As food prices push headline inflation to frightening highs

SULAIMON OLANREWAJU looks at the factors precipitating food price increase, the major propeller of the nation’s galloping inflation.

The National Bureau of Statistics (NBS), on Saturday, announced that the rate of inflation in the country rose to 22.04 per cent in March 2023 from 21.91 per cent in February.

According to the NBS, “On a year-on-year basis, the headline inflation rate was 6.13 percent points higher compared to the rate recorded in March 2022 which was 15.92 percent. This shows that the headline inflation rate (year-on-year basis) increased in March 2023 when compared to the same month in the preceding year (i.e., March 2022).”

The Bureau added that food inflation rose to 24.45 per cent in March 2023 from 24.35 per cent in February 2023. The import of this is that food inflation is the major fuel of headline inflation in Nigeria.

The rising rate of food inflation is evidenced in the rising prices of food items such as rice, beans, bread, yam, vegetables, fruits and eggs which have all gone up by at least 100 per cent over the last 10 years.

The rising food inflation has consigned many Nigerians into poverty as the rising price gets out of the reach of the average Nigerian.

According to the Food And Agricultural Organisation (FAO) in a quarterly report released in March 2023, nearly 25 million Nigerians are at risk of facing hunger between June and August this year unless urgent actions are taken. The international agency stated that continued conflict, climate change, inflation and rising food prices are key drivers of the trend.

FAO said in the report that “Of the 17 million people who are currently food insecure, 3 million are in the north-east Borno, Adamawa and Yobe (BAY) states. Without immediate action this figure is expected to increase to 4.4 million in the lean season. This includes highly vulnerable displaced populations and returnees who are already struggling to survive a large-scale humanitarian crisis in which 8.3 million people need assistance.”

This is even as Nigeria is ranked 103rd in the 2022 Global Hunger Index (GHI) out of 121 countries. GHI says with a score of 27.3, Nigeria has a level of hunger that is ‘serious’. The body warns that unless urgent steps are taken, serious hunger could result in child stunting, child wasting and child mortality.

According to data sourced from the National Bureau of Statistics (NBS), food inflation was 10.05 per cent in January 2013. It slid to 9.46 per cent in March, went up to 9.67 per cent in June, slid to 9.38 per cent in September and went further down to 9.28 per cent in December 2013. In January 2014, food inflation rate was 9.28 per cent. In March, it went down to 9.27 per cent. By June of the year, it was 9.76 per cent. It slid to 9.71 per cent in September 2014 and slid further to 9.14 per cent in December 2014. By January 2015, it was 9.2 per cent, climbed up to 9.37 per cent in March 2015, rose to 10.01 per cent in June, hit 10.2 per cent in September and closed 2015 at 10.6 per cent.

Food inflation rate remained 10.6 per cent in January 2016, rose to 12.7 per cent in March, climbed to 15.30 per cent in June 2016, hit 16.6 per cent in September 2016 and became 17.4 per cent in December 2016. In January 2017, it was 17.82 per cent, in March it was 18.4 per cent, in June 2017, it was 19.91 per cent, in September 20.32 per cent and closed the year at 19.42 per cent.

In January 2018, food inflation was 18.92 per cent; in March, it was 16.08 per cent, in June it went further down to 12.98 per cent, in September, it rose to 13.31 per cent and hit 13.56 per cent in December 2018. In January 2019, it slid to 13.51 per cent, went down to 13.45 per cent in March, rose slightly to 13.56 per cent in June, fell to 13.51 per cent in September and hit 14.67 per cent in December 2019.

Food inflation rate was 14.85 per cent in January 2020, rose to 14.98 per cent in March, climbed up to 15.18 per cent in June, rose to 16.66 per cent in September and closed the year at 19.56 per cent. In January 2021, food inflation was 20.57 per cent, in March, it was 22.95 per cent, in June it went down to 21.83 per cent, slid further to 19.57 per cent in September and closed the year at 17.32 per cent.

Year 2022 opened with 19.09 per cent food inflation, it went down to 17.16 per cent in March, moved up to 20.54 per cent in June, rose to 23.34 per cent in September and closed the year at 23.75 per cent. In January 2023, food inflation was 24.32 per cent and rose to 24.45 per cent in March.

The rising food inflation in the country is contrary to expectations given the interventions of the Federal Government in agriculture through the Central Bank of Nigeria (CBN) and the Federal Ministry of Agriculture and Rural Development.

The CBN came up with the Anchor Borrowers Programme (ABP) to create a linkage between anchor companies involved in the processing of food items and small holder farmers (SHFs) of the required key agricultural commodities. The focus of ABP is the provision of farm inputs for small holder farmers to boost production of their commodities, stabilize inputs supply to agro processors and address the country’s negative balance of payments on food. At harvest, the SHF supplies his/her produce to the agro-processor (Anchor) who pays the cash equivalent to the farmer’s account.

The CBN Governor, Mr. Godwin Emefiele, has said repeatedly that the apex bank is concerned about the huge foreign exchange spent by Nigeria in importing food items that could be produced locally.

Emefiele is of the belief that allocation of foreign exchange to the importation of items that could be produced locally had contributed immensely to the depletion of the nation’s foreign reserves.

He said the rising unemployment and escalating food imports prompted the CBN to shift from concentrating only on price, monetary, and financial system stability to act as a financial catalyst in specific sectors of the economy particularly agriculture, in an effort to create jobs on a mass scale, improve local food production, and conserve scarce foreign reserves.

