At 40.7%, food inflation in Nigeria has reached its highest level in the past 25 years.
This persistent food inflation has been attributed to rising foreign exchange rates and disruptions in the supply chain, particularly affecting food production and distribution.
In the last MPC meeting, CBN Governor Mr. Cardoso stated, “Inflationary pressure continues to be driven largely by food inflation.”
He further explained that several challenges hinder efforts to control food inflation. “These include the rising cost of transporting farm produce, infrastructure-related constraints within the distribution network, security challenges in some food-producing areas, and the impact of exchange rate fluctuations on the prices of imported food items.”
The cost of food items has increased the most in the first five months of 2024 than it has in the past five years.
One of the major sources of this persistent increase in food inflation has been the rising foreign exchange rate.
The exchange rate increased from N951 per dollar in January 2024 to N1,421 in May 2024, significantly affecting the cost of imported food items.
The inflation rate of imported food has grown faster than food inflation from January 2024 to May 2024.
The amount of food imported has been rising because the nation’s food production is now insufficient to meet Nigeria’s food demand.
The NBS data indicates that in the past four years, agricultural produce’s share of GDP has gradually decreased.
This might imply that food supplies across all forms of agricultural activities have slowly declined in the last 4 years in Nigeria.
Moreover, the growing population’s demand for the limited food supply is exerting pressure on prices.
The decline in food production has been linked to factors such as insecurity in some farming areas, climate change, and archaic farming practices.
In 2023, Nigeria’s Meteorological Agency (NiMet) revealed that the duration and intensity of rainfall have deviated from historical norms across several states over the years, leading to severe disruptions in agricultural practices.
One of such events is the flood experienced by most states in Nigeria in 2022, which was one of the most severe floods in the past decade in Nigeria.
This led to over 2.4 million people to be displaced and swamped hundreds of villages and urban areas.
The distribution part of the supply chain has also not performed well because rising transportation costs have raised food prices. The rising transport cost has gotten worse since fuel subsidies were removed.
An investigation by The Guardian Newspaper showed that “some farmers have frequently been compelled to leave their produce to rot at the farm gate due to the prohibitive transportation costs. This development has adversely affected the prices of the farm produce.”
The NBS report on transport fares shows that transportation costs have increased by a huge margin.
Bus trips within cities grew by 49.55%, bus journeys interstate increased by 79.17%, airfare increased by 18.96%, motorbike transport fares increased by 2.15%, and waterway transport fares increased by 34.25% between March 2023 and March 2024.
Will the Prices ever come down?
The recent increase in interest rate by the Central Bank saw a reduction in the month-on-month growth rate of food inflation.
The food inflation rate grew by 2.3% in May, compared to the 3.2% in January.
This decrease also confirms PricewaterhouseCoopers International Limited’s (PWC) predictions.
In its economic outlook for the second half of the year, titled “Nigeria Economic Outlook: Navigating Economic Reforms,” a recent report from PwC predicted that by the end of 2024, Nigeria’s headline inflation rate would drop to 29.5 per cent, while the country’s GDP would grow, albeit slowly, to 2.9%.
Reduced inflation, according to the multinational advising and tax services firm, would lessen economic pressure and offset the effects of market changes.
To boost the nation’s output of agricultural products, the Nigerian government has also released grains like maize, millet, and others from the country’s food reserve.
Other government initiatives are being implemented to combat food insecurity and decrease food prices.
Nigerians are hopeful for a reduction in food inflation to make food items more affordable in the markets.
The government has also assured the public of its commitment to achieving this affordability. However, the question of how long these high prices will persist remains a concern.