On a daily basis, Nigerians have continued to lament the increase in prices of goods and services. Many have blamed it on the removal of petrol subsidies. With the September Consumer Price Index report by the National Bureau of Statistics (NBS), analysts have said food inflation might just continue to push up inflation; BENJAMIN UMUTEME reports.
In the September 2023 Inflation report, the National Bureau of Statistics (NBS), stated that headline inflation rate increased to 26.72 per cent relative to the August 2023 headline inflation rate which was 25.80 per cent.
Looking at the movement, the September 2023 headline inflation rate showed an increase of 0.92 per cent points when compared to the August 2023 headline inflation rate.
The NBS stated: “On a year-on-year basis, the headline inflation rate was 5.94% points higher compared to the rate recorded in September 2022, which was 20.77%. This shows that the headline inflation rate (year-on-year basis) increased in September 2023 when compared to the same month in the preceding year (i.e., September 2022).
“Furthermore, on a month-on-month basis, the headline inflation rate in September 2023 was 2.10%, which was 1.08% lower than the rate recorded in August 2023 (3.18%). This means that in September 2023, the rate of increase in the average price level was less than the rate of increase in the average price level in August 2023.”
The NBS further stated that the food inflation rate in September 2023 rose to 30.64% on a year-on-year basis, which was 7.30% points higher compared to the rate recorded in September 2022 (23.34%). The rise in food inflation on a year-on-year basis was caused by increases in prices of oil and fat; bread and cereals, potatoes, yam and other tubers; fish; fruit; meat; vegetables and milk; cheese, and eggs.
And again, in its Selected Food Prices Watch report for the same month of September, the statistics bureau revealed that the average price of 1kg of Beef boneless rose to N2,816.91 from N2,799.51 recorded in August 2023, indicating a 0.62 per cent rise in price on a month-on-month basis.
The average price of 1kg of Rice locally sold loose increased by 60.59 per cent on a year-on-year basis from N471.42 in September 2022 to N757.06 in September 2023. On a month-on-month basis, the average price of this item increased by 2.48 per cent from N738.74 in August 2023.
The average price of 1kg of Beans brown (sold loose) rose by 28.76 per cent on a year-on-year basis from N556.81 in September 2022 to N716.97 in September 2023. On a month-on-month basis, it increased by 3.47 per cent from N692.95 in August 2023.
Mrs. Magdalene Mike said that the continuous rise in food prices was taking a serious toll on her profit margin. Mrs. Mike told this reporter that it is now difficult to determine the price of anything due to the constant change in prices of goods and services.
“Nobody knows what will happen the next day. Last week, I bought a mudu of rice for N1, 200 only for me to go to the market yesterday (Tuesday), and they are telling me the price is N1, 350. I don’t know where we are going in this country,” she said.
Worrisome trend
For Nigeria’s first professor of the Capital Market, Uche Uwaleke, rising inflation reflects the impact fuel subsidy removal and Naira depreciation is having on the economy.
Uwaleke while noting that the pressure point is on food which contributes about 14 per cent (over 50%) of the 26.72 per cent, said the pressure is felt more in the urban than in rural areas possibly on account of high transport costs.
He said that the “trend in the inflation rate is quite worrisome given its impact on the purchasing power of the Naira and by extension on poverty level. It is equally partly to blame for the increasing dollarisation of the Nigerian economy and the demand pressure in the forex market.”
Adefolarin Olamilekan, a political economist, noted that the prices of food and other commodities have contributed to the high inflation rate.
In a chat with Blueprint Weekend, Adefolarin said other non-monetary factors have contributed to worsen the situation – issues such as “insecurity, deplorable roads, multiple taxations, high cost of farm inputs, chemicals and fertilisers. Added to this is our proclivity for importation of foreign goods, particularly some food items that can be easily produced locally,” he said.
Many Nigerians were beginning to be optimistic that inflation might taper before the end of the year, but the Managing Director of SD&D Management Limited, Gabriel Idakolo, poured cold water on that optimism when he told this reporter that, “We are not likely to see food inflation slowing down because factors like the recent wage award by the Federal government and the astronomical increase in the rate of Naira to US dollars are key factors that drives food inflation upwards.
