High food prices squeeze consumers amid brighter prospect for oil revenue

The past one month  has been challenging  for consumers, as prices of food stuffs have soared more than 40 percent, despite brighter prospects for global oil prices at the international market.

Their plight is heightened by the weakened naira and the shortage of petroleum products which have reduced the disposable income of consumers.

Analysts say the implication is that basic consumer needs have continued to elude Nigerians as prices of food stuffs have increased by more than 40 percent in the past few weeks.

Bismarck Rewane, chief executive of the Financial Derivatives Company (FDC) in his recent report, observed that “prices of tomatoes have increased due to seasonality.”

The analysts however  see a rise in the monthly federal allocation to the coffers of the Federal Government, occasioned by the good outing of oil, the nation’s major foreign exchange earner at the international market.

“The country’s Federation Accounts Allocation Committee (FAAC) allocation for May will increase to N350 billion, as compared to N299.75 received in April,” Rewane added.

According to Rewane, “FAAC allocation to be shared in May is likely to increase. Average oil prices in April were 9 percent compared to March. Prices are expected to recover to $50pb in May.

Inflation in Africa’s largest economy and oil producer, accelerated to 12.8 percent in March 2016 basically driven by food inflation. This is against 8.5 percent in March 2015, according to data obtained from the National Bureau of Statistics (NBS) website.

BusinessDay surveys at Mile 12 Market in Lagos show that a big basket of fresh tomatoes which went for N17, 000 last month now sells for N35, 000, indicating a 105 percent rise.

Findings also show that prices of other staple foods have likewise risen. A 50kg bag of garri now goes for N8,000, as against N5,500 it sold for a month ago, showing a 46 percent increase.

A basket of fresh pepper has risen 50 percent to N7, 000, from N5,000 in the  last one month.

Also, a 50kg bag of beans, which was sold for N13, 500 last month, now goes for N15, 000, indicating an 11 percent increase. Similarly, a 25 litre can of palm oil now goes for N7,800, as against N7,500 last month, indicating a four percent rise.

Bashir Zakari, a tomato seller at Mile 12 market, said a basket of tomatoes now sells for between  N30, 000 and N35,000 depending on the size of the basket, as against N2,800 and N4,500 a month ago.

“The price of tomatoes normally goes up by this time of the year, but this year’s increase is higher because of the tomato disease that has affected some farms in the north. It has also been raining excessively in the north and this inhibits the progress of tomatoes,” he added.

Rewane expressed optimism about revenue from oil, following brighter prospects in the prices, adding that the implication is that more funds would be going into the coffers of the cash strapped states.

He however warned  “Lower oil production will limit impact of price rally on government revenue.”

The near 70 percent slide in the global price of  crude oil which earns Nigeria over 95 percent of its dollar revenue had already led to FX shortages and capital control which hurt businesses and undermined growth.

Consequently, the 36 states shared N299 billion in April (FAAC), as against N1.2 trillion in early 2015, the lowest level in six years.

The states have continued to struggle to meet social and economic obligations as dwindling federal allocations are not sufficiently supported by Internally Generated Revenues (IGRs) across states.

States and local government workers continue to groan over unpaid salaries, as some states owe between three and ten months.

The Federal Government has continued to provide reliefs and give bailouts to struggling states.

As at the fourth quarter of 2015, the debt owed by Nigerian state governments to deposit money banks (DMBs) was in excess of N600 billion. 

In addition to N338 billion injected by the Central Bank of Nigeria (CBN) as bailout, the total credit to some 27 financially distressed states was in the neighbourhood of N1 trillion.

Despite the situation of most states, the Edo state government increased its minimum wage by 38.9 percent to N25, 000 from N18, 000. The state had the fifth largest internally generated revenue in 2015.

Josephine Okojie