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Business News

Cost of preparing jollof rice in Nigeria rises by 7.8% in Q1 2021 – SBM

The average cost of making a pot of jollof rice in Nigeria rose by 7.8% between March 2020 and March 2021.

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SBM Jollof Index

The average cost of making a pot of jollof rice in Nigeria rose by 7.8% between March 2020 and March 2021. This is contained in the SBM Jollof index report for Q1 2021, published by SB Morgen.

According to the report, the increase was caused by the prolonged border closure, increased energy tariffs, exchange rate volatility, coronavirus pandemic, and the restrictions of forex for the importation of items, largely due to falling oil prices.

It also identified the effect of the #EndSARS protest against brutality and the response of the government, which brought the main economic states in Nigeria (Lagos and Abuja) to a standstill for major parts of the month of October 2020.

Highlights

  • Specifically, the average cost of making a pot of jollof rice in Nigeria increased from N7,167 recorded in Q4 2020 to N7400 in the first quarter of 2021. representing a 3.24% quarter-on-quarter increase.
  • The cost of making a pot of rice is most costly in Wuse and least costly at Awka. The report, however, suggests that the disparity could be a result of operational costs rather than the actual cost of commodities.
  • While it is possible for people in Awka to substitute buying some of the commodities with products from their subsistence agriculture, the same is not possible in Wuse, largely because of its very urban nature.
  • The high exchange rate of N410/$1 to N475/$1 in the parallel market also adversely affected the price of jollof rice in the country as tomato puree, rice, turkey, and seasoning are affected by the exchange rates.
  • Also, flooding destroyed several hectares of rice farms across the country. The report stated that up to 500,000 hectares of rice farms were destroyed in Kebbi State alone.
  • The price of turkey has increased as a result of increased electricity tariffs which has forced increases in cold room costs.

According to the SBM Jollof report, “Our interviews with traders shows that transportation costs have not reduced since they were increased during the introduction of the COVID-19 protocols. One of the traders stated that she pays almost twice her former transportation cost prior to COVID-19, and the prices have not gone down even after drivers began to carry more passengers than permitted by the social distancing protocol.”

Jollof costliest to cook in Wuse, Abuja

In Abuja, food production is mainly undertaken by its neighbouring states Benue, Kaduna, Kogi and Niger, all of which have seen several attacks in the past few years, showing a decline in that dimension.

  • The report revealed that the cost of making a pot of jollof rice is highest in Wuse, Abuja.
  • Although food distribution has not been affected and unemployment rates are over 40%, but being the administrative headquarters of the government and most international NGOs, outreaches and food distribution are common.

“In all the states surveyed, out of a score of 50, the combined score ranged from 18-27 which shows a general decline in entitlements across the states and similar levels of severity. While Bauchi has a higher chance at getting food insecure, the other states are slightly above the borderline, showing medium decline in their entitlement (ability to get food).”

What you should know

According to the report, in all the markets surveyed, the cost of making a pot of jollof rice increased in Awka, Calabar Municipal Market, Mbakpa, Onitsha, Port Harcourt and Trade Fair, while Balogun, Bauchi, Bodija, Dugbe, Kano, Nyanya and Wuse experienced a slight decrease.

  • The South-South and South-East states experienced an increase in the cost of making Jollof rice, Northern states experienced a price reduction.
  • The price decrease was attributed to the harvest period which usually forces prices of some commodities like onions and tomatoes down.
  • It however suggested that this decrease may have failed to happen in the Southern part of the country because of the cost of transporting the goods down south and because of the price surge introduced by the food blockade.

Nairametrics Research team tracks, collates, maintains and manages a rich database of macro-economic and micro-economic data from Nigeria and Africa. Our analysts share some of the data collated on Nairametrics, using formats such as docs, tables and charts etc. The team also publishes research based analysis as articles on a regular basis.

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Obituaries

BREAKING: Former minister and senator, Aisha Al-Hassan is dead

Ex-Women Affairs minister, Aisha Jummai Al-Hassan, popularly known as Mama Taraba is dead

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A former Minister for Women Affairs and ex-Governorship Candidate in Taraba State, Aisha Jummai Al-Hassan, popularly known as Mama Taraba is dead.

