By Marcel Okeke
Regrettably, for the umpteenth time, a critical driver of the hyper inflationary trend in Nigeria has been identified as the ever-rising price and shortage of food. Year-on-year, month-on-month, the consumer price index (CPI) record uptick mainly due to high cost of food and food-related items. Even in its latest MPC report, the Central Bank of Nigeria (CBN) still attributed the soaring inflation essentially to the impact of high food prices. In its communique (147) on March 21, 2023, the Monetary Policy Committee (MPC) “observed with concern, the increase in headline inflation (year-on-year) in February 2023 to 21.91 per cent, from 21.82 per cent in January 2023”, stressing that “this…rise was largely due to rise in the food component…” According to the National Bureau of Statistics (NBS), food inflation surged to 24.32 per cent in January 2023 from the 23.75 per cent recorded in December 2022, the highest in the last four years. The MPC said that “the shocks to the food component (of CPI) were driven by high cost of transportation of food items, lingering security challenges in major food producing areas and legacy infrastructural problems, which continue to hamper food supply logistics.”
All these vividly underline the pervasive impact of food scarcity with its attendant high prices on the quality and cost of living of the Nigerian populace. This persistent ugly trend is despite the best efforts of Government and its agencies to achieve ‘food security’ and sufficiency through several agricultural (or food) production initiatives. Surprisingly, the more these policies and initiatives are implemented and funded, the more (seemingly) food and related items gulp in terms of importation from other countries. Thus, highlights of the latest report by the National Bureau of Statistics (NBS) show that in the past five years (from 2018), Nigeria spent a humongous sum of N6.7 trillion on agricultural imports, accounting for 7.6 per cent of total imports of N89.2 trillion recorded during the period. According to the NBS, this shows that the country’s reliance on agricultural/food imports has doubled since 2019.
This also unfortunately affirms that despite years of shifts in government policy towards agriculture, the country still relies heavily on imports to meet its local food demand/consumption. The NBS data reveals that rather than drop, reliance on agricultural imports has kept rising in the past five years.
Meanwhile, the Food and Agriculture Organisation (FAO) has projected that about 25.3 million people in Nigeria would face acute food insecurity during the June to August 2023 lean season. A quarterly report released by the UN agency shows that the figure projected is higher than the 19.45 million forecast in 2022. The FAO report, titled “Crop Prospect and Food Situation”, assessed 45 countries to provide insight into the food situation with particular attention on Low-Income Food Deficit Countries such as Nigeria. According to the report, the state of insecurity in northern Nigeria plays a major role in the projected rate of food insecurity in the entire country. “Acute food insecurity is mostly driven by the deterioration of security conditions and conflicts in (Nigeria’s) northern states, which as of March 2022 (latest data available) have led to the displacement of about 3.17 million people and are constraining farmers’ access to their lands,” the report said.
The FAO recalls that in 2015, President Muhammadu Buhari administration launched the Anchor Borrowers Program (ABP) with the goal to boost food production, create jobs, and reduce food import bills for the conservation of the foreign exchange reserves. However, the initiative, FAO noted has been “marred by reports of poor allocation of resources and related issues.” The report noted that widespread flooding in 2022, affecting about 4.5 million people across the country, has further compounded conditions, particularly in areas already facing high levels of insecurity. “High food prices and the expected slowdown in economic growth in 2023 are additional drivers of acute food insecurity,” the report said. It added that this year’s situation would be a “significant deterioration” as the projection is bringing additional 5.85 million people to the 19.45 million estimated to face food insecurity earlier in 2022.
Specifically, a detailed review of Nigeria’s import data (by NBS) indicates a consistent increase in the value of agricultural imports during the period under review. In 2018, the value of agricultural imports was N851.6 billion; it increased to N959.5 billion in 2019, representing a 12.6 per cent increase; and further shot up in 2020 to N1.145 trillion, representing a 19.4 per cent increase from the previous year. Still, in 2021, there was a significant increase in agricultural imports to N1.96 trillion representing a 71.6 per cent increase from the previous year; and total imports in 2022 were N1.86 trillion representing 7.9 per cent of total imports, a slight drop from an average of nine per cent reported in 2021 and 2020.
