How logistic cost, loss in transit fuel food inflation

As inflation continues to deplete the value of household and individual incomes, a comprehensive look at transportation networks and logistics has shown they affect food prices.

The National Bureau of Statistics’ (NBS) data states that the inflation rate in March 2022, predominantly propelled by the higher cost of food, rose to 15.92 per cent.

Though food production is inadequate, as shown by production data from various reputable local and international organisations, there are other peculiar factors fuelling abnormal rises in food prices.

Demand for rice, for example, is greater than local supply amid restrictions placed on its importation, thus fuelling a hike in price. Nigeria produces about 5.0 million metric tonnes of processed rice, while its demand stands at about 7.2 million metric tonnes.

Again, according to the Foreign Affairs Service of the United States Department of Agriculture, Nigeria’s wheat production in 2020/2021 was estimated at 99,000 metric tonnes (MT), while the country imported additional 6.0 million metric tonnes in 2021.

Production of maize and soya beans, to mention a few, is also inadequate amid soaring demand and import restrictions.

Apart from the foregoing, food sector, stakeholders have also pinpointed a hike in diesel price following its liberalisation and disruption in supply chains as a result of the ongoing war between Russia and Ukraine; higher food haulage and transportation costs; expensive intra-city transportation networks and fresh food spoilage in transit as some of the ancillary factors.

Also, the state of the roads and delays cause deterioration and loss of fresh food similarly contribute to poor quality and a smaller quantity of food, causing price hikes.

Price of diesel has affected the cost of long-distance food transportation, especially from the northern to the south part. At a rate of N600/700 per litre, diesel has significantly contributed to a food price hike.

Also, unregulated transport and haulage fares indiscriminately fixed by transporters are not correspondingly proportional.

Expensive warehouses, food malls and the higher cost of renting shops traded explained have added to the cost of food. Securing space in popular food markets across the country costs a fortune, and prices produce and products become unaffordable in cities as ancillary costs are added as the landing costs, which determine selling prices.

The deplorable state of the roads often leads to frequent breakdowns of trucks conveying fresh and perishable goods, leading to food loss in transit and the consequence of higher prices.

Roads from food-producing rural communities across the country are mostly untarred, ungraded and largely deplorable. It is hell for even the rugged vehicles to commute most of the rural roads leading to food production hubs.

A packaged food processor and agro-allied entrepreneur, Kolawole Adeniji, the cost of diesel have driven the cost of production and transportation to the highest point so far.

He said: “Cost of diesel is central to food production, processing and transportation. Tractors, harvesters, trucks and food-processing machines are diesel-powered.

“Transporting food from points of production and processing to points of sale and consumption has become unsustainably expensive, hence, food inflation. But food inflation is just one of the consequences. There are several others.”

Managing Director of Terudee Farms and former Oyo State Chairman, Poultry Association of Nigeria (PAN), Mr John Olateru, said the high cost of fuels, poor road networks, extortions of food aggregators and dealers on the road and accompanying higher costs are factors causing food inflation. The consumer, he said, bears the brunt of the crisis.

The Managing Director and founder, Vertex Rice, Lokoja, Kogi State, Afis Oladejo, while buttressing how transportation cost adds to hikes in food prices, said to transport a 50kg bag of rice from his factory in Lokoja to Bodija market, Ibadan, in Oyo State, costs N1,100. Hence, a truck-load of 600 bags costs N660,000, from about N300,000 in April 2021.

He also explained that the cost of moving bags of rice paddies from local foodstuff markets to the factory had doubled following a hike in the price of diesel, among other factors.

“Processing the rice in the factory is done using diesel generators. This affects not only the price of the product but also our profitability and sustainability of the business,” Oladejo lamented.

The situation, he said, affects landing costs to distributors, who, in turn, add their profit margins before selling to the consumers.

“Cost of transportation along the value chain is huge. With the processing and packaging costs, they affect pricing, profitability, sustainability and affordability,” the rice processor explained.

Oladejo said transporting a bag of rice from Lokoja to Abuja has increased from N300 to N600 in the last year.

From Kano to Lagos, conveying a bag of 50kg rice costs at least N1500, implying N900,000 to transport a trailer-load of rice to the south. Apart from transportation, the cost of warehouses in Abuja, Lagos and other cities significantly add up to the landing cost of food grains, be it rice, maize, soybeans and others.

Also, a tomato dealer in Lagos, who does not want his name in the print, said the need to avoid the higher cost of transporting tomatoes through normal trucks forces them to use tankers coming for petroleum products, and this leads to great post-harvest losses as baskets of tomatoes are roughly packed on the tankers travelling hundreds of kilometres of rough roads.

The Country Director (Nigeria) and Regional Coordinator, Africa Rice Centre, IITA, Ibadan, Dr Francis Nwinele, said inbound logistics activities, including pre-farm activities involving companies supplying agricultural inputs of seeds, fertiliser and herbicides to be used in the field production process, contribute to food inflation following poor road networks and deregulated diesel market.
  
The rice breeder said outbound logistics activities that fuel food inflation include moving raw food crops to processing facilities, warehouses and storage facilities.

Activities such as handling, storage, transport, and warehousing drive up the costs and unit prices, he added.

“Food losses can occur mainly due to improper handling, poor storage, lack of temperature-controlled supply chain, poor cooling facilities to prevent fresh foods from spoiling during transportation and poor road infrastructure,” he said.

He also fingered insecurity, packaging, weighing, pre-washing, exposure of harvested produce to pests and disease damage, and sun-drying of harvested produce, as processes that are not backed with modern technologies and infrastructures, hence, food loss, inefficiency, higher costs and abnormal food prices.