According to media reports she died in a hospital on Friday in Cairo, Egypt at the age of 61.

Al-Hassan, who was a former senator of the Federal Republic of Nigeria from Taraba North Senatorial District, was the All Progressive Congress’ Governorship Candidate for Taraba in the 2015 general elections.

Details later…

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Financial Services

Ratings agency, Moody’s reveals it is reviewing First Bank’s ratings

Moody’s explained why it might downgrade First Bank’s ratings.

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Moody’s Ratings agency said on Thursday that it has put First Bank of Nigeria on review for a downgrade after the central bank sacked the board of directors and replaced them with new directors.

Moody’s made this statement in a report titled ‘Removal of Non-Executive Board Members Highlights Governance Shortcomings.’

In a quote, Moody’s said:

“Moody’s Investors Service, (“Moody’s”) has today placed all long-term ratings and assessments of First Bank of Nigeria Limited (First Bank) on review for downgrade. The review will focus primarily on an assessment of evolving governance considerations at First Bank, specifically corporate governance developments. The rating action follows the dissolution of First Bank’s board by the Central Bank of Nigeria (CBN), the bank’s primary regulator, on 29 April 2021. As a result of this action by the CBN, all the non-executive directors were removed while the executive management remained in place.”

The Governor of the Central Bank of Nigeria, Godwin Emefiele, had last week announced the sack of the entire board of directors of FBN Holdings Plc and its subsidiary, First Bank of Nigeria Ltd following the initial removal of its MD/CEO Dr Sola Adeduntan. Following his sacking of the board, he set up a new board for the bank holding company and its subsidiary and also reinstated Adeduntan as MD/CEO.

Moody’s mentioned that the regulatory actions demanded of First Bank by the CBN introduces a clould of uncertainty over the outlook of the bank. For example, the CBN had asked the bank to divest from its holdings in two listed companies while also recovering its loans from one of them.

“The review for possible downgrade reflects the rating agency’s view that the removal of all non-executive directors of the bank’s board by the regulator demonstrates corporate governance shortcomings and weaknesses in board oversight. The bank also needs to implement regulatory directives concerning the resolutions of loans to, and shareholding in non-banking related parties, which reportedly had not been executed in the recent past.

Moody’s notes that the outcomes of these developments are uncertain at this point, and the final and long-term governance, reputational and financial implications of the events for First Bank are also unclear.”

The central bank directive sacking the board of the bank also retained its executive management perhaps suggesting that the CBN had confidence in the ability of the MD and his team to manage the bank. Moody’s also noted this in its briefing.

“While the bank’s executive management team remained the same, the rating agency believes these developments could distract management’s focus on implementing the bank’s strategic plan and road to recovery. First Bank management’s immediate key target was to reduce nonperforming loans (NPLs) to levels comparable with domestic peers. The rating agency recognises that, in the context of asset risks, the bank took steps to reduce its stock of problem loans, with its reported NPL ratio falling to 7.7% at year-end 2020 from 25.9% in 2018.”

Will Moody’s downgrade First Bank?

The rating agency explained that the decision to downgrade will depend on how strong the bank’s corporate governance structure is and whether the CBN will impose additional sanctions. If any of these crystallizes, it could downgrade its ratings.

“The bank’s long-term deposit ratings can be downgraded if flaws in the bank’s governance systems exist, and if the CBN imposes additional sanctions on the bank, including, but not limited to, conditions to address any vulnerabilities that may be discovered. Financial output that is less than anticipated could also result in a rating downgrade.”

Moody’s, however, poured water on any optimism around a rating upgrade.

Given the review for downgrade and the pessimistic outlook on the government of Nigeria, there is a slim chance that First Bank’s ratings will be upgraded. Stronger solvency progress than currently reflected in the ratings, combined with a stabilization of the sovereign outlook, could result in the outlook being stabilized.

Why is rating important?

Corporate Organizations desire positive ratings because of the effect it has on their ability to raise capital as well as the cost of capital. A high credit rating typically attracts positive investor sentiments helping organizations tap the debt and equity markets, especially from institutional investors.

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