Food inflation falls for second consecutive month in August

Nigeria’s food inflation has declined for the second consecutive month in August after hitting an 18-month high in June on bumper harvest.

Data from the National Bureau of Statistics (NBS) shows that August food inflation slowed to 37.52 percent from 39.53 percent in July 2024, down by two percent.

On a year-on-year basis, it rose 8.18 percent from 29.34 percent in the same period of 2023, NBS data shows.

Experts attributed the decline to the improvement in food supply across markets in the country as prices of food items started declining since mid-June.

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Farmers in major crops growing states are currently harvesting various crops which have helped to boost local supplies.

BusinessDay findings show that a painter of garri dropped 25 percent to N3,000 from N4,000 in May and June when garri turned gold for an average Nigerian.

Prices of other food items like rice fell from an average of N90,000 per 50kg bag earlier in the year to currently N60,000, depending on the brand and location.

Similarly, fresh tomato and pepper prices dropped by about 62 percent as more farmers harvest their vegetables due to a break in rainfall.

The NBS explained that the drop in food prices was majorly driven by a decline in the average prices of tobacco, tea – cocoa, coffee,

groundnut oil, milk, yam, Irish potatoes, water yam, cassava, palm oil, and vegetables.

As food inflation, which is the main driver of headline inflation, dropped, headline inflation also decreased to 32.15 percent in the period under review from 33.40 percent in July 2024, marking its second decrease in 19-month.

In a September report, CardinalStone also pinned August food inflation drop to the onset of the harvest season.

“We attribute the deceleration to the food basket, which moderated to 37.52 percent year-on-year, largely supported by the onset of the harvest season,” they noted in the report.

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The NBS reported that although overall food inflation declined in August, Bauchi, Kebbi and Jigiwa were states with the highest level of food inflation with 46.46 percent, 37.51 percent and 37.43 percent, respectively.

Benue, Delta and Imo States recorded the lowest rate of food inflation with 25.13 percent, 26.86 percent, and 28.05 percent, respectively.

Some analysts however project a rise in food inflation in September because of the present Premium Motor Spirit (PMS) crisis.

Prices of fuel which have surged 67 percent from N568/litre to currently N950/litre, might be putting fresh pressure on declining food inflation.

BusinessDay analysis of the correlation between PMS commonly known as fuel and food prices, reveals that whenever there’s a hike in fuel prices, food prices also soar.

However, CardinalStone in its outlook for September sees food inflation decreasing further.

“On the food basket, we expect a sustained deceleration in September, supported by full-blown harvest season. Having adjusted our model for reported cases of flooding and lesser-than-average harvest in some states, we expect food inflation to decelerate by 11bps to 37.4 percent,” the report said.

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“Furthermore, the pass through of higher PMS prices is unlikely to be pronounced on food inflation as most agro-machineries and trucks for logistics are mostly diesel-powered. Overall, we expect headline inflation to increase by 15bps to 32.3 percent in September 2024,” it added.