15,000 in December, now sells for an average of N6,500. This represents a price decrease of 56.7% in three weeks.
• Also, the price of a medium-sized basket of round shaped tomatoes reduced by 64.7% to sell for an average of N3,000 as against an initial average of N8,500.
• A big bag of pepper now sells for an average of N7,750. This is 61.3% lower than an average of N20,000 recorded in December while a medium-sized bag currently sells for an average of N3,750 as opposed to an initial average of N10,000.
• A 50kg bag of brown beans currently sells for an average of N30,000, representing a 27.7% decline in price compared to an initial average of N41,500.
• The price of a 10kg bag of Mama Gold rice dipped by 8.3% to sell for an average of N4,400 compared to an initial average of N4,800.
• Also, a 50kg bag of Royal Stallion rice that was initially sold for an average of N26,125 now sells for an average of N24,500 while Mama Gold rice of the same size sells for an average of N24,875 as against an initial average of 26,125.
• The price of a carton of full chicken recorded a marginal decrease of 0.29% to sell for an average of N14,125 compared to an initial average of N14,167.
• A big bag of Bush mango seeds (Ogbono) that was sold for an average of N115,000 during Christmas festivity, now sells for an average of N105,000. This represents a price decrease of 8.7%.

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Items that maintained initial prices

• A crate of eggs continues to sell for an average of N1,200, the same as recorded in December.
• A big bag of yellow maize is still sold for an average of N20,167, while a bag of white maize costs an average of N20,000.
• A bag of yellow maize sells for an average of N23,333, the same as recorded in December, while white maize of the same size still sells for an average of N23,167.
• A 50kg bag of Honey well and Mama Gold flour sells for N13,950 and N13,850 respectively, while a bag of Dangote flour sells for an average of N13,750.
• Horse fish (Kote) and Titus fish still sell for an average of N613 and 638 respectively across markets in Lagos.
• A 50kg bag of garri (Ijebu) still sells for an average of N14,375, while white and yellow garri sell for an average of N10,750 and N11,125 respectively.
• Amongst the list of food items that maintained their initial prices include: noodles, beverages, cocoa drinks, sugar, water, and juice.
• A 12.5kg cylinder of cooking gas is filled for an average of N3,975, while a 5kg cylinder is filled for an average of N1,750.

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Special markets/items

• Several customers were sighted at Mile-12 market negotiating and transacting with traders at different units of the market as the prices of most food items recorded a significant decline in price compared to the just-concluded year.
• In an interview with a tomato seller at Mushin market, Mr. Bala, explained that the decline in the price of tomatoes is due to seasonal fluctuations and increased supply of the food item.
• He stated that there has been a huge amount of harvest during this period, which has caused an increased supply of tomatoes coming from the north, and as a result driving the price of the commodity downwards. He however mentioned that oval-shaped tomatoes are not currently in the market, only round-shaped tomatoes were harvested and supplied to the market.
• The price of foreign rice has continued to witness a significant decrease in the past four weeks, largely due to the reopening of some land borders across the country. Also, the price of locally produced rice trickled down last week due to the new influx of foreign rice.
• According to our correspondent at Daleko market, Mrs. Oladayo, she explained that foreign-made rice is of two types for each of the brands, long and short. A 50kg of the long grain of rice sells for an average of N24,000 in the market, while the bag of short grains sells for an average of N24,000.
• Although, a 50kg bag of Big Bull rice sells for an of N24,000 some Nigerian made rice are now selling for as low as N18,000 and N17,000. She however warned that some of these brands are quite stony. For example, Zainab rice sells for an average of N17,000 at Daleko market.

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Market insights

• In an interactive session with an Onion seller at Mile-12 market, it was revealed that the reason for the significant nosedive in the price of onions was due to bountiful harvest towards the end of December.
• According to Muhammed, he said this is a period for onion harvest and it is only normal for the price to decline, although it seemed like a significant decline due to the irregular hike witnessed in the price of onions last year as a result of some string of events, such as insecurity, lack of harvest, etc.
• He further mentioned that the reduction in the price of onions is a very positive development for the year, considering the hardship experienced by many Nigerians during the past year.
• “We are happy that the price of onions and other food items have dropped in recent times and we hope it continues this way, because the lesser the price, the more customers are likely to buy,” He added.
• In a bid to understand the cause of the increase in the price of potatoes, Mr. Audu explained to Nairalytics that the price of potatoes increased due to the effect of seasonal fluctuations.

