Food Prices Soar As Inflation Hits 11-year high

July 19, 2016

In the past six months, the prices of essential food items have risen significantly in consonance with the rising level of inflation in the country, which hit an 11-year high of 16.5 per cent last month.

The National Bureau of Statistics on Monday released the Consumer Price Index, which measures inflation, stating that the country’s inflation rate rose from 15.6 per cent in May to 16.5 per cent in June.

June’s rise in the inflation rate represents one of the highest to be recorded by the country over a decade.

Stakeholders in the food supply chain, in separate interviews with one of our correspondents, attributed the hike in food prices to the poor state of the economy occasioned by the declining supply of commodities, rise in fuel price and the devaluation of naira.

Wholesale and retail traders in Lagos complained that every time they decided to stock new supplies of food items, the prices would have been increased by the suppliers.

Surveys across some markets in Lagos revealed that the prices of semovita, vegetable oil, palm oil, fish, spaghetti, macaroni, rice, beans and garri, among others, had soared in the last six months.

It was observed that the prices of 500g packs of spaghetti and macaroni had increased from N120 to N180 between February and July this year.

On the average, semovita has experienced about 70 per cent rise in price from N200 for the 1kg bag, to N340; while a 1kg bag of processed wheat has doubled to N280 from N140 at the beginning of the year; garri has also recorded 100 per cent increase within the same period.

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Following the same trend, the price of the 100kg bag of red beans has increased from N20,300 to N23,000; while a 50kg bag of rice recorded about 40 per cent price hike from N10,300 to N14,000 in the same period.

For imported vegetable oil, the owner of Okikiola Ventures at the Ipodo Market, Ikeja, Mrs. Aboidun Adefolami, said that a 25-litre container of the product imported from Malaysia was being sold for N10,000 instead of N6,200 in January, while 25 litres of palm attracted N7,000  instead of N6,000.

A wholesale trader of fish at the Agege Market, Mrs. Abosede Moshood, explained that a carton of Alaska brand of fish cost N11,300, a 22 per price increase from N9,300 that it sold for in February.

Within the same period, she added that Titus mackerel fish, which was selling for N10,400, now  cost N13,000, while the price of Blue whiting had risen from N8,400 to N8,700.

However, the NBS attributed the rise in inflation to the increase in the prices of electricity, kerosene, furniture and furnishing materials, passenger transport by road, fuel and lubricants as well as transport equipment.

The inflation rate had been experiencing an upward swing in the last seven months, a development that analysts described as worrisome.

The implication of the resurgence in inflation, according to analysts, is that consumers will experience tougher times ahead due to the reduction in their purchasing power.

The NBS stated, “In June, the Consumer Price Index which measures inflation continued to record relatively strong increases for the fifth consecutive month. The headline index increased by 16.5 per cent (year-on-year), 0.9 percentage points higher from rates recorded in May (15.6 per cent).

“During the month, the highest increases were seen in the electricity, liquid fuel (kerosene), furniture and furnishings, fuel and lubricants.”

The report said while imported foods continued to increase at a faster pace, the food sub index on the aggregate increased at a slower pace in June relative to May.

The food index, it added, increased by 15.3 per cent (year-on-year) in June up by 0.4 percentage points from rates recorded in May.

Commenting on the latest inflation statistics, the Executive Director, Corporate Finance, BGL Capital Limited, Mr. Femi Ademola, said the country’s inflation was being induced by lack of infrastructure.

He called on the Ministry of Finance and the Federal Government’s economic management team to come up with workable fiscal policies that would help address the infrastructure challenge facing the country.

He said any attempt by the Central Bank of Nigeria to fight inflation would mean increasing the Monetary Policy Rate, which would lead to a rise in the lending rate.

Ademola said, “The rate of inflation currently is not caused by too much liquidity. It is structurally induced, because most of the factors that are causing the increase in inflation are what can be addressed by fiscal policies.

“To check the rate of inflation now means that the CBN would have to increase the MPR, and doing this at a time when the government wants to simulate local production will affect the rate of output.

“So, this is the time for the Ministry of Finance to come up with fiscal policies that will stimulate the economy particularly in the area of infrastructure such as road, electricity and so on.”

The Head, Department of Banking and Finance, Nasarawa State University, Keffi, Uche Uwaleke, said the rise in inflation did not come as a surprise as the factors driving inflationary pressures had yet to be addressed.

Uwaleke, an Associate Professor of Finance, said, “The CBN should not increase the rate of the MPR, because it has not worked in the past as the inflation is not demand pull, but cost induced. The economy is approaching recession and the factors that are responsible for inflation such as high electricity prices, imported items and the rest are still there.

“The CBN should scale up its developmental function rather than increasing the MPR so that more funds can be channelled to agriculture to scale up production so that the cost of food items can reduce.”

Uwaleke also called on the Federal Government to as a matter of urgency increase the rate of spending on critical projects approved in the 2016 budget, adding that this would assist in making the business climate less hostile.

Agitation by of workers for salary increase in view of the rising inflationary trend appears not to be feasible now, as some states are slashing the salaries of their employees, while many others are finding it difficult to fulfil their obligations to the workers for several months, in addition to massive job losses in the private sector.

The Director-General, Nigeria Employers’ Consultative Association, Mr. Olusegun Oshinowo, explained that salary increase for workers to cushion the effect of inflation would not be feasible due to poor sales by manufacturing industries.

He urged workers to rather pray for job security and regular salaries.

Oshinowo said, “This is not a time for salary increase, because most employers are struggling to keep their current staff strength on account of low demand for their products. And beyond the low demand for their products, some of them are finding it difficult to source for foreign exchange to bring in the inputs for production in spite of the liberalisation of the forex market.”

The price of kerosene, used by most Nigerians for cooking, has risen to as much as N300 per litre from N50; while Automotive Gas Oil (diesel), used largely by businesses to power their operations, has been selling for between N185 and N200 per litre from around N120 per litre earlier.

Economic and financial experts said the recent partial deregulation of the downstream petroleum sector and devaluation of the naira had pushed the prices of goods and services higher.

The Chief Executive Officer, Financial Derivatives Limited, Mr. Bismarck Rewane, noted that the inflation rate had increased sharply, but said it had almost got to a point where it would begin to ease up.

Rewane, said, “We are going to to see the effect and a downward pressure on prices from July. It is the exchange rate that drove the inflation to this point. I think that it will start to stabilise as from next month. It will still increase but it will begin to come down.”

A Professor of Financial Economics at the University of Uyo, Akwa Ibom State, Leo Ukpong, said, “I am surprised that the inflation rate rose to 16.5 per cent; I thought it would probably jump to 18 per cent. I think, in reality, it will be higher than that.”

The Head of Research and Investment Advisory at SCM Capital Limited, Mr. Sewa Wusu, said, “The rise in inflation is not a monetary phenomenon; it is not caused by increased level of liquidity in the system. It is more or less a structural defect, which I think the government should look into.”