In February 2024, Nigeria witnessed a significant surge in imported food inflation, reaching a record high of 29.8%, up from 26.3% in the previous month, marking a 352 basis points increase, according to analysis by Nairalytics.
This substantial rise in imported food prices reflects a persistent upward trend that has spanned over four years, driven by a combination of internal and external factors. Externally, global supply chain disruptions triggered by the Covid-19 pandemic and the Russia-Ukraine conflict, coupled with soaring global oil prices, have contributed to the inflationary pressures. Domestically, the scarcity of foreign exchange (FX) and the subsequent depreciation of the local currency have exacerbated the situation.
The Nigerian naira experienced significant depreciation rates, with a 37.7% and 17.3% decline in January at the official and parallel markets, respectively. Year-to-date, the naira has depreciated by 43.4% and 24.7%, closing at N1,602.75/$ and N1,614/$, respectively.
Consequently, headline inflation soared to nearly 28-year highs, reaching 31.7% during the review period, driven by both core and food components of the Consumer Price Index (CPI). Food inflation surged by 251 basis points to 37.92%, while core inflation, excluding farm produce and energy, increased by 154 basis points to 25.13%.
The National Bureau of Statistics (NBS) attributes the rise in food inflation to increases in the prices of key commodities such as bread, cereals, yam, tubers, fish, oil, fat, meat, fruit, and coffee.
Similarly, the surge in the core component of inflation was propelled by a spike in transportation costs, accommodation charges, medical services, and pharmaceutical products.
Despite efforts by the Central Bank of Nigeria (CBN) to curb inflation and manage FX volatility, including multiple benchmark interest rate hikes totaling over 700 basis points between April 2022 and January 2024, inflationary pressures have persisted.
President Tinubu’s administration has remained adamant against food imports, emphasizing the need to address food inflation. Data from the National Bureau of Statistics reveals a substantial increase in agricultural imports, valued at N2.28 trillion in 2023, a 22.3% rise from the previous year.
In a bid to enhance domestic food production and stabilize prices, the CBN recently allocated over N100 billion worth of fertilizer to the Ministry of Agriculture and Food Security. Additionally, the release of 42,000 metric tons of maize and millet from reserves aims to mitigate rising food costs.
Looking ahead, the CBN is poised to hold its second Monetary Policy Committee (MPC) meeting for the year, where deliberations may focus on maintaining or increasing interest rates. The committee aims to narrow the gap between interest rates and inflation, currently at a deficit of 8.95%.
Observers anticipate a cautious approach from the CBN, either considering further rate hikes at a slower pace or allowing previous adjustments to take effect, as the nation grapples with persistent inflationary pressures and economic challenges.
