The recent surge in the prices of diesel in Nigeria, Africa’s largest economy, has led to a fresh spike in food prices, dashing hopes of returning to a more stable market condition.
The price of Automotive Gas Oil, popularly known as diesel, has soared by almost 170 percent in one year to N620-650 per litre from N220-N240 in March last year.
The surge in the price of diesel, which has been deregulated, followed the rally in global oil prices, buoyed by the Russia-Ukraine crisis. Brent, the global oil benchmark, sold for $113 per barrel at the time of writing this report.
“Diesel prices are surging and with this, we are going to see another fresh spike in food prices,” said Victor Iyama, national president of the Federation of Agricultural Commodity Association of Nigeria (FACAN).
“Just in the last two weeks, we paid N350, 000 to transport our commodities from Kano to Lagos, and yesterday we had to pay N550,000 for the same truck and distance because of the surge in diesel price,” he said.
“We have no choice but to transfer the extra cost to the consumers,” he added.
In Africa’s biggest oil-producing country, food producers and retailers are now facing intense pressure from rising energy costs as they have to spend more on diesel to power their factories and on logistics.
Food prices spike in Nigeria
Food prices have been making a rapid climb in Africa’s most populous country since August 2019 when the country shut its borders from neighbouring countries and continued unabated owing to supply chain disruptions induced by the Covid-19 pandemic.
“Sadly, food prices are surging again when we are trying to build back from the pandemic impacts,” said Tola Faseru, former national president of Cashew Association of Nigeria.
“Since diesel prices started surging, the cost of food transportation has doubled and this has already started affecting commodity prices,” Faseru said.
“A ton of cashew sold for N440,000 when the season started in February is now being sold for N600,000 and this is because of logistics,” he added.
Inflation in Africa’s biggest economy declined marginally in January 2022 to 15.60 percent from 15.63 percent recorded in December 2021, but the food index rose by 17.13 percent in January 2022 compared to 20.57 percent in January 2021.
The inflationary pressure has reduced consumers’ disposable income, making basic needs elude Nigerians.
The limited purchasing power of Nigerians puts basic food commodities out of the reach of many, especially the country’s over 23.2 million unemployed people. This could indicate a famine threat.
“Things are just getting hard daily for Nigerians and the government is not doing anything about it,” said Obiora Madu, CEO and president of Multimix Group.
“Logistics is already a big challenge in Nigeria and now with the surge in diesel prices, it has further compounded the problem. Transporting fresh vegetables now with cold chains will be almost impossible,” Madu said.
BusinessDay survey of Mile 12 Market shows that 50kg of local parboiled rice which was sold for N24,000 last week now sells for N27,000 while a 50kg pack of foreign parboiled rice now goes for N33,000 from 28,000 sold a week ago.
A big basket of fresh tomatoes now sells for N16,000 as against N12,000 sold two weeks ago, while a small basket sells for N8,000 as against N4,500 sold two weeks ago.
A 25-litre measure of vegetable oil sold N27,500 last week now sells for N33, 500 while a 25-litre measure of palm oil is sold for N19,000.
“The recent increase in diesel prices is responsible for the current spike in food prices. The cost of transporting the food items from where they are produced to the markets have almost doubled,” said Muhammed Abdul, general secretary, Arewa Perishable FoodStuff Market Association, Mile 12 in a telephone response to questions.
“Last two weeks we transported a bag of potatoes from Jos to Lagos for N2,500 now it is N5,000. The truck drivers are saying it’s because of the high cost of diesel,” he added.