Nigeria’s inflation rate increased by 15.75% YoY in December 2020, hitting its highest figure in 3 years.
According to the latest Consumer Price Index report, released by the National Bureau of Statistics (NBS), the food inflation index rose sharply by 19.56% in December, caused by increases in prices of bread and cereals, potatoes, yam and other tubers, meat, fruits, vegetable, fish and oils and fats.
Nigeria’s food inflation looks gloomier if you consider the fact that the NBS, in its released COVID-19 impact report for the month of August 2020, revealed that 51.3% of Nigerian households obtained loans during the lockdown from mid-March to purchase foodstuffs.
This means that Nigerians cannot afford to buy food and the price of food is skyrocketing every month.
Nairametrics chatted with Cheta Nwanze, Partner at SBM Intel, a Geopolitical Research and Strategic Communications consulting firm and Professor Yomi Fawehinmi, an Agric stakeholder on the causes of food inflation and what should be done to control it.
The border was closed for over a year, depriving many Nigerians and businesses access to some food items and raw materials which prices were now hiked as a result of high demand and few competition within Nigeria. Could the closure have contributed to food inflation?
Nwanze said, “Of course it did. Simply looking at a chart of food inflation makes it clear. The curve, which was rising anyway, began to rise more steeply two months after the borders were arbitrarily closed, essentially the normal lagging effect associated with any change in policy. So yes, it is a fact that the border closure contributed to the rise in food inflation.”
Poor economic policies cannot however be distanced from the continuous rise in the inflation rate. Nwanze believes that the CBN’s mandate concerning the importation of maize is an example of such poor economic policy.
“Policy inconsistencies such as what happened with maize, where imports were restricted despite 2020 being in track to be our worst year in terms of maize production in a while. Now, given that maize is an input for the poultry industry for example, as well as the pharma industry, this had an effect,” Nwanze said.
Agriculture is very central to Nigeria’s economy, providing the main source of livelihood for the majority of Nigerians. The agricultural sector remains the largest employer in Nigeria, employing more than 36% of the labour force.
“Agriculture is actually a science. Without science, Agriculture is drudgery and unproductive. That’s why Netherlands is a small country but feeds the world. Netherlands is the 2nd largest food exporter in the world,” Prof Fawehinmi noted.
Water depletion and desertification have forced herders in the northern part of the country to shift southwards in search of grazing fields. This downwards movement has resulted in clashes between farmers and herders in many states, hence a reduction in the output of food production.
Highlighting the contribution of insecurity to poor harvest and subsequent food inflation, Prof. Fawehinmi said, “Insecurity makes farmers abandon their farms, which reduces output, leading to less market supply and more demand, thereby causing a spike in prices of food items.”
On how pressures in food, utilities and transport are driving the rising inflation numbers, Wale Smith, a Pension Professional revealed in an article that was published on Nairametrics stated that “A combination of weaker farming activity, Naira weakness and Covid-19 lockdowns are behind the uptrend in food inflation. Looking at food inflation, the big pressures came from the farm produce component which accounts for over 90% of food inflation.”
Professor Fawehinmi suggests intentional steps must be taken to develop and improve on every aspect of the agriculture value chain. He also added that special attention must also be paid to the area of agriculture research.
“We need to improve our agricultural research and innovation. That’s what will drive increased output and productivity. Also, we need to create a balance between imports of food and domestic production. Finally, we should do more about good storage and distribution,” Professor Fawehinmi said.
Agreeing with Prof. Fawehinmi, Nwanze adds that opening up of all the land borders and legally allowing the flow of goods puts Nigeria at a better chance of maximising trade relations with neighbouring countries.
“Open the borders, remove food items from the import exclusion list. When the ban on the importation of maize was announced, SBM did a report that predicted what will happen. It happened as we said four months later. Nigeria is incapable of meeting its food demand given our existing issues such as insecurity, poor farming practices, and a sharply growing population. This means increased scarcity and rising food costs. The only way we can cover the gap is by imports. It’s that simple,” Nwanze said.