About Nairametrics Food Price Survey

Nairametrics Food Price Watch is a bi-weekly Household Market Survey that covers the prices of major food items in Nigeria, with emphasis on five major markets in Lagos – Mushin market, Daleko market, Oyingbo market, Idi-Oro market, and Mile 12 market.

The Central Bank of Nigeria (CBN) backstopped a total of N2.8 trillion in support loans to the Federal Government in 2020. This follows the FG’s failure to meet its revenue targets due to the impact of the fall in oil prices and covid-19 pandemic.

The support came in the form of Ways and Means, a provision in the CBN act that allows the government to borrow from the Apex Bank. Provisions in the act cap monetary financing of fiscal deficits at 5% of the prior year’s revenues.

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This information was made known by the Minister for Finance Zainab Ahmed during a public presentation of the 2021 FGN Approved Budget – Breakdown & Highlights which was done via Zoom, an online platform for virtual meetings.

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According to the information contained in the report, the central bank provided financial support to the tune of N2.8 trillion which the government used to fund its budget expenditure. In the breakdown seen by Nairametrics, out of the 2020 budget deficit of N6.1 trillion, N2 trillion was sourced from domestic borrowing and another N1.2 trillion from foreign borrowing. The rest was via Ways and Means.

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Breakdown of the data

In her presentation, the minister said out of the N5.3 trillion in budgeted revenue, only N3.9 trillion was generated as actual, resulting in a 27% revenue shortfall for the year.

• However, in terms of expenditure, while N9.97 trillion was appropriated,  N10.08 trillion (representing 101%) was spent during the year.
• The shortfall in revenues and increased spending resulted in an actual deficit spending of N6.1 trillion as against N4.6 trillion budgeted during the year
• Nigeria also increased its debt service from N2.9 trillion to N3.2 trillion. Interest on Ways and Means totaling N912.5 billion contributed significantly to the cost.

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CBN financing

The government’s Ways and Means financing was brought to public view in 2016 after the former CBN Government Sanusi Lamido Sanusi accused the government of contravening the CBN Act by borrowing more than the required 5% of prior year revenues. Nairametrics dimensioned this matter in a 2016 article.

• At N2.8 trillion, the CBN basically lent the government 52.8% of its current year revenues or 62.2% of 2019 revenues of N4.5 trillion.
• This appears to violate the CBN Act which states that the outstanding amount should not exceed 5% of prior years’ actual revenue.
• The provision also requires that the loans are repaid at the end of the year or else the CBN will no longer be able to lend to the government in the following year.
• It is unclear if the loans have been repaid or will be repaid prior to the implementation of the 2021 budget.

READ: CBN introduces “Special Bills” as part of efforts to control money supply in the economy

The year 2020 was an exceptional year globally due to the Covid-19 pandemic and expectedly impacted government revenues negatively due to the lockdown and the fall in oil prices. Without the central bank backstopping these loans, it might have been practically impossible for the government to fund its expenditure programs for 2020.

The aviation sector suffered setbacks due to the emergence of the COVID-19 pandemic in 2020, as the lockdown effected by many countries led to travel restrictions, reduced revenue and mass loss of jobs.

In the case of Nigeria, operators in the sector felt the impact of the pandemic more than their counterparts, as ‘old illness’ suffered by the airlines was exacerbated by the pandemic and left the operators writhing in pains.

READ: COVID-19: Over 70% of jobs lost in aviation, tourism industries in 2020 – AfDB

For the sector to survive in 2021 – in the heat of the second wave of the pandemic, stakeholders shared their expectations and factors that must be addressed by the federal government to aid the rebound of the sector.

They listed stable exchange rate, reduction of cost of operations, waivers on Customs tariffs for aircraft and spares and cost of aircraft insurance, a reversal of 25% remittance of earnings, amongst others.

