Growing hunger amidst COVID-19-induced inflation, fallen income in Nigeria

Although states across the federation have started easing lockdown, most households are still struggling without income. CHIMA NWOKOJI examines how Nigerians are surviving inflationary pressures given their dependence on  small, informal businesses and for those in paid employment, living with delayed salaries.

James Oghene, a middle-aged man with two kids is a chef in one of the popular fast foods based in Surulere Lagos. Every day, Mr. Oghene spends an average of N1,000 from his Ejigbo residence to and from work, but since February, he has not received salary. Neighbors are already gossiping about his wife’s weight loss due to hunger as well as his constant begging for money to go to work.

However, Mr. Ogene hopes that he would soon get at least a month’s salary since he has not been sacked from work, a situation which many Nigerians have found themselves.

His experience battling this zero income and rising cost of food items is what majority of the population in Nigeria are going through and even worse than that.

Just as the country battles with the economic downturn that came with the COVID-19 pandemic, Nigeria’s inflation rate rose to its highest in 24 months.

According to the latest Consumer Price Index (CPI) report released by the National Bureau of Statistics (NBS), inflation rate increased by 12.34 per cent when compared yearly (year-on-year) in April 2020 from 12.26 per cent recorded in March 2020.

The rise in food index is more worrisome especially when it has been confirmed in certain quarters that people living in Nigeria spend more money on food than any other country in the world.

The NBS said composite food index increased by 15.03 per cent in April 2020, 0.03 points higher, compared to 14.98 per cent recorded in March 2020.

“The composite food index rose by 14.98 percent in March 2020 compared to 14.90 per cent in February 2020. This rise in the food index was caused by increases in prices of bread and cereals, fish, potatoes, yam and other tubers, oils and fats, vegetables and fruits,” the NBS stated.

A commodity index survey carried out by the Lagos-based Financial Derivatives Company show that major food items are going be unaffordable to an average citizen.

For instance, a 25-litres palm oil keg which sold for N9,000 in December 2019 now costs N10,000. The same way, a 10kg of Semovita which was sold for N2,900 as at January 2020 currently costs N3,400; a 50 kg bag of yellow garri that was sold for N7,200 in January 2020, now sells for N14,500. The list of important food items that are on this rising trend also includes flour, beans and sugar, among others.

Meanwhile, traders have blamed the price jump on the high cost of transportation and scarcity of some essential food items.

Findings show that the price of items such as beans, pepper, palm oil, onions, tomatoes, garri, and potatoes significantly increased. For instance, a big bag of pepper is currently sold for an average of N15,000, which indicates an increase of 114.3 per cent when compared to the pre-lockdown price of N7,000.

Similarly, the price of a big bag of dry onions spiked by 30.77 per cent, as it currently sells for an average of N17,000. In the same vein, a basket of sweet potatoes sells for an average of N15,000, marking a 150 per cent increase when compared to N6,000 pre-lockdown price.

According to Eurostat, food takes up an astonishing 58.9 per cent of Nigerians’ incomes where Kenya spends 52.2per cent and Cameroon 45.5 per cent.

Although, Eurostat put the average at close to 60 per cent, as a consumer nation where population is constantly outgrowing food supply, the poorest people (vulnerable) spend almost 80 to 100 per cent of their earnings on consumption.

Now that the earnings are being challenged, it is left to be imagined what majority of citizens are going through. In most communities, hunger has triggered an alarming rise in armed robberies, cult killings and gang warfare, as youths roam streets in search of work during the day, and too frightened to sleep at night.

 

Rising poverty

It is a big concern for a country constantly outgrowing food supply, where the poorest people (vulnerable) spend almost 80 to 100 per cent of their earnings on consumption to have falling or no income.

The International Monetary Fund (IMF) had feared that food security in sub-Saharan Africa is under threat. It said the ability of many Africans to access sufficient, safe and nutritious food to meet their dietary needs has been disrupted by successive natural disasters and epidemics.

In Nigeria, the bottom line of the current rising inflation and dwindling income is that the per capita income is rather too low for a country of this size, and the level of poverty presents a major development challenge, as Dr. Yemi Kale, Statistician General of the Federation/ CEO National Bureau of Statistics, has warned.

The statistics office had published a report in March 2020, showing that  40 per cent of people in the population lived below its poverty line of N137,430  ($381.75) a year (or N11,453 a month).  When a Nigerian survives on N11,453 a month, it means the future is actually bleak if nothing serious about food security is done.

Poverty is a clear factor of industrialization (productivity) and population, regional disparities notwithstanding.

Nigeria, Kale stated, has the lowest poverty line, and the lowest Gross Domestic Product (GDP) per capita, even though it is the largest economy in Africa.

“Nigerians at the poverty line spend almost thrice as much on food as they do on non-food essential items. Significantly different from counterparts in South Africa and in Egypt, an indication of agricultural productivity, and reliance on food imports and the impact on prices.

“Egypt has the lowest poverty rate, even though it has a lower poverty line and GDP per capita, compared to South Africa and its poor population spends significantly less on food when compared to both Nigeria and South Africa, indicating the importance of local agricultural productivity,” Kale stated.”

He said poverty in rural areas (52.1 per cent) is nearly three times that of urban areas (18 per cent).

Indeed, rural farmers are not left out of the fallen income problem. Since the inter-state travel ban and lock down is still ongoing in most states, every store is trying to manage what it has so it does not run out of supplies completely as farmers find it difficult to sell farm produce.

Some farmers’ harvests are not selling. For instance, poultry farmers are most hit with low egg sales, just as off takers refuse to pick up matured birds.

“We are bleeding internally and if care is not taken, most farms will be bankrupt and out of business soon,” a Lagos-based farmer said.