Over all, a comparison of Nigeria’s agricultural products imports with the exports clearly show it imported much more than it exported in all the five years under review. This implies that there is a consistent trade deficit in the agricultural sector, which usually translates to an adverse effect on the country’s balance of payments. This trade deficit means that there is usually a net outflow of currency from Nigeria to other countries, as Nigeria is paying more for imports than it is earning from exports. This has unleashed several adverse effects on the country’s economy. For instance, it has contributed to a decrease in Nigeria’s foreign exchange reserves, as more currency is leaving the country than is coming in. This has also in part made it difficult for Nigeria to finance its other imports and pay its foreign debts. Nigeria is already experiencing this with severe currency depreciation occurring over the last five years: the exchange rate has depreciated to N750/$1 on the black market from about N360/$1 five years ago
Of course, the consistent trade deficit has also lead to, and sustained rising inflation rate, as the increase in demand for imported (agric.) goods keeps driving up prices. This has obviously led to a decrease in the purchasing power of the Naira, a development that has been hurting the country’s consumers and businesses to no end. Nigeria’s inflation rate is currently (end-February 2023) at a 17-year high of 21.91 per cent—a whopping 100 per cent rise in prices, compared to the CPI level in 2017. Furthermore, the persisting trade deficit has left the Nigerian economy more vulnerable to external shocks, such as changes in global commodity prices (occasioned by the Russia-Ukraine war) and/or currency fluctuations. For instance, the sudden increase in the price of agricultural products in the international market since the onset of the war early in 2022, has forced Nigeria to spend more money to import those products (e.g. wheat); and this has worsened the trade deficit. This extant reality has seen imported inflation rising by as much as 120 per cent between December 2017 and December 2022.
Notably, the Central Bank of Nigeria (CBN) had put in place a number of initiatives to not only improve the food security of the country but also to produce for exports. However available data suggest that many of such policies aimed at stimulating local production of agricultural produce have not significantly reduced the country’s reliance on imports. The apex bank under Godwin Emefiele has introduced schemes such as the Commercial Agric Credit Scheme (CACS), the ABP as well as banning of access to forex to at least 41 importers of some items (most of them related to agriculture). In consequence of all these, while Nigeria has somehow cut down on imports, especially rice, the country still imports a huge amount of Wheat and other food items.
Yet, with all these intentions and efforts, the underlying reasons for the low agricultural production and rising food insecurity persist. For instance, fuel scarcity has become a ‘new normal’ in the country. Since about a year ago (February 2022), Nigeria has been experiencing unprecedented fuel scarcity. This has forced motorists to charge more for the transportation of goods and services and the aftermath of this translated to the sudden rise in prices of foodstuffs across the country. Also, the nation’s electricity grid has collapsed at least five times since the beginning of 2022. Experts have attributed this to poor utility performance, theft of grid equipment, weather, gas supply, insufficient funding and aged grid infrastructure. Consequently, erratic power supply has pushed business owners (food processing and manufacturing companies) to seek alternative but expensive means to power their tools so as to prevent food spoilage across agricultural value chains, translating to high cost of food production, supply and definitely high cost of food in the market shelves.
The ongoing Russia-Ukraine crisis has also imposed unprecedented strain on the food supply chain of countries that source most of their agricultural products as well as other raw materials from both countries. Nigeria is one of them; and still on the receiving end as it imports some agricultural products from both countries and mostly depends on the imports from them. However, by far, the worst threat to food security in Nigeria remains general insecurity. The glaring insecurity in the country alone has led to an acute rise in food prices due to the substantial reduction in food production. Prices of basic food items like rice, beans, yams, vegetables and poultry products among others have been on a steady rise, with millions of Nigerians struggling to adjust. The gruesome activities of herdsmen, kidnappers, bandits and Boko Haram have displaced farming communities, disrupted markets and limited agricultural production as most farmers deserted their farmlands and escaped to other regions for safety.
- Mr. Okeke, an economist, sustainability expert and consultant on business strategy is a National Daily Columnist. He can be reached at: obioraokeke2000@yahoo.com