Business

Higher Food and Commodity Prices Raise Nigeria’s Inflation to 22.79%

The Consumer Price Index (CPI) which measures the rate of change in prices of goods and commodities increased by 0.38 per cent to 22.79 per cent in June compared to 22.41 per cent in the preceding month, the National Bureau of Statistics (NBS) disclosed on Monday.

Year-on-year, headline inflation was higher by 4.19 per cent when compared to 18.60 per cent in June 2022, the NBS added.

According to the CPI Report for June, 2023, which was posted on the website of the statistical agency, the increase in the headline index for June was attributed to increases in some items in the basket of goods and services at the divisional level.

Food inflation rose by 4.65 per cent to 25.25 per cent year on year compared to 20.60 per cent in the preceding year.

The rise in the annual food index was attributed to increases in prices of oil and fat, bread and cereals, fish, potatoes, yam and other tubers, fruits, meat, vegetable, milk, cheese, and eggs.

Month on month, the food index increased to 2.40 per cent compared to 2.19 per cent in May.

However, core inflation, which excluded the prices of volatile agricultural produce, increased by 4.53 per cent year on year to 20.27 per cent in June compared to the 15.75 per cent recorded in the corresponding period of 2022.

The core index was attributed to the highest increases in prices of passenger transport by air, gas, vehicles, spare parts, liquid fuel, fuels and lubricants for personal transport equipment, medical services, passenger transport by road among others. Month on month, the rate dropped to 1.74 per cent compared to 1.81 per cent in May.

The Urban index also rose to 24.33 per cent year on year, up by 5.23 per cent compared to 19.09 per cent in June 2022. Month on month, urban inflation increased to 2.31 per cent compared to 2.09 per cent in the preceding month.

On the other hand, rural inflation was 21.37 per cent year on year compared to 18.13 per cent in June 2022. Month on month, the rural index increased to 1.96 per cent compared to 1.80 per cent in May.

At states level, the all-items inflation was highest in Lagos (25.75 per cent), Ondo (25.40 per cent), Kogi (25.23 per cent), while Borno (20.44 per cent), Zamfara (20.93 per cent) and Ekiti (21.06 per cent) recorded the slowest rise

Month-on-month, however, the highest price increases were recorded in Ogun (3.21 per cent), Plateau (3.05 per cent), Jigawa (3.00 per cent), while Zamfara (1.40 per cent), Delta (1.42 per cent) and Rivers (1.54 per cent) recorded the slowest rise.

Year on year, food inflation was highest in Kwara (30.80 per cent), Lagos (30.37 per cent), and Kogi (29.71 per cent), while Zamfara (21.38 per cent), Sokoto (21.60 per cent) and Borno (21.75 per cent) recorded the slowest rise.

On a month-on-month basis, also, the food index was highest in Kwara (3.82 per cent), Abuja (3.64 per cent), and Ogun (3.56per cent), while Rivers (0.75 per cent), Zamfara (1.33 per cent) and Adamawa (1.47 per cent) recorded the slowest rise.

Meanwhile, the naira closed at N795.28 to a dollar on the Investors and Exporters’ window of the forex market on Monday, compared to the N803.90 to a dollar it closed last Friday.

Meanwhile Nigeria’s current food inflation may worsen as Russia, Monday formally announced the suspension of its participation in the Black Sea grain deal, hours before its previous extension expired.

The agreement before it was called off, ensured that no ships would be attacked entering and leaving the Ukrainian port while a separate one also facilitated the movement of Russian food and fertiliser.

Russia’s withdrawal from the pact sent shivers through African countries, including Nigeria, which is currently reeling from inflation, climate shocks and conflicts.

Nigeria’s food security remains vulnerable to major global shocks as over 50 per cent of the foods consumed by Nigerian households come from purchased sources, according to the International Food Policy Research Institute (IFPRI).

Also, Nigeria is one of the 10 countries with the highest number of people in food crisis, according to the 2022 Global Report on Food Crises. A report by the US Department of Agriculture’s Foreign Agriculture Service (FAS) Global Agricultural Information Network, further stated that Nigeria traditionally gets much of its wheat from the Black Sea region and would therefore be impacted.

