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Nigeria food prices defy global drop on low productivity

food-market

Prices of food commodities in Nigeria have not tracked global trends which have dropped for the fourth consecutive year, as a combination of inefficient transport links, high energy costs and low productivity combine to keep prices elevated. 

The UN Food Price Index “averaged 164.1 points over 2015 and ended the year even lower, at 154.1 points during the month of December,” data from the Food and Agricultural Organisation (FAO), website shows.

“In December, the index declined a further 1.0 percent from its revised November value, as falling prices for meat, dairy and cereals more than offset gains by sugar and vegetable oils.” 

In Nigeria however, prices of food commodities have been on the increase without recourse to price drops on the global scene. While prices dropped even further at the end of 2015, the opposite was the case in Nigeria, especially in December.

Consequently, the headline inflation for December edged 0.2 percent points to 9.6 percent, a second consecutive increase, as prices of both food and food items moved higher.

According to the National Bureau of Statistics (NBS)  the increase in the Headline Index was driven in part by higher prices within key divisions, which contribute to the index.

In particular, imported food items within the Food and Non Alcoholic Beverages Divisions; Alcoholic Beverage, Tobacco and Kola; Clothing and Footwear and Transportation (as a result of intermittent PMS supply shortages) divisions all impacted the index.

At the beginning of 2016, prices have remained largely unchanged. A big sack of onions sells for N9, 000 and rice sells for N10, 000 or more.

A recent exception is a big basket of tomatoes weighing 45kg on the average, which in December sold for as much as N8, 000, but presently sells for N4, 000.

Market sources however, express skepticism on the sustainability of the reduction, which is described as seasonal and erratic.

Abdolreza Abbassian, FAO senior economist said “abundant supplies in the face of a timid world demand and an appreciating dollar are the main reasons for the general weakness that dominated food prices in 2015.” 

Victor Okoruwa, a professor in the Agricultural Economics department, University of Ibadan, ascribes the lack of food price reduction in Nigeria to local costs of PMS otherwise known as petrol.

Said Okoruwa, “It is true that the price of crude is dropping internationally but the refined product (fuel), which we use in Nigeria, is not coming down.” 

He further explained, “a lot of processors and marketers use fuel and diesel because we have not been able to improve the capacity of our energy without relying on fuel. As a result, these will raise the cost of production; cost of moving these goods from one end to the other, and of course, it will backfire on the prices of food.” 

Lateef Sanni, a professor at the Federal University of Agriculture, Abeokuta, also buttresses this position. Sanni says, “We spend much of our energy on non-agricultural based activities, and unfortunately for us, the price of crude oil is coming down and it is affecting production costs for some of these commodities too. The transportation cost is now higher than before, as well as labour cost.”

He added, “As a country, the government seems to talk too much about going into agriculture rather than doing the work”.

Apart from energy and government’s resolve to focus on agriculture, infrastructure is identified as another variable contributing to increasing food prices against global reductions which ought to be experienced in Nigeria as well. 

Sanni, also a professor, explains, “ We are supposed to have warehouses to store our commodities and release (when needed) just as it is done in other countries.We do not have much of the storage silos in Nigeria. The implication of this is that once farmers have harvested and seen what they can sell, all others are left to rot.

“As a result of this, there is high food loss, which according to him also translates to farmers and distributors putting more money on the available quality commodities that they are selling in the market.”

CALEB OJEWALE