Hunger, starvation loom over food inflation spike

…CBN policy needs review – Expert, … Apex bank blames inflation on insecurity, petrol price hike, others

Inflation in Nigeria hit a four-year peak in February as food prices jumped more than 20 per cent. In this report, BENJAMIN SAMSON examines implications for most households already faced with shrinking income in a stagnant economy.

The National Bureau of Statistics (NBS) in its report on Consumer Price Index for the month of February, released on March 17, revealed that the consumer price index which measures inflation increased by 17.33 per cent (year-on-year) in February 2021. This marked the highest figure recorded in the country since 2017.

Food inflation climbed to 20.57 per cent year-on-year, according to data released, making it the highest in over 11 years. Before now, the highest level was in July 2008.

According to the NBS, the February rate was 0.86 per cent points higher than the rate recorded in January 2021 (16.47) per cent.

The urban inflation rate increased by 17.92 per cent (year-on-year) in February 2021 from 17.03 per cent recorded in January 2021, while the rural inflation rate increased by 16.77 per cent in February 2021 from 15.92 per cent in January 2021.

On month-on-month basis, the headline index increased by 1.54 per cent in February 2021; this is 0.05 per cent higher than the rate recorded in January 2021 (1.49 per cent).

The percentage change in the average composite CPI for the 12 months’ period ending February 2021 over the average of the CPI for the previous twelve months’ period was 14.05 per cent, showing 0.43 per cent point from 13.62 per cent recorded in January 2021.

On a month-on-month basis, the urban index rose by 1.58 per cent in February 2021, up by 0.06 the rate recorded in January 2021, while the rural index also rose by 1.50 per cent in February 2021, up by 0.04 the rate that was recorded in January 2021 (1.46) per cent.

The corresponding 12-month year-on-year average percentage change for the urban index was 14.66 per cent in February 2021.

This is higher than 14.23 per cent reported in January 2021, while the corresponding rural inflation rate in February 2021 was 13.48 per cent compared to 13.04 percent recorded in January 2021.

CBN monetary policy

In a chat with Blueprint Weekend, an economist Dr Nanman Ihaku attributed the rising food inflation on the monetary policy of the Central Bank of Nigeria (CBN).

He said the rise indicated that the policy of the CBN aimed at taming inflation needed critical review, stating: “The CBN claims it has spent about N3.5 trillion on several stimulus programmes since Covid-19 outbreak in the first quarter of last year. However, food inflation rate continues to gallop, eroding the purchasing power of ordinary Nigerians.

“The downside of this strategy is that there is very little impetus for foreign investors to purchase CBN securities at very low-interest rates. This shuts the door to the reliance of foreign portfolio inflows to shore up dollar reserves, leaving us with investors who may want to return to the stock market. This is an indication that the CBN needs to review its policies aimed at checking inflation.”

He noted that the persistent increase in food prices, restrictions in the FOREX market, rising cost of transportation and insecurity predominantly in the Northern states had further heightened the situation.

“Since the deregulation of petrol prices, the country has witnessed petrol increase by almost 30 per cent in the last four months, which suggests a continuous increase in transport cost. Sadly, Nigerians are now being battered on two fronts; high transport cost and high inflation.”

 Impact on Nigerians

Also, the Policy Officer in charge of Agriculture and Inclusive Growth at Save Nigeria Campaign, a Civil Society Organisation (CSO), Dr Chike Okorie, told this reporter that the rise in inflation has severe implication for vulnerable populations.

He said: “Given that millions of Nigerians have either lost their means of livelihoods or faced lower incomes due to the Covid-19 pandemic, the impact is clearly severe for such vulnerable populations.

“Naira has lost over 20 per cent of its value since the Covid-19 crisis began in 2020, meaning it would cost more in Naira to import staples like wheat and rice.

“It appears a lot of local commodities traders are increasingly scared of moving goods from one location to the other due to the fear of getting killed and a lot of farm settlements have been damaged by either flood or conflicts.

“In a country plagued by insecurity following a wave of kidnappings of schoolchildren in its increasingly lawless North, there are concerns that the ‘stagflation’ combination of rising unemployment and prices and low growth could trigger significant social unrest.

“Inflation pressures would probably remain high in coming months; this is because only 30.6 million Nigerians in a population of around 210 million were considered fully employed.

“The ‘stagflation’ crises would take a long time to resolve, with inflation eating up economic gains to the point where any government stimulus might be too weak to generate jobs.”

Nigerians lament

Similarly, Nigerians who spoke with Blueprint Weekend also lamented their inability to buy much needed food stuff due high prices.

A school teacher and single mother, Toun Adebisi, said she could not afford to buy a bag of rice as she used to, due to the recent price hike.

“We have to resort to local rice. My children have even abandoned the rice for yam, but it is still costly,” she stated.

Sunday Ogunnusi, a resident of Masaka, in Karu local government area of Nasarawa state, said the increase in the prices of staple food was an attempt to annihilate the poor and vulnerable in the country.

“Just visit the market and you would notice that things are costly now. My wife used to buy a bag of rice and half bag of beans and garri for the house but we can’t afford it any longer. Now, we only take home what we see and would eat what is available and this is frustrating and saddening,” Ogunnusi said.

