While global food prices dipped for the fourth consecutive month in July 2022, food inflation has continued to accelerate in Africa’s biggest economy for the fifth straight month.
The July inflation report published by the National Bureau of Statistics (NBS) shows that food inflation rose by 22.02 percent in July, month-on-month, up 2.04 percent from 20.6 percent in June, the highest in 14 months. It also rose by 0.99 percent compared to the rate recorded in July 2021 (21.03 percent).
This rise in food inflation was caused by the increase in prices of bread and cereals, food products, potatoes, yam and other tubers, meat, fish, oil, and fat.
For the global food prices, the Food and Agricultural Organisation reported that the food price index averaged 140.9 points in July, down 13.3 points (8.6 percent) from June, marking the fourth consecutive monthly decline.
The international organisation noted that the July decline was the steepest monthly fall in the value of the index since October 2008, led by significant drops in vegetable oil and cereal indices, while those of sugar, dairy and meat also fell but to a lesser extent.
Analysts at Financial Derivatives Company tweeted via their Twitter handles that the divergence between domestic inflation and global prices are partly because of the time lag between exogenous events and transmission into domestic prices.
“Imported inflation is a combination of high global prices and exchange rate depreciation. And even though we have begun to see global food prices declining, the impact may be limited in Nigeria by a further deterioration in the value of the naira,” they tweeted.
They added that based on their econometric model, the exchange rate had a 76 percent impact on the price level.
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.
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On July 28, at the official market, the exchange rate between the naira and the US dollar closed at N430/$1, an increase of 31.4 percent from 327/$1 in March 2020. While at the parallel market, it closed at N710/$1, an increase of 92 percent from N368/$1 in March 2020
“In recent times the exchange rate in Nigeria has been volatile and moving upwards. So, while global food prices are dropping, the exchange rate at home is not, this is why there is an increase in the food prices because most of them are usually imported,” said Moses Ojo, a Lagos-based economic analyst.
Ojo expects that food prices will increase further in the coming months, as long as the exchange rate keeps increasing.
Apart from July food inflation, the NBS report highlighted that the country’s headline inflation also sustained its upward movement as it rose to 19.64 percent in July, the highest inflation figure since October 2005 compared with 17.38 percent in July 2021.
Core inflation, which excludes the prices of volatile agricultural produce stood at 16.26 percent in July, the highest since January 2017.
Food is now costly to prepare. I used to budget a specific amount for feeding but I don’t do that anymore because you can’t determine what the market brings next, says Emmanuel Chigozie, a 22-year-old undergraduate at the Federal University of Technology, Owerri.
“Now, I just buy a bag of rice and other items in large quantities and support them with noodles. I eat more noodles in midweek and prepare rice on weekends which I handle with care,” Chigozie explained.
A recent report by the World Bank titled “The Continuing Urgency of Business Unusual,” stated that inflation in Nigeria, already one of the highest in the world, is likely to increase further as a result of the rise in global fuel and food prices caused by the war.
The international organisation estimates that the inflation is likely to push an additional one million Nigerians into poverty by the end of 2022, on top of the six million Nigerians that were already predicted to fall into poverty this year.
