Inflation bites harder as Nigerians await FG’s food import-duty waiver

• AFAN blames rising food prices on falling naira, rising transport cost
• 35% of farmers abandoned farms for terrorists

The aggressive monetary and fiscal measures taken to check headline inflation appear to be slow in taming inflation as the consumer price index rose to 34.6 per cent in November, setting a new multi-decade high and suggesting that the war against price crisis is far from being won.

Food inflation, a major driver of the inflation run that has lasted for over two years, climbed up to 39.93 per cent, sending a shockwave through the market for the umpteenth time.

The spike in food inflation is happening at a time when crop harvest was expected to have moderated the prices of essentials, suggesting that the country is yet to see the worst and that the situation could deteriorate towards the end of quarter one when planting season would be approaching.

The crisis comes just as the government continues to dilly-dally on the fiscal measures aimed at reining in the escalating food prices. For instance, six months after the Federal Government rolled out zero-import duty waivers on selected food items, there are no signs that the programme has commenced.

On July 8, 2024, the Federal Government announced a 150-day duty-free import window for food commodities to ensure a reduction in food inflation in Nigeria. The food commodities include maize, husked brown rice, wheat and cowpeas.

The executive order gave a 150-day window for the importation of food items, including rice, millet, maize and wheat duty-free.

The Guardian reported that the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, confirmed that the FG started guided import some weeks back while the private sector was expected to follow suit.

Neither the imports by the government nor the reported participation of the private sector has moved a needle in the food market. Since the policy was unveiled, a bag of rice has increased by 50 per cent, with 50kg trading around N110,000 a few days to Christmas.

Edun while responding to a question at a media event in Abuja about the delay in the take-off of the duty-free import of food, said the government was being careful not to flood the country with food that can be produced locally and thereby shutting out local producers.
He noted that the government was rather supporting local farmers.

Edun highlighted ongoing efforts to increase the availability of essential farming inputs such as fertiliser and seeds, particularly for small-scale farmers, which is expected to enhance local food production and ensure food security in the long run.

The government may have also frittered away the opportunity to leverage fiscal spending to stimulate the performance of the agriculture sector, with the sector getting as little as one per cent of the yearly budget in some cases.

In eight years spanning 2017 to 2023, the budget for the agricultural sector has not exceeded two per cent of the total budget, a report tracking budget allocations said.

Within the periods under consideration, the budget for agriculture increased from 1.7 per cent in 2017 to two per cent in 2018. Then, it fell to 1.56 per cent in 2019, and fell further to 1.34 per cent in 2020 with a slight increase to 1.37 per cent in 2021. It increased to 1.78 per cent in 2022 and fell back to 1.11 per cent in 2023.

The trend shows a precarious allocation pattern with no commitment to increasing the allocations in line with the expected demand in the sector.

According to the analysis of the 2023 agriculture budget prepared by ActionAid, the marginal decrease of about 0.67 per cent from the N291.4 billion budgeted in 2022 was 1.11 per cent of the total budget. That falls short of the Comprehensive African Agricultural Development Programme (CAADP) benchmark of 10 per cent.

It is against this background that stakeholders argued that public spending in the agricultural sector is low and should be increased. Demands have also been placed on agriculture as part of the government’s vision of diversifying the economy.

In recent years, different agencies including the World Food Programme (WFP) and the Food and Agricultural Organisation (FAO), have warned of an impending food crisis in some parts of the country, especially the north.

In their recent Cadre Harmonisé report, 33.1 million Nigerians were projected to face acute food insecurity in 2025.

Cadre Harmonisé is a biannual analysis led by the Nigerian government in collaboration with the United Nations, regional technical agencies and non-governmental organisations (NGOs).

It noted that there are 5.4 million children and 800,000 pregnant and breastfeeding women at risk of acute malnutrition or wasting.

“Of these, an alarming 1.8 million children could face Severe Acute Malnutrition (SAM) and may require critical nutrition treatment,” the report said.