“The distribution of palliative is not an effective action to halt the rise of food inflation because from what is being reported what has been distributed is grossly inadequate and it has also been reportedly shared to very few people in the various states where it has been distributed.”
No slowdown until Q1 2024
In a chat with Blueprint Weekend, a senior economic analyst, Baze University, Abuja, Dr. Okafor Tochukwu, insisted that Nigerians were not likely to see a slowdown in food inflation until the first quarter of 2024.
For Dr. Okafor, “Any policy that is being put in place to fight inflation, even if it’s going to work, we are going to witness a large effect, the impact is going to be felt in the next three months because the impact come after the policy have been implemented not as soon a the policy is announced.
“Secondly, a couple of factors in the current reality are not going to permit that, first, we are in an election year, and an election year is usually inflationary naturally. That one is basic.
“We are nearing the yuletide period; Christmas comes with a certain level of inflation. Prices always spike and skyrocket. If we were to witness any slowdown we were supposed to have started witnessing it in August and September. Why we are not witnessing it is because there are a couple of infrastructural and security anomalies that are inherent in the system. And what do I mean by this? If you look at the declaration made by the president when he assumed office, he said subsidy has been reduced not removed.
That subsidy reduction actually increased diesel prices, and you know that diesel prices are what most of these farmers use to transport their goods. When prices of diesel go up naturally the price of food will go up. And you know everybody already had a budget for what they wanted to spend, that shock actually hit a lot of people’s budget outside their spending capacity.
“We know that the roads themselves are not good, they are not even secure, and that is where the insecurity comes up. The insecurity contributes heavily because farmers are actually increasing the prices of their goods because of the stiff nature or flexibility they have to work within their farms. Take for instance, personally, I know a farmer that opened a palm oil factory and in less than a month, two of those factories were burnt all in one day.
No question was asked, they burnt it, burnt his farm. This is someone that is supposed to be supplying palm oil to a certain state. You notice that immediately he is out of the window, the number of palm oil that will be delivered by others will reduce. And you know that when there is shortage in supply it drives scarcity and scarcity drives value and value drives prices up. So, you begin to see that prices of those specific commodities start going up.
“Another one is the trickle-down effect from import. As a result of the devaluation of the naira from N400 to N700, we notice that importation of goods started skyrocketing, now that is at the official market and we know that everybody uses the black market presently and at the black market dollar is going for N1250-N1300, so when you look at that you’ll notice that things that people usually import before at N800 has skyrocketed by more than N500. So, if you put that into the value chain, you will discover that the prices of certain food items are going to skyrocket because we import most of them,” he further explained.
Addressing the inflation trend
Idakolo said, “Monetary policy alone cannot address the rising inflation challenge we face because fiscal input from the government is key to attacking the problem headlong. The twin instruments of both monetary and fiscal policies need to be employed to have meaningful impact.
“To curtail the rise in food inflation, the government needs to address the continued depreciation of the Naira and implement the agricultural policy aggressively.”
In view of the supply-side factors driving inflation in Nigeria including rising cost of transport, energy, flooding and insecurity, the government must play complementary roles to that of the CBN through tackling insecurity, massive investments in power and agriculture in partnership with the private sector as well as ensuring the speedy resuscitation of the refineries in order to bring down the cost of transport as well as help naira appreciation in the forex market when an end is put to import of petroleum products,” Uwaleke said.
“For us, the government tackling the over 30 per cent high food inflation would require consistent policy implementation. Therefore relying on CBN monetary policies is not enough without balancing it up with a mixture of fiscal and trade policies that would go a long way to help us address the imbalance within the nation’s weak macroeconomic fueling food inflation. Another is for the government to prioritise its food and water resource security policy by ensuring sub-national governments are carried along in the implementation,” Adefolarin said further.
Monetary, fiscal harmony
To address the present anomaly, Dr. Okafor opined that fiscal and monetary authorities should meet at the beginning of every year where they can have a single agenda for the year and both of them work on that agenda.
“For some reason, we begin to see that there is now a thin line between the CBN encroaching into the fiscal space and doing the fiscal authority space and the fiscal authority doing the CBN job.
“When they harmonise, both of them know what their responsibilities are. As far as I am concerned the reason there is dollar scarcity is that the CBN is meant to control the demand and the utilisation of forex while the fiscal authorities have the sole duty of dealing with the supply end of it,” he said.