Panic buying to drive food inflation to yet another record high
The marginal respite felt by Nigerian consumers in the moderation of increasing food prices known as food inflation may not be felt in March 2020.
There is every indication that the food sub-index will accelerate in March, to a two-year high as a result of COVID-19 induced panic buying amid the structural challenges affecting food supply.
According to the National Bureau of Statistics (NBS), month-on-month basis, food prices rose but at a slower pace by 0.87 percentage points, the lowest since February 2019 to 14.90 percent in February as against 14.85 percent in the preceding month. Analysts attributed the slow pace to the impact of the border closure gradually fading off.
“Increased demand for food items seen in the second half of March over fears of lockdown, led to higher prices, and will most likely push food inflation above 14 percent mark, Damilola Adewale,” a Lagos-based Economic researcher said.
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.
For example, a 50kg of tomatoes rose by 50 percent to N9,000 in March from N6,000 in February, a bag of pepper rose by 25 percent to N10,000, a medium-sized yam increased by 28.6 percent to N900 and a 50kg bag of yellow Garri increased by 3.3 percent to N9,200.
For headline inflation, there are expectations for it to also rise, making it to a possible 23-month high. From the NBS, for February 2020, the inflation rate rose by 0.07 percentage points to 12.20 percent from 12.13 percent recorded in January 2020; the present inflation rate is the highest in 22 months. Food inflation contributes than 50 percent to inflation.
Abiola Gbemisola, analyst at Lagos-based Chapel Hill Denham said, “We expect headline inflation to reach about 12.4 percent, driven by consumers buying at higher prices, food insecurity in the north and the planting season. So, a combination of these will impact inflation.”
But Ayorinde Akinloye, a consumer analyst at CSL Stockbrokers does not expect food inflation to accelerate further but to increase at a reducing rate like in February
“I don’t think panic buying will lead to a massive increase in food prices because it happened during the last week of March. So, I don’t expect it to have a significant impact,” he said.
Before the emergence of this global pandemic, Nigerian consumers were struggling with squeezed disposable income evidenced by the four-year continuous downtrend in real income per capita
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 capital or income per head, a perfect proxy for living standard, fell by 40 percent between 2014 and 2018, official data show.
Also, data from the National Bureau of Statistics on Gross Domestic Product (GDP) by Income and Expenditure approach at 2010 purchaser’s values show that consumption expenditure of households has been declining at varying pace since it rose by 1.5 per cent in 2015.