The National Bureau of Statistics (NBS) on Thursday reported that Nigeria’s headline inflation rate has dipped to 33.40% in July from 34.19% in June, sparking a glimmer of hope for many Nigerians.
In July 2024, the food inflation rate stood at 39.53% year-on-year, a significant increase from 26.98% in July 2023.
However, on a month-on-month basis, there was a slight decrease in the rate of food price increases—down from 2.55% in June 2024 to 2.47% in July 2024.
This drop, albeit minor, is attributed to a reduction in the prices of certain staple foods such as garri, akpu (fufu), and fresh fish, among others.
Several reports and surveys confirm these trends, highlighting that prices of items like tomatoes, pepper, and Irish potatoes have indeed dropped in recent months.
For instance, a basket of tomatoes has reportedly fallen from N120,000 to N50,000 between June and August 2024, offering some relief to consumers. The cost of garri, a staple in many Nigerian households, has also seen a reduction.
Many people, 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.
“The figures don’t reflect what I’m seeing in the market,” said Adenike, a mother of three in Lagos. “The price of beans, bread, and rice has gone up again. It’s becoming increasingly difficult to put food on the table.”
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Similar sentiments were echoed by market traders and consumers across the country. While some items may have experienced a slight price reduction, the overall cost of a food basket remains exorbitant for many families.
“Price of Garri, yam, tomatoes dropped a little, but rice, beans, bread, spaghetti, and groundnut oil is still very expensive,” said a trader in the Ikotun area of Lagos who does not want to be mentioned.
Beyond the numbers, inflation has a profound impact on people’s lives. Many Nigerians are resorting to desperate measures to cope with the rising costs.
Some are reducing meal sizes, skipping meals altogether, or buying cheaper, less nutritious food. Others are withdrawing their children from private schools and enrolling them in public ones to make ends meet.
“I used to buy two crates of eggs a month,” said Samuel, a small business owner in Lagos. “Now, I can barely afford one. It’s a constant struggle for my family.”
Experts weigh in
Economists and analysts have offered various explanations for the fluctuating inflation rates. Some attribute the recent decline to seasonal factors like increased agricultural production. Others point to government policies and exchange rate stability as contributing factors.
However, most experts agree that addressing the root causes of inflation, such as insecurity, infrastructure challenges, and monetary policy, is crucial for achieving sustainable price stability.
“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, said.
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.
Olorudero attributed the current food price challenges to unfavorable weather conditions, particularly the rainfall deficit experienced in the northern part of the country. This, he said, has adversely affected agricultural production.
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He expressed skepticism 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.
Olorudero 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.
On his part, Muda Yusuf, the chief executive officer of the Centre for the Promotion of Private Enterprise, said, “The deceleration and inflation rate is a good development because we have seen spiraling inflation for more than a year. So this is a very good development and we hope that this deceleration trajectory will be sustained.”
The economist also attributed the slight drop in July inflation rate to “seasonality factor,” saying that we operate a “climate dependent agriculture.” He posited that prices of perishables are dropping because we are in the harvest season.
Yusuf also attributed the deceleration to base effect, saying that inflation started accelerating from July, August, September last year.
“When we use those months as our baseline to computation of our inflation, naturally, it slows down the inflation situation,” he said, predicting that the base effect is likely to reflect going forward, “which means that inflation numbers may continue to drop.”
The CPPE CEO recognised the role of the Central Bank of Nigeria, saying that it has been “strategically intervening in the foreign exchange markets to minimise the volatility.” He added that there has been a decline in insecurity, which has made many farmers return to their farms and further increased agricultural production output.
Yusuf believes government policies on food and fuel imports could significantly reduce inflation. He highlighted that food prices contribute substantially to overall inflation.
He also pointed to the potential benefits of increased domestic petroleum refining. This could stabilise fuel prices, leading to lower energy costs. Reduced fuel imports would also lessen pressure on the naira, potentially strengthening the currency and further curbing inflation.
Samson Simon, chief economist ARKK Economics & Data Limited, also agreed that the slight relief in the inflation figure is linked to the harvest season. He dismissed the claims that the deceleration is linked to government’s efforts, saying that food inflation dropped but headline inflation is still high.
“When the time harvest starts coming in, food prices and inflation by extension, headline inflation, tend to go down. So with the current trend, I think we should expect this inflationary pressure to ease even further within the year,” he said.
Simon, however, said that the chances of inflation dropping to 21.4% or 25% as predicted by the CBN and fiscal authorities is very slim.
The chief economist argued that the hike in monetary policy rate and other fiscal policies are to tackle core inflation, but not yielding the desired result.
“Our stock of money supply has actually gone up despite hiking interest rates,” Simon said.
The Abuja-based economist also believes that the federal government’s policy of food importation, if properly implemented, will lead to reduction of inflation in coming months.