It blamed a combination of triple-digit increases in food prices, the aftermath of devastating floods, and 15 years of insurgency in the northeast for the debilitating food shortages.

Reacting to the continued rise in food prices, the National President of the All Farmers Association of Nigeria (AFAN), Kabir Ibrahim, said the association was as surprised as everyone that there is heightening inflation at the height of harvest.

He blamed the rising food prices on the dwindling fortunes of the naira and high transport costs. According to him, those trading in produce pay large sums of money to get the produce to the market.

He said: “We made statements to the effect that the import of the listed commodities was only a stopgap and might not bring about sustainable solutions to the problem at hand.”

He said Nigeria must optimise production internally, shore up the Naira and stem insecurity as well as create special vehicles for the distribution of food items by giving sustainable subsidies to make food distribution seamless to minimise food inflation.

The National Administrative Secretary of Nigeria Cassava Growers Association, Segun Ilori, said the major driver of food inflation in Nigeria is the high cost of transportation as well as the cost of input.

He said since the removal of fuel subsidies, and the devaluation of the naira, prices of everything have gone up.

“It now costs more to cultivate a hectare of land unlike before, all the input from seed to agrochemicals including fertilisers are very expensive now because most of them are imported,” he said.

He said it is also expensive to transport food from the farm to markets because of the high cost of fuel and diesel.

He counselled that the only way to bring down the prices of food is for the government to support farmers with mechanised farming, not by food importation.

Also reacting, the National President of the National Palm Produce Association of Nigeria, (NPPAN), Alphonsus Inyang, said the decision by the Central Bank of Nigeria to stop development finance intervention programmes, is a wrong policy decision.

He said bad as the Anchor Borrowers Programme may have been said to be, it was a good programme that made available to farmers funds to carry out their farming activities.

He said as it is now, no more funds are available to farmers as they cannot borrow from commercial banks.

He said some rice mills are selling off their plant to raise money to pay off their loan.

He said the price of palm oil has gone up by as much as 130 per cent and it is not likely to come down. He said the reason is that Indonesia, a major exporter of crude palm oil, has stopped exporting.

“As I am talking to you, I know many vegetable oil firms that have shut down because they cannot access palm oil for their operation,” he said.

He said rather than waste money by granting import duty waivers, the government should make this money available to farmers at cheap rates.

Business and policy analyst, Dr Vincent Nwani, said the sharp rise in food and core inflation is not surprising and that some experts had warned the government about it, given that over 35 per cent of Nigerian farmers did not plant this year because their farmlands were taken over by terrorists.

“Those that farmed did not farm on a large scale, that is, those that supply food to the markets. Imported food on the other hand is suffering from exorbitant FX costs at almost N1800/$1 in Q3 and Q4 this year. The two hydra-headed monsters- insecurity and high FX have impacted food costs and that is why we are experiencing this level of inflation,” he said.

Nwani said the unfortunate situation would continue in the new year as “we head into the planting season” when local foods become scarce.

Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr. Muda Yusuf, pointed out that food inflation at almost 40 per cent is disturbing and that the figure would spike further given the fact that the festive season is around the corner.

“We are likely to see a further increase in food inflation. The cost of rice, vegetable oil and transport are all very high and the festive season contributes to it. Inflation is the worst enemy of the poor and the earlier we can tame it, the better for social stability.

“These numbers also show the limitations of the CBN’s monetary policy which has undergone consistent tightening with not much to show for it. Interest rate keeps going up, yet inflationary pressures have not abated,” he said.

Calling for a rethink of strategy, he urged more fiscal policy intervention.

“We had thought the food import waiver would bring some measure of relief to food prices. Sadly, implementation has been delayed. We are yet to see the effects of the food import waiver. There shouldn’t be too much implementation lag to policy pronouncements – once a policy is pronounced, we want to see immediate implementation of said policies,” he said.