Cash-strapped consumers continue to face tough times as Nigeria’s food inflation surged to the highest levels since October 2005, keeping the cost of living significantly high.
Food prices rose by 23.12 percent in August 2022, the highest in 16 years and nine months, from 22.02 percent in the previous month, data from the National Bureau of Statistics (NBS) show.
Worsening insecurity and climate change are fuelling a surge in food prices in the country. The situation has been aggravated by the Covid-19 disruption, the Russia-Ukraine war, and foreign exchange (FX) scarcity.
Analysts say the surge in prices would worsen Nigerians’ living standards and ability to invest for future wealth creation, as more people would have less income to access quality education, healthcare, transportation, and adequate shelter, among others.
“With a food inflation rate of more than 20 percent, it is safe to assume that the share of food expenses would have increased to more than 65 to 70 percent with the negligible increase in income,” said Temitope Omosuyi, an investment strategy analyst at Afrinvest Limited.
Omosuyi further said that more specifically, the rising prices have increased the incidence of food insecurity.
“This is a sure recipe for rising social tensions and a prolonged underdevelopment of the economy. If people do not have enough money to spend on education and health (both critical to human capital development) as a result of the high cost of food, the economy will continue to remain less industrialised, fragile, and less competitive,” he added.
Nigeria’s headline inflation rate also sustained its upward movement as it rose to 20.52 percent in August, the highest inflation rate since September 2005 compared to 19.64 percent in the previous month.
Core inflation, which excludes the prices of volatile agricultural produce stood at 17.20 percent in August, the highest since January 2017.
This implies more cost pressures on the average consumer, said Damilola Adewale, a Lagos-based economic analyst.
“Then they would have to incur more cost or spend more to acquire basic food and services; implying further weakening of their wallet or real income,” Adewale said.
The World Bank 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.
In order to curb rising food prices, a new report titled ‘How Africa Can Escape Chronic Food Insecurity Amid Climate Change’ by the International Monetary Fund (IMF), recommends climate-resilient infrastructure as a way to protect food production and distribution from weather events.
Some of the frameworks considered by the international organisation include solar power, for example, which it said will facilitate irrigation, water access, and temperature control for food storage. “Equally impactful is a flood barrier that protects ports and roads critical to food distribution,” the report stated.
“Digitalisation is also crucial as it gives farmers access to early warning systems and mobile banking as well as platforms to purchase fertilisers, seeds, or sell produce, connecting small producers to large vendors,” it added.
The IMF report also identified that social cash transfers/assistance that is targeted and far-reaching can help people buy food and rebuild after weather shocks, making families and small businesses able to invest in resilience-building equipment and technology.
It also said access to larger markets can incentivise investment in agricultural production networks and value chains, facilitate knowledge spread such as how to plant drought-resistant crops and spur competition.
“One positive step in this direction is the Africa Continental Free Trade Agreement among 54 countries, which covers most goods and services,” it said.