A public policy commentator, Mrs Arinola Awokoya, is also worried about the challenges that farmers face in the current COVID-19 pandemic dispensation.

Awokoya took to her twitter handle to lament the hardship that livestock farmers, especially poultry farmers face.

“They have eggs no one is buying and chickens the market cannot absolve. The problems of low demand arise from many factors. It is only after a discussion with my brother that I got a clear insight into the economy that is built around parties/events in Nigeria,” she stated.

Chickens both broilers and old layers are supplied for parties, eateries, bars, restaurants and joints. COVID-19 has practically wiped out these demand sources.

“Farmers were encouraged to go into farming by the federal government and they did. They cannot be abandoned at present and must not suffer loss from situation of force majeure,” she said.

IMF feels the pulse of households

The World Bank in May 2020 launched a series of high-frequency phone surveys in selected Sub-Saharan African countries, including Nigeria, to better understand governments’ responses to COVID-19 and the socio-economic impacts on households.

Last week, the National Bureau of Statistics (NBS) published its findings from the COVID-19 National Longitudinal Phone Survey (COVID-19 NLPS) between April 20 and May 11, 2020, in collaboration with the World Bank. The survey assessed the impacts of COVID-19 using a sample of 1,950 households across five metrics – knowledge and concerns about COVID-19 transmission, employment and livelihood, access to basic needs, safety net as well as coping and education.

Regarding employment, the survey showed that 42.0 per cent of respondents reported losing jobs due to COVID-19 while 79.0per cent reported a reduction in income. Furthermore, non-farm family businesses have been the hardest hit with 85.0 per cent reporting reduction in income, followed by 73.0 per cent in the agriculture sector and 58.0 per cent in wage employment.

Broadly, the pandemic directly affected workers in all economic sectors with the commerce, services and agriculture sectors being the most impacted. It also showed that 35-59 per cent of households were unable to purchase much needed basic food items such as yam, rice and beans, while 26 per cent of households had no access to medical treatment.

Analysts believe weaker access to food and healthcare services could be due to weaker incomes and social distancing measures. Indeed, findings from the survey revealed that economic shocks from COVID-19 have been more severe than in the past three years.

In this regard, 85.0 per cent of households reported rising price of food items compared with 19 per cent between January 2017 and January 2019.

This, according to the survey, is unsurprising as 46 per cent of households reported that farming/business inputs were higher, 36.0 per cent reported the closure of non-farm businesses and 29 per cent reported disruption to farming activities. Due to these severe shocks, households had to resort to coping mechanisms, with 51 per cent reducing food consumption and 29 per cent drawing down savings.

“As we earlier reported, lockdowns disrupted supply chains and businesses in the large informal sector were most affected. Unlike in advanced economies that imposed similar economic restrictions, there was no reprieve for households and businesses in Nigeria. The stimulus measures adopted by fiscal and monetary policymakers were negligible relative to the size of the economy, neither were the support measures disbursed with the urgency needed to support household consumption and ensure business survival.”

 

No respite from inflation

Commenting, analysts at the Lagos-based investment firms, Afrinvest Limited and United Capital Plc, projected that the inflation rate will rise faster this month due to impact of COVID-19 restrictions and onset of the planting season.

Analysts at Afrinvest said: “Going forward, we anticipate increased pressure on domestic consumer prices, mainly food. Our expectation is driven by the disruption to the agriculture value chain amid the lockdown as well as the lean season when there is usually reduced agriculture output.

“We believe there would be a faster-paced increase in inflation once the lockdown measures are relaxed and economic activity resumes. Until then, the pass-through of trade restrictions, exchange rate weakening and the recent VAT increase to consumer prices would be muted.”

Analysts at United Capital stated: “A number of factors are pointing towards a sharp increase in headline inflation rate. Of all factors, we expect the most significant pressure to come from increases in food prices, as two key states in terms of economic activities, Lagos, Ogun, and the FCT are on lockdown.

“Notably, the restriction of movement has caused a wave of panic buying, as consumers stock up on essentials, coupled with the fact that all land borders remain closed, with local supply barely meeting demand.”

 

Way forward

Some experts agreed that higher incomes (from diverse sources), and access to finance would help households buy food even when prices rise, allow them to invest in resilience ahead of a shock, and better cope afterwards.

Also, access to mobile phone networks enables people to benefit from early warning systems and gives farmers information on food prices and weather, just as a single text or voice message, could help them decide when to plant or irrigate.

Similarly, Professor Uche Uwaleke, Professor of Finance and Capital Market, Nasarawa State University, Lafia and former Commissioner of Finance of Imo State, said “Mechanized farming will go a long way in boosting food production. Doing so will bring down food inflation which was over 15 per cent as of April according to the NBS. Secondly, there is no doubt that the CBN’s interventions in agriculture, especially the Anchor Borrower Scheme, has helped in no small measure to grow the sector.

“It is time to expand and scale up the interventions to cover more products and states of the federation. The IMF has projected that the Nigerian economy will tank by -3.4 per cent this year. In order to reduce the size of the economic recession below forecast global average of -3 percent, it is important that the COVID-19 stimulus packages both by the government and the CBN are well targeted and executed in ways that will protect jobs and speedily reverse the present downturn in economic activities.”

On his part, Kabir Ibrahim, National President, All Farmers Association of Nigeria (AFAN), stressed the importance of incentivising the smallholder farmers in boosting productivity in the agric sector.

This calls for higher investment, focus and sustainable policies as well as purposeful leadership.

“We should create a separate and well-funded advisory for the attainment of food security with NFRA, PFI, cooperatives, livestock and the seed council in one-stop-shop.”

 

 

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