Insecurity driving Nigeria’s inflation, than by Ukrainian crisis
You receive your monthly salary, and by the middle of the new month, you feel that an imaginary being from somewhere has spent all the money. That imaginary being is inflation.
The urgency to address the rising inflation has been further reinforced with the warning sounded by the World Bank in its latest report, entitled ‘The Continuing Urgency of Business Unusual’ where the global bank indicated that inflation will push 15 million more Nigerians into poverty in the next two years. In 2021, Nigeria was regarded as the poverty capital of the world, having recorded the highest number of people, 87 million individuals, living in poverty. That was before the Ukrainian crisis started.
While poverty elimination is a long term project, there are quite a number of options Nigeria can exercise in the short to medium term to alleviate the suffering of the people. This is necessary because the causes of inflationary pressures in Nigeria have more to do with internal issues such as farmer-herders crisis, insurgency, inadequate supports for smallholder famers than the conflicts in Ukraine.
“Since structural transformation and the creation of productive wage jobs on a large scale may not happen overnight, policies to boost the productivity of farm and non-farm household enterprises—by improving access to inputs, credit, and markets—will be crucial in the meantime”, the World Bank, said.
According to the National Bureau of Statistics(NBS), on the average, households in Nigeria spend 56.65 percent of their consumption expenditure on food items and 43.35 percent on non-food items. Also, 20.1 percent of food expenditure is spent on food consumed outside of home; 11.09 percent on starchy roots, tubers and plantains; 8.69 percent on rice; 7.73 percent on vegetables; 5.86 percent on fish and seafood; 5.64 percent on grains and flours; 5.24 percent on pulses, nuts and seeds, and 5.23 percent on meat. Thus, the top eight items we consume in Nigeria account for approximately 70 percent of household’s spending on food items.
As of May 2022, the general average price level in the country rose by 17.71 percent year on year. That is, an average household in Nigeria now needs an extra N17.71 to buy an item they bought at N100 in May 2021. And if it is a food item, the household in question will need an extra N19.50 to buy a foodstuff they bought for N100 in May 2021. This is because, the National Bureau of Statistics (NBS) reported in its latest CPI release that the food inflation was higher at 19.50 percent.
If your salary or income has not increased in the last one year, you will have to exercise discretionary spending, which implies prioritising spending by going for strictly essential items, or you continue to live as a net borrower if you want to retain the same number of items, be they food or non-food items.
The effect of the rising inflation is much more in some states. As of May 2022, twenty-one states in Nigeria have their food and non-food inflation figures higher than the national average of 17.71 percent and 19.50 percent respectively. Those states that have higher inflation (headline) than the national headline (All items) inflation are Bauchi, Akwa Ibom, Rivers, Ebonyi and Kogi. These are the worst hit states. Their headline inflation ranges from 17.81 percent to 20.62 percent.
Q: If your salary or income has not increased in the last one year, you will have to exercise discretionary spending, which implies prioritising spending by going for strictly essential items, or you continue to live as a net borrower
Many Nigerians have been feeling the heat before now, only that the release of the May 2022 Consumer Price Index(CPI) or headline inflation shows the extent the upward trend in the general average price level affects everyone. The feeling is the same in most places.
The least affected states in terms of All items headline inflation are Borno, Sokoto, Jigawa, Kaduna, and Kwara. Their headline inflation ranges from 15.45 percent to 16.38 percent.
For food inflation, the worst hit states are Kogi, Akwa Ibom, Kwara, Cross River, and Ebonyi, as their food inflation ranges from 22.03 percent to 22.79 percent against the national average of 19.50 percent. The least affected states are Bauchi, Sokoto, Jigawa, Anambra, and Kaduna whose inflation ranges from 16.46 percent to 17.14 percent.
“Most households are poor and cannot do much as they cannot cut down food, or electricity that their homes or businesses use. Do not forget that food and energy costs contributed significantly to the high inflation rate in Nigeria.
“Government must look at its monetary policy again. The CBN should stop printing money for the federal government to spend. We also need to rethink our social investment programme which fuels consumption and not production”, Abdulrauf Aliyu, a senior consultant with Fringe Insight, said.
Yam tubers, garri, and plantain have had their prices rise by 43 percent, 14 percent and 30 percent in the last one year. These are the most consumed items in the country. An average yam tuber that cost N253 a year ago now costs N361 on the average nationwide. This item costs as much as N695.93 in Akwa Ibom State. White garri that cost N318.7 on the average in April 2022 was sold for N276.3 a year ago. It was N453.3 in Ebonyi State. Yellow garri was sold for N335.2 in April 2022 as against N299.2 a year ago.
Yam tubers, plantains and garri (product of cassava) are not imported from overseas. Therefore, Nigeria will have to look in-house to address the cause of their upward movement in their prices. For years now, Nigeria has maintained its position as world’s largest producer of cassava but in spite of this, the country is losing on two fronts.
First, the prices of cassava products such as white and yellow garri, basic staples, are high, making them unaffordable to the poor, and second, the country is not making much foreign earnings from the exports of cassava products. Cassava matures between 8 and 12 months.
According to Sahel Consulting, the challenges facing inadequate cassava production could be addressed if Nigeria improves yield per hectare and other agronomic practices.
“Cassava production is dominated by smallholder farmers who use low-quality inputs and poor agronomic practices and have limited access to mechanization. This has been a major determinant of Nigeria’s current yield of 8.2MT/ha as opposed to a potential of 20-30MT/ha if mechanization and good agronomical practices are involved”, Sahel Consulting, said in its publication on cassava value chain.
Nigeria currently produces about 47 million metric tonnes yam tubers out of the global production of 73 million metric tonnes, according to the Federal Ministry of Agriculture and Rural Development. That amounted to 64.4 percent of the global production. Yam tubers have gestation period of about 14 weeks.
By geographic regions, Benue State, north central Nigeria is where yam is most produced in Nigeria. Unfortunately, the state has been embroiled in crisis in the last four years, leading to the deaths and displacements of many farmers. Addressing the crisis in this state and other states in north central Nigeria, will go a long way to aid production, and eventually make the staple more available and affordable to Nigerians.
Niger, Plateau, and the southern part of Kaduna states, a region that contributes significantly to yam production, cannot boast of such feat now as farmers’ lives are threatened on a daily basis by violent herders and insurgents.
The price of a litre of Automotive Gas Oil (AGO) popularly known as diesel rose by 181 percent in May 2022 when it was sold for N671.08 on the average nationwide compared with N238.82 per litre in May 2021. Apart from Nasarawa State in the north central region, most of the states in the north west, which is a major rice belt, experienced the most increase in the price of a litre of diesel year on year.
Year on year, diesel price rose by 220 percent in Nasarawa, it was 213 percent in Rivers, 213 percent in Zamfara, 211 percent in Kebbi, and 209 percent in Jigawa State. It was Kebbi State that produced LAKE rice in partnership with Lagos. Rice farmers in Jigawa State successfully increased yield per hectare. But due to insecurity, production has slowed in the north west region of the country.
Insecurity seriously affects agricultural productivity. As farmers run away from their farms, from fear of being kidnapped or killed, their income level drops. Not only that, some of them will find it difficult sending their children to schools, as this may explain the rising out of school children. Agriculture is still the largest employer of labour. Thus, addressing insecurity facing farmers will go a long way to reduce inflationary pressures in Nigeria.