Food inflation rises despite low global commodity prices, strong output

Nigerian consumers are not benefitting from declining commodity prices despite strong recovery in global Agriculture production. Food inflation has increased in the country as a result of hike in transportation cost due to fuel shortages and late onset of rains.

Major cities in Africa’s largest economy are still suffering from crippling fuel shortages despite the end of a fuel distribution strike which disrupted economic activities affecting key sectors.

“Consumer inflation rose 9.0 percent year-on-year in May, making it the highest rate since May 2013,” according to the National Bureau of Statistics (NBS).

Food inflation edged higher to 9.8 percent year-on-year in May, up 0.3 percentage points from April, due to the late onset of rains which pushed back the harvest season and a hike in transport costs because of a fuel shortage, NBS said

Comfort Adegoroye, frozen food trader at Ile-Epo market, Abule-egba, said that “food prices have increased because of the high cost of transportation and the poor power outrage in the country.”

“I normally transport my cartoon of turkey and chicken for N2, 500 from the market to my shop now I pay N3, 200. The transporters are complaining of fuel. I still buy fuel above the official rate to power my deep freezer for my goods. I bought yesterday at the rate of N100 per litre,” She said.

She noted that as a result of these additional expenses the final consumers have to pay more.

The dispute over subsidy payments disrupted services including telecom services, banking and aviation in May, as Nigeria, which does not have sufficient refining capacity, relies almost wholly on imports.

There are still queue at various filling stations across the federation as at the time of writing.

The price of crude oil dropped by 50 percent since last year, the second-biggest annual decline ever, hitting a five-and-a half-year low. Oil prices have had a knock-on effect on the global price of food, which fell for a third straight year in 2014.

“Supply keeps being revised up, and on the import demand side, there really isn’t much activity simply because many importing countries themselves have very good supply,” said Food and Agricultural Organisation’s (FAO) Economist Abdolreza Abbassian.

India, the world’s biggest sugar producer after Brazil, exported 2.1 million tonnes of sugar, in the year to September 2014 after the government gave export incentives to help mills cut back large stockpiles at their warehouses.

Agricultural products prices are seen languishing as global output continues to see strong recovery according to Bismarck Rewane, Chief Executive Officer, of consulting firm Financial Derivatives Company, in a presentation on the falling Naira.

“Higher export subsidies in India may boost supply of sugar and dampen its price in the global market,” Rewane added.

Food prices have been on the increase in the North East before the fuel shortages due to rising input prices following continued unrest in the region.

Abdurahaman Modibbo Girei, President, Adamawa Chamber of Commerce and Industry told BusinessDay that most farmers have abandoned their farms and fled, while major borders have been shut owing to high insecurity in the state

“Farmers have deserted their farms and fled to from hostile parts of the state, to less volatile areas,” Girei added.

Josephine Okojie