However, a banker with one of the first generation banks in Abuja, Paul Auta, blamed traders for the skyrocketing food prices, arguing that some of them were using the fuel price hike and coronavirus pandemic as excuse to exploit Nigerians.

He urged the government to come to the rescue of Nigerians by looking into the increase in the prices of essential commodities.

“We can’t continue to blame our problems on inflation. Are we saying the increase in dollar rate is the reason prices of yam and cassava flours were hiked, he queried.

A trader, Mrs Ijeoma Ibe, at the Mararaba Market, said the government should rise to the challenge and address the yearnings of Nigerians over the cost of necessary commodities.

She said all the stakeholders in agriculture needed to come together and address the challenge of the hike in food prices, which is being attributed to Covid-19 and insecurity.

She explained that the surge in food prices might also threaten the nation’s food security if the government decided not to intervene.

“If people say we should not blame the government for this, then who else should we blame? We need those who understand how to run our economy in power,” she maintained.

CBN’s intervention

Meanwhile, the Governor of the CBN, Godwin Emefiele, has said that the rising inflation was due to insecurity.

He made the remark, Tuesday, while presenting the communiqué from the Monetary Policy Committee (MPC) meeting.

The decline in purchasing power has increased for the 18th consecutive month and the CBN chief blamed unsafe food-producing areas.

The inflation continued on an upward to 17.33 percent at the end of February 2021 from 16.47 percent in January 2021, according to Emefiele.

The CBN governor said while the bank was making significant intervention in the agricultural sector, insecurity was limiting supply to the market.

Emefiele urged stakeholders to collaborate with the federal government to tackle the challenge.

He also attributed the hike in petrol pump price, electricity tariff, and Naira depreciation to inflation.

Emefiele assured that the CBN would continue to use its interventions to boost food security in the country.

…Experts too

Similarly, economic experts have identified the lingering insecurity challenges in food producing parts of Nigeria as one of the major factors fuelling the surge in food prices inflation as the country’s inflation rate jumped to its highest level in more than three years.

The Managing Director/Chief Executive Officer, Cowry Asset Management Limited, Mr Johnson Chukwu, said the inflationary pressures were coming particularly from volatile food items.

He said, “We must recognise that the disruption we have had in the northern part of the country in terms of food production has a direct impact on food inflation.

“We should expect these pressures to continue in the next couple of months. We should expect that the price of diesel will further increase because crude oil price has moved up and exchange rate has also deteriorated.”

In the same vein, a Professor of Capital Market at the Nasarawa State University Keffi, Uche Uwaleke, said the inflation rate was exacerbated by the lingering effects of increase in Value Added Tax, electricity tariffs and the pump price of fuel.

 “Insecurity may have also accounted for why the food inflation was highest in a state like Edo. The rate of increase in urban inflation gives cause for worry. This may not be unconnected with the rise in rural-urban migration.

 “Given that food inflation remains the major challenge, the inflation rate is expected to moderate this year following the intensification of the Central Bank of Nigeria’s interventions in agriculture and improvements in FOREX supply, the implementation of the 2021 agriculture budget and transport infrastructure, border reopening as well as improvements in security.

“It is important that the relevant agencies of government plans ahead to tackle flooding issues detrimental to the farming season,” he said.

FG commits to food security

The Federal Ministry of Agriculture and Rural Development has pledged commitment to partner with stakeholders to increase food security and reduce the threat of scarcity.

The Permanent Secretary in the ministry, Mr. Ernest Umakhihe, said this at the Result Presentation Workshop of March 2021 Cadre Harmonise (CH) Food and Nutrition Insecurity Analysis for Nigeria, recently in Abuja.

Umakhihe said the analysis came in the face of the pronounced threat of Food and Nutrition Security (FNS) occasioned by economic stress faced by several households due to lockdown and realised restrictions to curb Covid-19 spread.

He said the government realised the importance of CH results as it relates to effective intervention programming and resources allocation to prevent further deterioration of the FNS in identified areas.

“The management of the ministry has approved the expansion of CH activities to other states of Nigeria to achieve wide coverage.

“This approval will facilitate the generation of a global view of the food and nutrition insecurity situation in Nigeria,” he said.

Way out

Speaking on way out, an economist at Nigerian Economic Summit Group (NESG), Wilson Enaremor, said Nigeria was in need of investments to rejig economic activities.

He said, “Typically, what you do to bring down inflation, from the monetary policy point of view, is to reduce the money supply to the economy. However, we desperately need investments to resume economic activity.

“Already, there is very little money reaching the investor. The investment to jumpstart growth is not taking place.

“To make money expensive by hiking the interest rate (which is a natural response to inflation) will make matters worse. This is because it will discourage investment and we will get a really awkward situation.

“The Nigerian economy will not grow until we have banks sensitive to development. For too long, banks have been profitable from lending to three or four people in the economy.

“The banking industry has not supported real growth in the economy. Now, we have a situation where the supply chain has made products unavailable, pushing costs and therefore we have inflationary pressures.”

Enaremor said that the challenge of the moment was to ensure that whatever credit available goes to the productive sector and to crash the cost of governance.

He called for stimulus responses and more investments in agriculture to create growth, saying Nigeria might go on the path of Venezuela.

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