While global food prices dipped for the tenth consecutive month in January 2023, food inflation has continued to accelerate in Africa’s biggest economy.
The January inflation report published by the National Bureau of Statistics (NBS) shows that food inflation rose by 24.32 percent in January, month-on-month, up 2.4 percent from 23.75 percent in December. It also rose by 7.19 percent compared to the rate recorded in January 2022 (17.13 percent).
“The rise in food inflation was caused by the increase in prices of bread and cereals, oil and fat, potatoes, yam and other tubers, fish, vegetable, fruits, meat, and food products,” according to the country’s statistics agency.
For the global food prices, the Food and Agricultural Organisation (FAO) reported that the food price index averaged 131.2 points in January, 0.8 percent lower than the previous month and 17.9 percent below its peak reached in March 2022.
The international organisation noted that the January decline was essentially unchanged (up a mere 0.1 percent) from December and stood 4.8 percent above its level of one year earlier.
The marginal decline however, was driven by drops in international wheat prices which declined by 2.5 percent, vegetable oil price index which declined by 2.9 percent, prices of palm and soy oils, sunflower seed and rapeseed oils, dairy price, meat price index which edged down by just 0.1 percent, and sugar price index which dropped by 1.1 percent from December.
Analysts at Financial Derivatives Company tweeted via their Twitter handle that because Nigeria is not a net food importer, the impact of the drop in global food prices may be less pronounced than in other economies.
“And even though the CBN has raised interest rates cumulatively by 600 bps, inflation has only declined by 13 bps. Therefore, the impact of an increase in the interest rate on raising the marginal propensity to save and reducing aggregate household consumption in Nigeria has been ineffective,” they tweeted.
Also, foreign exchange volatility is another factor driving food prices up.
Since 2020, the COVID-19 pandemic coupled with the Russia-Ukraine crisis which started earlier in the year, has worsened the country’s FX challenges in the country.
BusinessDay finds that queues for petrol at filling stations across the country are also responsible for the surge in food prices, as transportation costs double.
Analysts have also said the scarcity of the currency notes and petrol is leaving critical sectors such as trade and agriculture particularly vulnerable. These sectors contribute significantly to the country’s Gross Domestic Product (GDP).
“The scarcity of the new notes and petrol is causing distortions to individuals, businesses and the economy at large,” said Sola Obadimu, director general of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA).
Last year, the World Bank said the country’s accelerated inflation growth pushed an additional five million Nigerians into poverty.
“On a month-on-month basis, January 2023 food inflation was highest in Lagos (3.67%), Ogun (3.54%), and Ekiti (3.32%), while Yobe (-0.50%), Jigawa (0.18%) and Kebbi (0.92%) recorded the slowest rise on month-on-month inflation,” the NBS report stated.