Wheat is the third most consumed grain in Nigeria and by the end of Q3 2021, data from the National Bureau of Statistics (NBS) showed that Nigeria imported durum wheat and mackerel worth N88.46 billion and N30.69 billion, respectively, from Russia.

The Black Sea grains deal, brokered by the United Nations and Turkey in July 2022, helped bring down global food prices and allowed aid agencies to access hundreds of thousands of tonnes of food at a time of rising needs and scarce funding.

Nearly 33 million metric tonnes of corn, wheat and other grains have been exported by Ukraine under the agreement, which has been extended twice since it was first signed. Kyiv has also contributed 725,200 (2.2 per cent) tonnes to the UN World Food Programme (WFP).

The reason for Russia’s decision is not far-fetched. Some days ago, Russian President Vladimir Putin during an interview said “not one” of Moscow’s conditions for the deal to function had been met.

“I want to emphasise that nothing was done, nothing at all. It’s all one-sided,” said Putin.

“The obligations recorded in the relevant Russia-UN memorandum to remove obstacles to the export of Russian food and fertilisers still remain unfulfilled,” Putin said , according to a statement by the Kremlin.

Russia has also claimed that not enough grain was being sent to the poor countries, while the UN has argued that the deal had helped those states by lowering food prices by over 20 per cent across the world.

The end of the deal means that the pressure by the United Nations and the diplomatic shuttle between Russia and Ukraine by seven African leaders, including the presidents of the Comoros, Senegal , South Africa and Zambia , as well as Egypt’s prime minister and top envoys from the Republic of Congo and Uganda did not yield much results.

Ukrainian President Volodymyr Zelensky, in response to Russia’s decision, said Kyiv was prepared to continue grain exports despite Moscow’s backing out of the deal.

“Even without the Russian Federation, everything must be done so that we can use this Black Sea corridor. We are not afraid. We have been approached by companies that own ships. They said that they are ready” to continue shipments, Zelensky said through his spokesperson, Sergiy Nykyforov.

Turkish President Tayyip Erdogan said that he believed the Russian president wanted to continue the deal, despite the statement on Monday and hoped talks will progress on the issue after Turkish Foreign Minister Hakan Fidan and his Russian counterpart Sergei Lavrov held talks on Monday.

The emergency director in East Africa for the International Rescue Committee (IRC), Shashwat Saraf, told Reuters the impacts would be far-reaching in Somalia, Ethiopia and Kenya, which have been facing the Horn of Africa’s worst drought in decades.

Beyond the direct impact of reduced supply from Ukraine, one of the world’s largest grains suppliers, instability in global markets would likely lead countries with modest surpluses to hold back exports, said Saraf.

Nigeria was projected to import 6 million tonnes of wheat in the 2022-23 marketing year, a 3 per cent decrease over the previous season, according to a Global Agricultural Information Network report from the Foreign Agricultural Service of the US Department of Agriculture (USDA).

In 2021, Nigeria imported 51 percent of its wheat from Russia, Lithuania, Latvia, and other Baltic countries. Wheat from Russia, Ukraine, and other Black Sea countries remains the cheapest option for many milling companies in Nigeria.

Beyond the wheat import, Nigeria also buys a large quantity of potassium from Russia, which is a by-product for production of fertilisers.

The country’s fish and wheat imports from Russia plunged by 83 per cent year-on-year in the first quarter of 2022 amid the ongoing war in Ukraine, data from the National Bureau of Statistics (NBS) shows.

In a reaction on her verified Twitter handle, the Director General of the World Trade Organisation (WTO), Dr Ngozi Okonjo-Iweala, lamented the development, but expressed the hope that the deal could be renewed soon.

“(I am) Deeply disappointed at the termination of the Black Sea Grain Initiative & the interruption of the grain trade from Ukraine. I share UN SG @antonioguterres’ regret and concern.

“Black Sea trade in food, feed and fertiliser is critical to the stability of global food prices. Sad to say that poor people and poor countries are hardest hit. Let’s keep hope alive on renewal,” she stated.

James Emejo and Emmanuel Addeh