In the last 10 months, Nigerian consumers have battled to keep up with rising prices of their basic needs.
There has been significant price hike on almost all basic items. The price of 500g of bread grew from N456.79 to N800, fuel price also increased to N250 per litre from N165 it was sold last year, diesel was not left out on the surge in price, as it surged to N800 from N288 early this year. Other food items like rice, wheat, among others have also almost doubled in price this year alone.
The headline inflation rate began an upward movement in February 2022 at 15.70 percent and has not relented till now. It grew to 21.47 percent in November 2022. In July, the country’s inflation rate hit a 17-year high with 19.64 percent. The uptick is still on.
The inflation rate is expressed as a percentage of the increase or decrease in prices of all the items of a group of goods.
This group of goods is called the basket of goods and services; it contains food items, alcoholic and non-alcoholic beverages, clothing, footwear, housing, water, electricity, fuel, transport, and other goods and services needed for everyday life.
Here are the reasons why African most populous country have been experiencing higher prices
In February, the Russia-Ukraine war (both major commodity exporters) broke out and the disruptions caused by the war and restrictions caused higher inflation globally. Global prices of oil, natural gas, and food prices rose making it harder for middle- and low-income earners to afford basic needs.
A major area of impact in Nigeria was on food prices, since both countries at war are major producers and exporters of agricultural commodities, particularly grains, and Nigeria depend heavily on them for inputs in direct human consumption and industrial processing.
The World Bank reported that in April “the average prices of locally produced staples had increased faster than the average inflation rate”
It said that before the war in Ukraine inflation was pushing millions of Nigerians into poverty. War inflation will push many more.
Read also: Food, petrol drive inflation for 10th straight month
The effect of the war is still very much felt today.
Another reason for higher prices was the hike in the average price of diesel also known as automotive gas oil (AGO) which rose by more than 200 percent over last year.
According to data by the NBS, the average retail price of diesel in August 2022 was N786.88 per litre, indicating a 209.54 percent increase from an average retail price of N254.21 in August 2021.
The impact locally has been higher costs of energy, pushing up prices of commodities and food as producers find it increasingly difficult to power factories, storage facilities and transport both raw materials and finished goods.
Rice, a key staple mostly consumed by households, was affected by the impact of the flooding incidences the country recorded two months ago. The situation caused the price of paddy to jump by over 100 percent per ton which piled more pressure on rice millers were already contending with rising production costs amid a nearly three-fold increase in diesel cost.
All these contributory factors brought about a sharp rise in rice prices across the country.
The volatility of the naira this year and its different market rates raised the cost of doing business in the import-dependent country.
The naira fell to a record-low of N800 per US dollar in the parallel market in October this year. The embattled currency is now down 20 percent since January in the parallel market,
Some manufacturers power their factories with gas, but gas prices are also surging due to the war. There are no official price rates for natural gas in Nigeria, but in the global market, natural gas sells for $8.76/MMBtu, according to data from Bloomberg.
“Nigerian factories that run on gas pay for it with dollars. FX is scarce currently in the country; so apart from contending with the surging gas prices they still need to source for the dollars to make purchases,” said Joseph Okojie, a geophysicist in Lagos.
The recently released inflation rate of 21.45 percent which is the rate at which prices of goods and services across Nigeria increased in November is said to be driven by increase in food inflation and core inflation.
Analysts at FBNQuest, in its daily morning note, said that In line with recent trends, the pressure on food prices was sustained, accounting for the largest contribution to the headline rate.
“According to NBS, the increase in food inflation reading can be largely attributed to the sharp increase in demand due to the festive season,” the report said.
It also highlighted that Imported food inflation, which increased by 15bps to 18.23 percent year-on-year from the 18.08 percent rise recorded in October, was another source of pressure.
