Food prices in Africa’s biggest economy rose the highest level since April 2018 as households stockpile food and essential items ahead of lockdown and movement restriction imposed by government at Federal & State level to curb the spread of novel coronavirus.
According to the March inflation report released by the National Bureau of Statistics, food inflation accelerated by 14.98 percent last month, compared to 14.90 percent in February 2020. The food monthly sub-index, which had earlier moderated by 0.79 percent in February, advanced by 0.84 percent in the reference month, suggesting increased pressure on food prices.
“There is a potential risk that we might see a further acceleration till the end of the year because the imported food inflation which is about a quarter of the index may likely come under increased food pressure due to weaker exchange rate, supply chains issue and some of the movement restrictions that we have now, making farmers to have very little access to market,” Omotola Abimbola, a macro and fixed income analyst at Lagos-based Chapel Hill Denham said.
Abimbola argued that there is a chance that planting season which has already started, might see increased scarcity of some food items at the peak of planting season by May, which could further drive up food prices.
Nigeria’s statistical agency headed by Yemi Kale, had clearly ruled out possible impact from covid-19 lockdown on the inflation numbers. Nigeria has been on a lockdown for more than three weeks since March 31.
In mid-March, BusinessDay survey of markets across Lagos showed that consumers flooded the markets due to the increasing number of COVID-19 cases and a partial lockdown, making traders take advantage of the excess demand by hiking prices of food items.
Analysts expect food prices to maintain an upward trajectory in coming months as the country is headed fully for the planting season, which usually marks a period of reduced agricultural output.
“Food prices will face increased pressure in the next two months due to supply shortage as planting season kicks in fully. For April, food inflation will break into the 15 percent territory as the lockdown directive significantly destabilized the agricultural value chain” Adeshina Adewale, a Lagos-based economist said.
Adewale positioned that the outlook for higher inflation numbers in coming months amid weak macro environment make the price stability task of the Central Bank more difficult.
Headline inflation accelerated to almost a two-year high to 12.26 percent in March, some 0.06 percent points higher than the 12.20 percent reported in February 2020.
Abimbola said, “The uptrend was a function on many things. There was a second-round effect on the increase Value Added Tax rates that was very apparent in the core index and we saw a weaker exchange rate in March which begun to pass through in prices. We also saw a number of supply chains disruptions towards the end of month after restrictions were imposed so all these factors led to a higher inflation rate.”
Core inflation was recorded at 9.73 percent, up by 0.3 percent when compared with the 9.43 percent recorded in February. NBS said core numbers were pushed up majorly by prices of Passenger transport by air, Tobacco, Household textiles, Major household appliances, Domestic services and household services, Pharmaceutical products, Maintenance and repair of personal transport equipment, Water supply as well as Catering services.
“Going forward, inflation numbers in coming months will maintain an upward trajectory due to uncertainties around lockdown directive and commencement of planting season. Putting these together makes the price stability mandate of the Central Bank of Nigeria more difficult,” Adewale said.
The Nigerian economy is yet to recover fully from a recent recession as the growth of the wider economy which printed at 2.27 percent in full year 2019 underperforms population growth rate estimated at some 3 percent.
This indicates that Nigerians are getting poorer even as GDP per capita or income per head, a perfect proxy for living standard, fell by 40 percent between 2014 and 2018, official data show
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