Why food prices remain high despite fall in inflation

Nigerians have continued to decry the rising food prices of some staples even as inflation begins to decelerate after 19 months straight rise.

Africa’s biggest economy saw its consumer prices drop slightly to 33.40 percent in July, 2024 while food inflation declined to 39.95 percent on lower food prices, according to the National Bureau of Statistics.

Experts said the drop in the headline inflation does not necessarily mean prices are coming down, rather it gives some respite to consumers of a halt in further rises.

“When we say inflation is dropping, what it means is that the rate of increase is slowing, not that prices are coming down,” said Muda Yusuf, the chief executive officer of Centre for Promotion of Private Enterprises (CPPE).

“Deflation is a drop in price but inflation is a decrease in the rate of the increase in prices,” the CPPE boss added.

For Samson G Simon, an Abuja-based economist, the general price level still remains high but at a reduced rate as core inflation rose from 27.40 percent in June to 27.47 percent in July.

“Prices of food items actually reduced due to harvests like tubers (yam and potatoes) and tomatoes. While other food items like milk actually increased but at reduced rates.

“This is attributable to base effects. Those not harvested on an industrial scale yet like rice, beans and maize have remained stubbornly high without budging,” Simon said.

BusinessDay’s findings show that prices of key staples such as tomatoes, pepper, potato, yam and garri have declined slightly across markets in the country as farmers commence harvest, offering relief to households.

But for average Nigerians, the reality at the market is still a far cry as they continue to grapple with rising prices on food and energy.

Omoyemi Olaniran, a public servant and single mother of three said prices are coming down but still elevated as she spends over half of her income on procuring food.

“The rate at which foodstuffs are coming down is not significant when compared to early this year or the previous year. Prices of rice, beans, garri are still high. The government needs to make it drop to stop this hunger all over the country,” she said.

Nigerians, especially those in urban areas and low-income households, report that the prices of essential food items like rice, beans, and bread have remained stubbornly high or even increased in recent months.

“It is a reality that prices of tomatoes, pepper and some other vegetables have dropped. And there is fluctuation in prices of other commodities like beans and rice,” Abiodun Olorundero, managing partner at Prasino Farms, told BusinessDay.

The agricultural expert has cautioned that the recent decline in inflation rates might be short-lived. Despite the positive figures, he pointed out that the prices of essential commodities such as bread and rice remain elevated.

Olorundero attributed the current food price challenges to unfavourable weather conditions, particularly the rainfall deficit experienced in the northern part of the country. This, he said, has adversely affected agricultural production.

“The prices of food items in the market have reduced compared to previous months, “Tobi Ehinmosan, macroeconomic and fixed income analyst at FBNQuest Merchant Bank said.

He noted that this might not really be felt by the average Nigerian immediately as prices had skyrocketed so high.

The federal government had announced a 150 day-free import duty on staples such as maize, millets, sorghum but still banned the imports of processed rice for a country whose domestic demand is rising.

Olorundero expressed scepticism about the effectiveness of the government’s new policy of zero import duty and VAT exemption on basic food items.

According to him, the policy’s stringent conditions, which limit imports to paddy rather than processed rice, could hinder its impact on rice prices.

“The transportation of paddy to processing plants in the north and the potential for rice exports due to a weaker naira could further mitigate the policy’s benefits,” Olorundero said.

He emphasised that the ongoing challenges of high energy costs, foreign exchange volatility, and increased labour expenses due to the minimum wage hike would likely contribute to persistent inflationary pressures.