READ: Nigeria owes foreign airlines $53 million as proceeds from ticket sales – IATA

Unstable exchange rate

In an interview with Nairametrics, the Managing Director, Aero Mainstream Cargo Services, Ajibade Adewale, explained that the unstable exchange rate, especially for aviation stakeholders, has been a clog in the wheel of operations of the airlines, and most of them cannot afford to inflate their charges in line with the unstable rate.

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He said,

“Operations of the airlines are largely dollar-denominated. Operations like aircraft purchase plus maintenance and training of staff amongst others can only be done in dollars. The only thing they do in local currency would be salaries. 

“Either airlines are allowed to access stable rates or the federal government creates an enabling environment for aircrafts maintenance or repairs here.

READ: Nigeria @ 60: The Aviation sector and its travails

“The rubber industry should be revived for investors to set up tyre manufacturing factories in Nigeria, in order to stop importing aircrafts tyres from other parts of the world. Most of the aircraft tyres are manufactured and imported from the United Kingdom (Dunlop), France (Michelin), United States of America (Goodyear), and Bridgestone (Japan).”

He insisted that if enabling environment is created by the government, some of these companies will return to Nigeria and this will reduce cost of maintenance for the airlines.

READ: COVID-19: Travel agencies beg FG for interest-free loans

Lack of skills to execute right policies

On creating an enabling environment, especially for maintenance factory, Capt. David Olubadewo, Managing Director, Starburst Aviation Limited and a Nigerian based in UK, explained that aviation in Nigeria is a very difficult business because the environment is unfriendly.

He said,

“Aside from the role of the government, the industry has always been given a bad name in that light. It is not that we don’t have the people to fix it, but there are different aspects that have been compounded over the years. That is why we are where we are today.

READ: Nigeria generates N424.71 billion VAT in Q3 2020

“We have lots of very qualified people, there are lots of engineers in the United Kingdom and the United States who are Nigerians. We have people that are overqualified, but we lack the skills to execute the right policies to grow the sector.”

Cheaper loans

Olubadewo explained that most of the airlines and other industry stakeholders could not access cheaper loans because banks believe that the sector is too difficult to invest in.

“But that is wrong. It is not different from other sectors. We are all in it to make profit at the end of the day. I don’t obtain loans from Nigerian banks, because I will end up with -25% loss or more, but that is not happening in the UK where I pay far less interest rate.

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“If I take such loan in Nigeria, it means I am -28 per cent (interest rate) in red, and by the time you get to the top, you are owing millions. I cannot approach any of the banks to give me local money to do business in Nigeria. If I can go through that, you can imagine the experiences of the airlines.”

Suspension of 7.5% VAT

Recently, a member of the finance bill drafting committee and West Africa Tax Lead, PwC Nigeria, Taiwo Oyedele, disclosed via a tweet, that the federal government has again suspended the deduction of 7.5% Value Added Tax (VAT) on airfares and other air transport services.

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According to him, the latest suspension order was scheduled to take effect on January 1, 2021, as it is contained in the 2020 finance act recently signed by President Muhammadu Buhari. Operators in the aviation sector are convinced that its implementation would ease the burden on them in 2021.

Effective 1st Jan 2021, commercial flight tickets have been exempted from VAT.

Next time you fly, cross check that you're not wrongly charged VAT (and hopefully air fares should come down). #FinanceAct2020

— Taiwo Oyedele (@taiwoyedele) January 5, 2021

Media and Communications Manager, Dana Air, Kingsley Ezenwa, explained that his airline would be excited to plow back the proceeds of VAT removal to the business and ticket fares subsidy.

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He said,

“But that may not happen soon, the expected gains are subject to the actual implementation of the policy and the review of other multiple charges in the aviation industry.”

READ: COVID-19: The ‘New Normal’ for Nigerian aviation industry

What you should know

• The FG in June 2018 issued an executive order on the suspension of VAT in air transport, but the Federal Inland Revenue Service (FIRS) claimed to be unaware of such a directive, hence it was never implemented.
• Airline operators had complained that Nigeria is the only country that still charges VAT on air transport services. The VAT plus 36 other charges, according to the airlines, account for at least 40% of total revenue and N10 billion in taxes yearly, leaving the airlines heavily indebted and in financial distress or both in most cases.