Nigeria’s Meals Inflation – Losers, Winners and a Attainable Resolution

Current inflation numbers from Nigeria are creating critical concern over the rising price of meals gadgets within the nation. However this isn’t Nigerians’ first encounter with meals costs working scorching, because the spikes date again roughly twenty years.

Between January 2003 and August 2021, the meals inflation price has raced to a few main peaks. The primary and highest was about 38% in August 2005, greater than 16 years in the past.

The second, about 21%, was in July 2008. The third – the second-highest in 20 years – was about 23% in March 2021.

Many Nigerians imagine that both the rising greenback or middlemen, or each, are accountable.

However there’s one other issue on the root of the issue: the common price of transporting meals from the comparatively extra productive Northern states to least-producing Southern states inside the nation. Environment friendly transport infrastructure and native refining of gas are key to fixing the issue.

Crunching the numbers

I obtained and used month-to-month information for the interval from January 2017 to August 2021 from the Nationwide Bureau of Statistics.

The information pertains to costs of 43 continuously consumed meals gadgets in Nigeria, together with gari (cassava flour), rice, maize, beans, crimson oil, vegetable oil, meat, hen, eggs, potatoes, yam and fish. It covers the 36 states within the nation, together with the federal capital.

I noticed that every one the states with the bottom meals costs are within the north (Kano, Katsina, Gombe, Kebbi, Niger) and all of the states with the best meals costs are within the south (Imo, Anambra, Rivers, Enugu, Bayelsa).

It is clear that the north ‘feeds’ the south. However the north shouldn’t be capable of feed itself equally nicely. Greater than 25 million individuals (22% of the inhabitants) within the north are unable to spend roughly N200 (US$0.48) per day on meals, in comparison with simply 4 million (4% of the inhabitants) within the south.

I primarily based my calculations on household-level welfare info collected by the nationwide bureau of statistics between September 2018 and October 2019, and an annual meals poverty line of N81,767 (US$198).

In doing so, I thought of owned-food manufacturing, that’s meals not purchased from the market however farmed and consumed by the poor. That is to be able to account for meals gadgets farmers might domesticate straight for his or her consumption.

Farmers within the north will not be benefiting (or seeing their incomes rise) on account of rising meals costs. Inflation shouldn’t be transferring wealth from states that do not produce meals to states that do. Different elements similar to the price of imported petroleum merchandise is mopping up the rise in costs.

Winners and losers

Rising common diesel costs in cheap-food states are linked to rising meals costs in expensive-food states. Throughout the research interval, diesel costs have risen by a nationwide common of 67%.

Regionally, meals gadgets are often transported on diesel-powered autos reasonably than petrol-powered autos. Since autos transporting meals gadgets from the north to the south will often fill their gas tanks within the north, it’s believable to match diesel costs within the north with meals costs within the south.

The latest sharp, regular spike in meals costs began in August 2019. Nationally, between this era and August 2021, common meals costs rose by roughly 18%, however decrease within the north (8%) and highest within the south: 25%.

Apparently, the south is driving the rise in nationwide meals costs. It contributes 78% to the general improve.

This truth, together with the diesel value connection, reveals that the price of transport is the wrongdoer.

The chart above reveals the connection between the common gas costs in 5 Nigerian states with the bottom meals costs and the price of meals gadgets in 5 Nigerian states with the best common meals costs.

It signifies a powerful optimistic hyperlink between the 2 variables. As an example, a further one Naira within the value of diesel within the north is anticipated to end in a further 5 Naira in common meals costs within the south.

Customers of meals gadgets transported from the north to the south are paying a considerable a part of the meals inflation burden. They’re the ‘losers’. However that does not imply the northern farmers are winners.

Meals costs within the south are increased than meals costs within the north by an quantity nearly equal to the price of transporting the meals gadgets from the north to the south.

Due to this fact, the possible winners could also be residing exterior Nigeria: the oil entrepreneurs and people supplying refined petroleum merchandise to Nigeria. About 80% of the nation’s diesel is imported.

Rise of the greenback

Many Nigerians have the view that the depreciating worth of their native foreign money is chargeable for meals inflation.

There’s some reality on this declare. Primarily based on a 2019 survey by the nationwide bureau of statistics, 32% of Nigerian households reported shopping for imported rice. The worth of imported rice will rise with the rising worth of the greenback.

Primarily based by myself calculations utilizing information from the nationwide bureau of statistics, I discovered that domestically cultivated meals gadgets are chargeable for 85% of the surge in meals costs between August 2019 and September 2021. Imported meals gadgets will not be driving up the meals inflation price, as overseas rice accounts for nearly 2% of the meals inflation.

The best way ahead

There are two methods to deal with meals inflation in Nigeria. First, shut the inter-regional value variations by organising a extra environment friendly transport system that connects the 2 main areas of the nation.

One of many ongoing railroads initiatives within the nation, linking Nigeria’s two industrial capitals – Lagos within the south and Kano within the north – is a welcome growth.