Nigeria’s already high food prices are expected to take yet another jump as the Central Bank of Nigeria (CBN) considers adding sugar and wheat to the list of items not granted access to foreign exchange for import.
In a tweet on Friday, the CBN said it is considering adding the two items on its FX restriction list, adding that Nigeria must work together to produce the items in the country rather than importing them.
“Sugar and wheat to go into our FX restriction list,” said the tweet, quoting Godwin Emefiele, the Central Bank governor.
The addition of sugar and wheat to the already restricted 44 items takes the list to 46 that are not granted access to FX for importation.
“It is going to add more pressure on the already high food inflation. Sugar is one of the most used items, both for industrial and retail,” Yinka Ademuwagun, research analyst, FMCGs at United Capital Plc, said.
Wheat dominates Nigeria’s agricultural import as it accounted for about 41 percent of total agric import in 2019. While local demand for wheat is put at about 5 million metric tons (MMT) supported by a paltry domestic supply of less than 1 MMT, Nigeria has a wheat demand gap that is estimated at over 4MMT and is met by production from Russia, Ukraine, among others.
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According to Ademuwagun, the move will affect the outlook for food inflation which was projected to improve in the second half of 2021.
Nigeria’s consumer price index, which measures the rate of increase in the price of goods and services, increased to 18.17 percent in March from 17.33 percent in February, according to data from the National Bureau of Statistics (NBS).
With 19 straight months of the rising inflation rate, the figure reported in March is the highest Africa’s largest economy has recorded since January 2017 when it climbed 18.72 percent.
Food inflation, which is now at the highest in over 12 years, remains the key driver of Nigeria’s core inflation. Food inflation increased by 1.16 percent, year on year, from 21.79 percent in February to 22.95 percent in March.
The rise in the food index was caused by increases in prices of bread and cereals, potatoes, yam and other tubers, meat, vegetables, fish, oils and fats and fruits.
With the increasing price of tubers, Nigerians were largely depending on a substitute like wheat but the FX restriction for the item means there is likely no hiding place for most of the country’s consumers whose purchasing power has been eroded by the country’s struggling economy.
The last time the CBN added an item to the FX restricted list was in July 2020 when it added maize.
The apex bank in 2016 restricted 41 items from access to officially sourced forex. In 2019, President Muhammadu Buhari directed the apex bank to stop providing foreign exchange for the importation of food into the country. This was followed by forex restrictions on the importation of fertilizer, milk and dairy products in January and February 2020, respectively.
Responding to the restriction of the new items, a manufacturer who asked not to be identified said it was a welcome development but the CBN should have paused to ensure that Nigeria was self-sufficient in its domestic production of the two items.
According to him, it is to ensure “we do not create a knock-on effect on inflation” because sugar, for example, “is used on virtually everything in our industries”.
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