After 15 months of persistent rise in inflation, the main drivers of the adverse economic trend – food and non-food items – moderated in February, bringing the rate down to 17.78 per cent.
Nigeria is no stranger to riots and demonstrations. From the days of “Ali Must Go” in the late 1970s; the SAP riots in 1989; the June 12, 1993 protests and the perennial outbursts by the various militant groups in Nigeria, the country appears to have become accustomed to riots. While the Nigerian state has managed to weather these storms, the country can ill-afford food riots. As the saying goes, a hungry man is an angry man. Nigerians are already very angry about the high level of corruption in the country; the ongoing recession; the lack of inclusive growth; the high unemployment rate; chronic poverty; infrastructural decay and the lack of economic opportunities. For many Nigerians, a persistent increase in food prices would be the last straw that jolts them into food riots.
Professor Yemi Osinbajo, Nigeria’s Vice President, understood the severity of the problem when he established a Presidential Task Force last February to address the problem of escalating food prices. But long-term solutions require much more than the mere setting up of a task force. Some of those solutions will be discussed later in this article. Rising food prices in Nigeria is very intriguing, considering that food prices have been falling globally. According to a January 2017 report by the United Nations, the global prices of food declined for the fifth time in a row, in some cases by 1.5 per cent below 2015 levels. The Food and Agriculture Organization’s (FAO) food price index plummeted from a high of 229.9 in 2011, to 161.5 in 2016. In contrast, Nigeria’s National Bureau of Statistics (NBS) estimates that the average price of food in the country increased by a whopping 18 per cent during the past year. Beyond statistics, most Nigerians I spoke with in the past year, including middle-class households, complained that food is increasingly becoming unaffordable.
Rising food prices is problematic because it reduces the real purchasing power of households, and shifts expenditures away from essential items such as health, education, housing, etc. Data compiled by the World Economic Forum show that the average Nigerian household spends about 56 per cent of income on food (the highest in the world!). Three other African countries with high expenditures on food as a percentage of income are: Kenya (46.7 per cent), Cameroun (45.6 per cent), and Algeria (42.5 per cent). To put things in context, countries like USA, UK, Canada and Australia spend 6.4 per cent, 8..2 per cent, 9.1 per cent and 9.8 per cent, respectively. This is consistent with Engel’s law in Economics, which argues that poor households (and developing countries) typically spend a larger proportion of income on food.
Why are food prices rising in Nigeria, whereas they have been falling globally? First, as an import-dependent economy, the depreciation in the value of the Naira relative to foreign currencies may have resulted in steep increases in the prices of imported food (rice, sugar, milk, beverages, frozen food, etc.). Second, because of Nigeria’s rapid population growth, food supply in the country may be lagging behind demand. Nigeria’s population has been growing by about 3 per cent per annum, while the growth of agricultural value added was estimated by the World Bank to be 3.7 per cent as of 2015. This means that agricultural output is barely keeping pace with consumption. Supply shortfalls have been exacerbated by instability in food-producing areas of the country, deteriorating rural infrastructures, climate change and the exodus of rural dwellers to urban centres in search of illusive opportunities. Finally, the country’s high inflation rate of about 16 per cent inevitably affects food prices, as all prices adjust to reflect the level of inflation.
Rising food prices is a major problem in Nigeria, and may precipitate food riots if not addressed effectively. The unemployment rate in Nigeria, officially estimated at 14.2 per cent, implies that many Nigerians suffer the double-whammy of low income (or no income at all) and rising food prices. Wages have also been very stagnant, causing significant decreases in the real purchasing power of workers. Thus, the demand by the Nigerian Labour Congress (NLC) for a significant increase in the minimum wage is unassailable and long overdue. It is now obvious that the so-called minimum wage in Nigeria has become the proverbial “starvation wage.”
Nigeria is one of few developing countries with no food-related safety nets for the poor. Perhaps more worrisome is the fact that the Nigerian financial system has not evolved to the level whereby people could easily obtain credit to smoothen short-term falls in consumption.
I would like to offer some advice on how not to address the problem of rising food prices in Nigeria. When I heard that Osinbajo was about to form a task force to address the problem of Nigeria’s food crisis, I muttered to myself: Gee, I hope they’re not going to resort to the era of the 1980s when, in response to rising food prices, the Shagari government (and later Buhari’s military administration) resorted to the massive importation of the so-called “essential commodities.” Those commodities were supposed to be sold at heavily subsidized prices through designated supermarkets and other outlets. Companies, government ministries and universities received “essential commodities” from the government, and sold them to their workers at huge discounts. But we all know the end result: racketeering, cronyism, emergence of a black market in “essential commodities,” and corruption. There are no easy and quick fixes for Nigeria’s food crisis. India started its arduous, but purposeful, journey to food self-sufficiency in the 1960s, and it took a very long time before its agricultural development strategy began to pay-off .The way to solve the problem of food crisis in Nigeria is through sound economic policies and institutional reforms that raise farmers’ productivity, boost supply, and lower prices. I doubt that a task force would succeed in accomplishing that task.
Prof. Onyeiwu writes from the Swami Vivekananda Leadership Development Institute, Mysore, India