1 week Ago By Jeff Ukachukwu
Nigeria’s Headline Inflation Increased by 33.69% YoY in April 2024 as Food Inflation Rises by 40.53%.
The average CPI for the twelve months ending April 2024 increased by 28.10% compared to the previous twelve-month period, showing a 7.28% increase from April 2023’s 20.
82%. This is having a devastating impact on the lives of millions, especially Nigerians on the fringes of the economy, who are either already living in extreme poverty or are at risk of falling into this category. The high cost of food is causing hunger in the land.
Hunger is breeding desperation and frustration among the people and making many become malnourished, leading to all sorts of health problems and outbreaks of preventable diseases in Nigeria. The government needs to act quickly to nip the impending catastrophe if the cost-of-living crisis keeps exacerbating. One way to achieve this is to see and seize the opportunities the threat of food inflation presents.
The high cost of food presents opportunities for Nigeria that, if used properly, can be harnessed to our advantage. The answer to this question is plausible. Food inflation in Nigeria, like in any country, is generally seen as a negative economic phenomenon due to its adverse effects on consumers, particularly people experiencing poverty and the broader economy.
However, under specific circumstances, some perceived advantages or opportunities can arise from food inflation. While often limited and context-dependent, these potential benefits are real and must be harnessed. A caveat I must acknowledge before delving into the opportunities the high cost of food presents is this.
While the points I will outline below show the potential advantages, it is essential to recognise that the overall impact of food inflation is often detrimental, especially for low-income households that spend a significant portion of their income on food. The benefits are typically secondary effects that can arise if appropriate measures and policies are in place to support and capitalise on these opportunities. Effective management of food inflation is crucial to mitigate its negative impacts while potentially harnessing any positive outcomes.
Food inflation can increase farmers’ profitability, creating a significant incentive for them to invest more in their farms. According to the National Bureau of Statistics (NBS), the average inflation rate for food was 18.34% in 2023.
This rise in food prices can result in better returns, enabling farmers to purchase superior seeds, fertilisers, and equipment, boosting productivity. For example, the International Food Policy Research Institute (IFPRI) reports that a 10% increase in agricultural investment can lead to a 2-4% increase in crop yields. With a 40% food inflation in 2024, the government must develop a strategy of showing farmers and investors the excess profit inherent in investing in agriculture and encourage many to join the sector, thereby boosting food production and eventual demand and supply equilibrium that will impact the price.
Therefore, I propose a detailed public-private sector initiative to drive investment in agriculture immediately. This initiative will create an enabling environment for private sector involvement in agriculture, rounding all stakeholders up for improved actions and outcomes, aiming to produce abundant food for local consumption and export. Some states are taking this seriously.
Niger State, Akwa Ibom State, Cross Rivers State, Nasarawa State, and Ebonyi State are a few I know that are actively partnering with private sector companies to improve food production and harness the profitability in that sector. We know that the areas that are major agricultural belts in Nigeria are plagued with insecurity and banditry, leading to loss of investment in agriculture and loss of life and property. There is a need to solve insecurity in these places, but even with the current status quo, the government and private sector should explore investing in massive food production in areas with relative or complete security.
This will augment the loss of food production in insecure and ungoverned spaces. It is time for other parts of Nigeria to move into food production as part of our food security strategy. Higher food prices incentivise farmers to increase the cultivation area and diversify their crops to meet rising demand.
In 2022, Nigeria’s agricultural sector grew by 2.58%, contributing about 24% to the GDP, as reported by the NBS. Furthermore, as local production becomes more profitable, Nigeria can reduce its reliance on imported food worth $5.
9 billion in 2021. This improvement in the trade balance can help conserve valuable foreign exchange reserves, which stood at $37 billion at the end of 2023. In the interim, I support the government’s plan to remove import duties on food importation as an emergency measure to shore up the quantity of food within the country.
I sincerely hope that this short-term measure is followed by a medium- and long-term measure that supports massive production of local food, even for export, to improve our trade balance in the food sector. One of the notable benefits of food inflation is the potential for rural economic development. Higher food prices can translate into increased incomes for farmers and agricultural workers, stimulating economic activity in rural areas.
According to the World Bank, agriculture employs about 36% of Nigeria’s labour force. With increased incomes, rural communities may invest in better infrastructure, education, and healthcare, contributing to broader rural development. The NBS reports that rural poverty decreased from 52.
1% in 2019 to 48.9% in 2023, partly due to higher agricultural incomes. The agricultural sector is a significant employer in Nigeria, and increased agricultural activity resulting from higher food prices can create more jobs.
The Food and Agriculture Organization (FAO) estimates that every 1% increase in agricultural output can generate up to 0.5% additional employment in the sector. Furthermore, higher food prices can spur the development of agro-allied industries such as food processing, packaging, and logistics, creating further employment opportunities.
According to the NBS, the agro-allied sector grew 4.7% in 2023, leading to significant job creation. Food inflation can highlight the need for economic diversification, reducing Nigeria’s dependence on oil and gas and promoting agriculture as a significant financial sector.
Agriculture’s contribution to GDP increased from 23.4% in 2020 to 24% in 2023, while the oil sector’s contribution declined from 8.8% to 7.
5% over the same period. This shift can foster a more resilient and balanced economy. Moreover, the need to manage and benefit from higher food prices can lead to the development of complete agricultural value chains, enhancing the efficiency and sustainability of the sector.
Higher costs associated with food inflation can drive the adoption of more efficient and sustainable agricultural practices. According to the Federal Ministry of Agriculture and Rural Development (FMARD), the adoption rate of improved seeds and modern farming techniques increased by 12% from 2020 to 2023. These practices can help ensure food security and environmental conservation.
Food inflation can also encourage investment in agricultural technology, leading to long-term improvements in productivity and sustainability. Food inflation can lead to changes in consumer behaviour that have positive economic effects. For example, a survey by the Nigerian Bureau of Statistics found that 35% of households switched to consuming more locally produced foods in 2023, supporting local farmers and reducing the carbon footprint associated with imported foods.
Additionally, higher prices can lead to more careful consumption and reduced food waste among consumers, promoting more sustainable consumption patterns. The Food Waste Index Report by the United Nations Environment Programme (UNEP) noted a 10% reduction in food waste in Nigeria in 2023. Effective policies and strategic investments are crucial to mitigating the adverse effects of food inflation while capitalising on the opportunities it presents.
By harnessing these benefits, Nigeria can turn the challenges of food inflation into opportunities for growth and development. I propose that food production be the mainstay of all the tiers of government in Nigeria. The federal, state, and local governments must be at the forefront of any strategy to boost food production and secure our self-sufficiency in food.
We should also look at the regional levels to harness each sub-region’s natural environmental advantages in food production for local consumption and export. Intra- and inter-local government, state- and federal-government collaboration is essential to food production. Private investment and private sector engagement in agriculture are at the core of Nigeria’s agricultural and agro-allied industry development.
Foreign investment into our agricultural sector and multinational and multilateral cooperations must be encouraged. The government must declare a war on hunger. For any Nigerian who goes to bed hungry, it is a slap on our collective face and diminishes our shared humanity.
A national policy that will work towards keeping food inflation in single digits by 2030 is needed and is a welcome development..
