April 28, (THEWILL)- Nigeria’s rising headline inflation rate has been driven by high cost of food. This has been the trend for a long time now, culminating in the latest inflation surge of 33.2 percent in March 2024, up from 31.7 percent as of February.
The National Bureau of Statistics (NBS) maintains that the surge in food inflation continues to challenge the economy with firms shutting down over high operation costs while households experience steep drop in living standard spiked by high cost of living.
The NBS also explained that worsening insecurity across the country, especially in the North whichs the nation’s food basket, is behind the high cost of food. It noted that the mass food producing areas of the North have been under the siege of insecurity in the past nine years.
In states like Niger, Benue, Plateau, Borno, Katsina, Taraba and others, the farming communities have deserted their farm lands where they were displaced by bandits, herdsmen, terrorists and kidnappers; and are now living in the internally displaced persons (IDP) camps.
Unfortunately, there are no signs that the ugly trend is likely to improve in 2024 given the continued spate of killings and abductions in the North since the beginning of the Bola Tinubu-led government in May 2023.
An added dimension to the sad situation is the insecurity and high cost of transporting food items from the North to other parts of the country, especially the South. Recently, there are cases of youth attacking trucks carrying food items and looting their cargoes.
Additionally, extortion, multiple levies and taxes created by security personnel, state and local government agencies and hoodlums add to the frustration experienced by motorists and traders who dare it to convey the food items to other parts of the country.
At the backdrop of sustained rise in prices of staple food items in the market, Nigeria has recorded an unprecedented food inflation rate of 40.01 percent in March 2024
According to NBS, food inflation in Nigeria averaged 13.26 percent from 1996 until 2024, reaching an all-time high of 40.01 percent in March of 2024 and a record low of -17.50 percent in January of 2000.
Economists and financial analysts explained that the development would put more pressure on the purchasing power of average Nigerian and they also predict that the trend will continue for some months before stabilising.
The analysts also see a wider headline inflationary jump in this month (April) to 34.6 percent, representing a 2.4 percentage month-on-month rise resulting from the recent hike in electricity tariff.
“The inflation outlook is biased to the upside, a consequence of the recent implementation of a new electricity tariff. For context, the Nigerian Electricity Regulatory Commission (NERC) have hiked price for Band A customer from N68 to N225 per kilowatt hour.
“Nevertheless, we see some downside risk from the recent currency sustainability. Overall, we project inflation to print 34.6% in April 2024”, analysts at CardinalStone Finance Limited, a Lagos-based investment house said in a note to their clients.
The trend will certainly impact negatively on the agricultural sector which has been on a continued decline in the past seven years – since 2017.
According to data by the National Bureau of Statistics (NBS), aside from the second quarter (Q2) of 2016 when agriculture achieved a real gross domestic product (GDP) growth rate of 4.5 percent year-on-year, the sector has maintained an uninterrupted slide in the past seven years. The facts speak:
In Q2 2017, agriculture declined to a growth rate of 3.01 percent (from 4.5 percent in the corresponding period of the previous year), before it hit 1.19 percent in Q2 2018. The fortune of this strategic sector, which is the largest employer of labour, rose marginally to 1.79 percent in Q2 2019, then plunged to 1.58 percent in Q2 2020.
Although the overall GDP growth rate rose to 3.40 percent in Q2 2021 from -1.92 percent in the previous year’s equivalent period, the positive trend did not impact on agriculture
The sector, instead, nosedived to a 1.3 percent growth rate in Q2 of that year. It then sank deeper to 1.2 percent in Q2 2022, before recording a stunted growth of 1.50 percent in Q2 2023.
In all, while the overall contribution of agriculture to GDP hovered on the average of 23 percent during the seven-year period, the receding fortune of this sector was a major concern to the consumer goods firms. This is because the consumer goods firms rely significantly on agriculture to source their local raw materials under the backward integration policy.
In his reaction, President of Association of Small Business Owners of Nigeria (ASBON), Dr Femi Egbesola, said the development will worsen survival of small businesses, including those in the agricultural sector.
“More Nigerians will suffer from hunger, and lack of access to basic necessities and amenities, worse of it is health and medical needs.
“Overall, the implications of this on SMEs is that many more businesses will die off and become ailing, job losses will increase as many more businesses will lay off workers”, he was quoted as saying.
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