Similarly, the Federal Ministry of Agriculture and Rural Development has come up with a number of programmes to facilitate increased agricultural output. Among these programmes is the Agro-Processing, Agricultural Productivity Enhancement and Livelihood Improvement Support (APPEALS).

The essence of APPEALS is to enhance agricultural productivity of small and medium scale farmers and improve value addition along priority value chains in the participating states.

There are five components in the project. These are production and productivity enhancement, primary processing, infrastructure support to agri-business clusters, technical assistance, knowledge management and communication to build capacity of the project staff and project management and coordination.

But in his comment on why there seems to be no respite with respect to the rising prices of food items despite the federal government’s interventions, the National President of All Farmers Progressive Association (AFPA), Ogbo Joseph Douglas, said it is due to the lack of sincerity on the part of those executing the government’s interventions.

He said the money purportedly given out to support farmers doesn’t get to practising farmers but is shared between those handling the projects and their proxies who parade as farmers.

According to him, “That is why most of what government is doing is not commensurate with expectations. If what the government is spending on agriculture is reaching farmers, food prices should have gone down by now. How do you explain a module of beans that sold for N250 last year now going for N1000, or a module of garri that was selling for N100 now selling for N500?”

In a chat with Nigerian Tribune, a poultry and fish farmer, who operates in Ogun State, Mr Femi Agbabiaka, put the blame of the seeming consistent rise in the prices of food items on a number of factors such as the foreign exchange policy of the apex bank, insecurity and energy cost.

According to him, “In Nigeria, everything rises and falls on the dollar. For a while now, our local currency has been fighting a difficult battle against the dollar. This affects virtually everything because we are largely an-import dependent country. So, when the dollar exchange rate is high it will affect the price of local items.”

He added that the issue of untamed insecurity has scared many farmers off their farms, noting that this has resulted in a decline of farm produce.

“When there is a shortage in supply even when demand remains constant, there will still be a hike in price because what is available is not enough to go round. This is an economic principle. Insecurity is a major cause of the rise in prices of food items.”

Agbabiaka said his poultry farm runs on generator most of the time.

“With the cost of diesel on a consistent rise, there is no way it would not affect the cost of production and eventually, the prices of eggs and similar farm produce,” he said.

In his own submission, Sebastian Ugwu, a Lagos-based economist, said the fact that food prices are rising is indicative of a shortage in supply or that the cost of production is on the rise. He urged the government to look at these two factors as a way of bringing down the rising prices of food items.

But according to President Muhammadu Buhari, middlemen and COVID-19 are mainly responsible for the rise in food prices.

In a statement issued by his Senior Special Assistant, GarbaShehu, President Buhari said, “Apart from the destruction caused to rice farms by floods, middlemen have also taken advantage of the local rice production to exploit fellow Nigerians, thereby undermining our goal of supporting local food production at affordable prices.”

The President added, “No government in our recent history has invested as heavily as we are doing to promote local production of about 20 other commodities, through the provision of loans and several other forms of support to our farmers.”

Corroborating the President’s view, the Minister of Agriculture and Rural Development, Dr Mahmood Abubakar, said the rise in food prices was caused by many factors including the COVID-19 pandemic, insecurity and the Russia-Ukraine war.

The minister added that the government was working hard to address the rising prices of food items, though he noted that the rise in the prices of food was not peculiar to Nigeria.

He said, “When COVID-19 came, it affected a lot of things including food production and the after effect of that is what we are still facing and that will lag for some time before it is stabilised.”

Abubakar said, “The whole world is currently reeling out of COVID-19 and now battling the consequences of the war in Ukraine and Russia but things will stabilise and the Ministry of Agriculture is doing everything possible in terms of addressing the problem; we are not relenting, so that the prices will come down faster.”

The minister added that attacks by herders and terrorists had denied some farmers the opportunity to go to their farms, especially in the north-west and north-central regions of the country. He, however, said despite the security situation, food “production has not dropped to any significant level.”

But while speaking on what the government should do to stem the tide of rising food prices, MrSegunAjayi-Kadir, Director General of the Manufacturers Association of Nigeria (MAN), counseled the government to come up with consumer price stabilisation measures that would stimulate growth in agricultural output.

He said, “Government should sensitise citizens to patronise and consume locally produced goods, imbibe the benefit of consuming local goods and government should set a good example by patronising local products in all government purchases.”

According to Ugwu, not much progress could be made about bringing down food inflation unless the government is determined to address the issue of insecurity that has drastically reduced crop production.

“For food prices to come down, the farmers in Benue, Nasarawa, Oke-Ogun in Oyo State and other parts of the country must be able to go fully back to the farm without any fear of harassment,” he said.

Also speaking on the matter, the National Association of Chambers of Commerce, Industry and Agriculture (NACCIMA) said, “the government must develop and implement policies targeted at increasing food supply and decreasing enterprises’ production costs while encouraging local production and ensuring that adequate infrastructure are put in place to meet the country’s needs and strengthen the food supply chain.

“This will also encourage the private sector and attract Foreign Direct Investment (FDI), thereby positively impact the Gross Domestic Product (GDP). Nigeria can increase its output if the nation’s production problems are addressed in the interest of inclusive economic growth and development.”