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More worries over rising inflation amid static household incomes


Food market

Surging food prices push inflation to 18.17%, highest in four years
• Households consumption expenditure drops as govt expenditure rises
• Insecurity aggravates food inflation as expert demands local substitution

Nigerians have been struggling with some unpleasant news lately, especially from the National Bureau of Statistics. Many were however not jolted by the NBS latest reports, which showed that Nigeria’s inflation rate surged to 18.17%, amid high food prices, the highest in four years.


Also accompanying the inflation figure was NBS reports showing consumption expenditure of Nigerian households fell in full-year 2020, while that of the government increased during the same period. It was also learned that the disposable income declined in Q4 of 2020. At the time consumption expenditure dwindled among Nigerians, that of government rose to 61.58% in 2020.

Stakeholders have expressed concerns about the country’s mounting inflationary pressure on static household incomes citing the need to address causal factors before it becomes unsustainable. 
Indeed, food inflation, a closely watched index spiked to 22.95% from 21.79% recorded in the previous month, as food prices and cost of transportation get out of the reach of the average Nigerian whose incomes have stagnated or even become irregular in many cases.
The current 18.17% inflation rate recorded yesterday by the NBS, is a far departure from the Federal Government’s 11.95 per cent inflation target for the year as contained in the fiscal year 2021 Appropriation Act and remains the highest since January of 2017, amid the continued impact of the coronavirus that has also induced a slump in oil prices and weakened the naira.

Stakeholders noted that continued rise in inflation rate also means a devaluation of the citizenry’s purchasing power as the value of assets including monies in the banks, equally weaken.
Specifically, the inflation rate for the month of March 2021, rose to 18.17% from 17.33% recorded in February 2021, representing 0.82% points higher than the February figures,” the NBS report said.
It further explained that: “On a month-on-month basis, the food sub-index increased by 1.9% in March 2021, up by 0.01% points from 1.89% recorded in February 2021. The rise in the food index was caused by a hike in prices of bread and cereals, potatoes, yam, and other tubers, meat, vegetables, fish, oils and fats, and fruits.”
The Lagos Chamber of Commerce and Industry (LCCI) in its reaction noted that the mounting inflationary pressure is a troubling phenomenon.  
LCCI’s Director-General, Dr Muda Yusuf, noted that the key drivers of the mounting inflation include currency depreciation, acute illiquidity in the foreign exchange market, rising transportation costs, agricultural output disruptions caused by growing insecurity, logistics challenges, hike in energy prices, climate change, and structural bottlenecks to production.  
“These are essentially supply-side issues. The major issues are cost and output-related. The solution therefore would have to be situated in the context of these causal factors. Rising inflationary pressures weaken the purchasing power of citizens as real incomes collapse, accentuate pressure on production costs, negatively impact profitability, and undermines investors’ confidence. 
“It is not in all cases that high production and operating costs can be passed on to the consumers. The implication is that producers are also taking a hit. This is more severe where a product or service is faced with high demand elasticity. These are products that consumers can readily do without. Therefore, tackling inflation requires urgent government intervention to address the challenges bedeviling the supply side of the economy.”
A Senior Research Fellow at the National Institute for Legislative Studies (NILS) Abuja, Dr. Asemota Omos Asemota, said the panacea is for the country to achieve fast growth through increased productivity, even as he described the fourth quarter 2020 GDP growth figure as very slim.
Asemota said: “Having posted a 0.11% GDP growth rate in the fourth quarter of 2020, Nigeria’s exit from recession holds promise to a steady economic growth path on the heels of negative economic growths in the last three quarters. Despite this slim positive economic growth, Nigeria’s economic growth trajectory may reverse to a negative trend amid untoward socio-economic headwinds such as persistent rising inflation (18.17%), spiraling unemployment, shrinking fiscal space, burgeoning external debt ($32 billion), exchange rate volatility (N380:1$), and worsening insecurity, amongst others.  

“However, a combination of fiscal, monetary, trade, amongst other policies, and the requisite political will and leadership could constitute a tailwind that would ultimately launch the economy on a steady growth path. First, the political will to address the worsening insecurity is highly imperative and critical to a sustainable growth trajectory in Nigeria, otherwise, growth may remain episodic. Suffice that the inflationary trend is propelled by the food inflation (22.95%) component of the consumer price index, resulting from the adverse effect of the incessant herders-clashes. 


“Second, the government should broaden all revenue-generating efforts while blocking leakages such as corruption, mismanagement, wastages, and inefficiency in public expenditure. In addition to this, government should optimize the cost of governance by rationalising its spending. A critical step in this direction is the implementation of the Oronsaye Report.” 
For Prof Uche Uwaleke, a Finance and Capital Market professor at the Nassarawa State University Keffi, the continuous rise in price level is attributed to the spate of insecurity across the country, which had taken a toll on agricultural activities with very serious implication on food inflation driving the other indices. 

Prof. Samuel Olakoja, a maize breeding specialist at the Institute of Agricultural Research and Training (IAR&T), Ibadan, identified insecurity and poor mechanisastion of farm operations as some of the factors.

Insecurity, he said, is responsible for food scarcity in Nigeria. Boko Haram insurgency, kidnapping, banditry, and herder-farmer crisis have displaced millions of farmers from their farmlands. Hence, they cannot produce adequate food.


Farmers in Borno, Adamawa, and Bauchi states in the Northeast have been displaced and the majority now live in IDP camps. Their farmlands have also been taken over by terrorists and bandits. Also in the north-central zone, Niger, Benue, and Plateau states, among others, are engulfed in farmer-herder crises and reprisals.

“Banditry, miscreants, and looters of food shops have compelled food dealers to shift to the sale of products that attract little or no looting,” Olakojo explained.

“Currently in Nigeria, food inflation is aggravated by insecurity, especially as the area considered the food basket of the country is bedeviled by bandits who prevent farmers from farming for fear of being kidnapped,” said Prof. Shehu Garki Ado, a grain breeder and Vice-Chancellor of Al-Qalam University, KatsinaState. “Again, some middlemen procure food and stock in their stores to create artificial scarcity to increase the prices.”

Also, the high cost of transportation of food from rural to urban areas is traced as a serious factor in food inflation in Nigeria. Frequent increases in the price of Premium Motor Spirit (PMS) have forced commercial bus and truck operators to increase the fares.


The increased fares have affected the cost of middlemen who aggregate foodstuffs and farm produce from rural areas. The deplorable conditions of the roads also lead to breakdowns of vehicles, frequent replacement of car parts, and repairs.

Prof Olakojo said: “Total lockdown during cropping season of 2020, ever-increasing price of fuel that brought about the high cost of transportation; multiple tariffs on food being brought from villages to the town and illegal collections from uniformed security men are food inflation factors.”

Apart from the insecurity and transportation hurdles, climate change is a scientifically proven disruption to food availability around the world. Climate change has caused flooding, desert encroachment on farmlands, and scarcity of rainfalls and droughts. These reduce the ability of farmers to produce enough food, the academic said.

In the same vein, former Deputy Vice President of the Nigerian Institute of Food Science and Technology (NIFST), Emmanuel Oluwole Toye, said sourcing substitutes locally to replace imported food would help reduce inflation.


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