Reasons behind rising cost of food items

CHIMA NWOKOJI, FUNMILAYO AREMU and ADEOLA OTEMADE report on lamentations of Nigerians
amidst rising cost of foodstuffs despite official claims to the contrary.

For many Nigerians, life and living is becoming extremely difficult. Many of them go through hardship to acquire the crucially needed basic necessities of food, clothing and shelter.

The situation today is such that Nigerians are groaning under rising prices of food items, as well as other essential goods, thus making it difficult for many people to afford them. While the minimum wage of government workers remains N30,000, the ability of a worker to afford a bag of rice which goes for N28,000 becomes almost impossible.

With the number of poor Nigerians rising daily, the World Bank even predicted that “the rising prices of food items in the country could push additional six million Nigerian into poverty.” The reason for this assertion is not far to seek, as Nigerians, like never before, continue to groan under the weight of inflation without a commensurate increase in their salaries. The rises in prices witnessed between June 2020 and June 2021 alone, according to the World Bank, “could push another six million Nigerians into poverty with urban areas disproportionately affected.”

 

Prices of food items continue to rise

However, in its most recent report on inflation, the National Bureau of Statistics said the Consumer Price Index (CPI), which measures the rate of change in prices of goods and services in the country, declined for the seventh consecutive time to 15.99 percent in October 2021. The bureau said further that the figure is 1.76 per cent points higher than the rate recorded in October 2020 (14.23) per cent.

To many Nigerians, the figures do not add up as the prices of goods continue to rise pushing several food items beyond the reach of consumers. When Sunday Tribune engaged food sellers on reasons prices of foodstuffs continue to rise, explained that  that the cost of transporting food items from the Northern part of the country has increased exponentially giving rise to corresponding increase in prices of food items. Many of them expressed disappointment over poor sale, claiming that consumers no longer patronize them as before.

Suliyat Arisekola, a foodstuffs seller at Apata market, in Ibadan, Oyo State, told Sunday Tribune  that the prices of food items have become unaffordable for many of her customers.

“Rice is now N25,000, but two weeks ago it was N24,500. A jerry can of vegetable oil goes for N28,000. The one I just finished selling was N27,000. Three Crown milk is now N270 per tin and carton N10,800. Prices of foodstuffs are not stable at all,” she lamented.

Though prices of beans have temporarily dropped to as low as N1,200 owing to availability of new beans types and also that of garri to about N700 or less, MrsRaimoAdeleye, another food seller at Molete market, in Ibadan, disclosed that the food situation is getting out of hands. Many Nigerians, she insisted, are very hungry, as some of her customers, according to her, now beg either to buy on credit or be given the foodstuffs.

“Despite the drop in prices, patronage is still poor; People don’t have money. Some of my customers now buy on credit. We also borrow money to run the business, so we cannot afford to give out food just like that. Many people are hungry and they have no money to eat,” she explained.

 

Factors influencing the rise in food prices.

Apart from inflation occasioned by the country’s troubled economy, cost of transportation and ravaging insecurity in Northern part of the country, which has forced farmers to abandon their farms, the traders blamed officials of Nigeria Customs Service for rising cost of food items.

According to Adeleye, many traders often had their goods seized by officials of Customs services and would have to pay huge amounts of money to get them released. This in turn contributes to increase in prices of foodstuffs.

“My rice suppliers told me that the goods are always being held and they have to recover them with lots of money. “Whenever they get their goods back, they will have to inflate the prices in order to recoup their investment. A lot of goods are being seized so it will definitely be expensive after the suppliers recover their goods,” Adeleye explained, noting that poor economy has affected people’s income which in turn has caused the plight of foodsllers.

 

Food prices and Nigeria’s peculiar inflation rate

Reacting to NBS data on inflation figure, analysts are, however, divided in their opinions. While a public policy analyst, Mr. Kalu Ajah wondered why the inflation rate in Nigeria falls to 15.99per cent but food Inflation is up 18.34per cent in the same report, others explained that current inflation figures means that there is a slight reduction in the rate at which cost of items is rising.

“One wonders how food that makes up about 51 per cent of CPI in Nigeria can rise but inflation falls,” Ajah stated, just as research analysts from Afrinvest (West) Africa Limited in an e-mailed response to Sunday Tribune’s enquiry said that prices of Nigeria’s food items are still high despite slowing inflation because of importation.

“In terms of month by month (m/m) performance of each component item of the CPI basket, we observed the highest increase from imported food index, up 136 basis points (bps) to 444.3 index points in October 2021. We attribute the increase to the pass-through effect of the high inflation rate in advanced economies and weak Naira exchange rate.

“We expect the headline inflation rate to further moderate on a Y/Y basis in November to 15.6per cent owing to a high base-year effect, although, the protracted insecurity challenges, supply chain bottlenecks, and likely increase in power tariff are potential downside risks to this projection,” the analysts stated.

Professor Uche Uwaleke, President of the Association of Capital Market Academics, in his own response explained that it is possible the marginal drop in food inflation may not reflect actual drop in basic food prices, but “arising from the ‘base effect’ associated with the methodology of computing CPI on a year on year basis.”

Uwaleke said, “Insecurity which directly impacts food inflation, the recent devaluation of the naira and the likely hike in pump price of fuel and electricity tariffs,” which are the major drivers are still prevalent.

In his own response, a former President of Trade Union Congress (TUC), Peter Esele, questioned the metrics used by the NBS to measure the inflation rate. According to him: “I am sure many Nigerians will be asking if those working in the NBS come from the moon. Even the price of naira, which is the exchange rate, has gone up. The price of cooking gas has gone up by more than 100 per cent. The price of every commodity in the market has gone through the roof. So, I ask the NBS, what metrics did they use?”

Esele pointed out that if the prices of goods and services are rising at a faster rate in America, Britain as well as in all of Europe while it is in reverse in Nigeria, it suggests that Nigeria has a different definition of what inflation rate is.

“Why is the price of cooking gas going up? That is the trend in the international market. The British government is subsidising gas now because winter is here. What is the Nigerian government subsidising for its citizens? No one needs to speak about inflation decelerating or accelerating. The market is there to determine what the inflation rate is. The NBS cannot be saying exactly the opposite of what the market and the pockets of Nigerians are saying,” he stressed.

Similarly, a report by the World Bank entitled:”COVID-19 in Nigeria: Frontline Data and Pathways, “states that COVID-19 has continued to threaten food security in Nigeria, as households and firms are yet to recover from the devastating impact of the pandemic.

According to the World Bank, the food supply chain disruptions caused by the pandemic translated to an increase in price across food items in Nigeria. It also said the move by the CBN to encourage local production by not allocating foreign exchange to importers of food and fertilizers also contributed to the rise in the price of food items.

“Added to the increase in food prices is the surge in utility costs (fuel and electricity and most recently gas prices) continue to weigh on the average Nigerian consumer. Despite the reopening of the land borders, food prices continue to rise as trade flows are yet to return to normal. Clashes between farmers and herders continue to impede increased food production. Also, local production still lags consumption significantly,” the multilateral institution stated.

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