© 2019 - International Centre for Investigative Reporting
Nigeria and its dilemma of inflation
DESPITE the government’s commitment to reducing inflation, prices of commodities keep rising in Nigeria as the value of Naira erodes nearly on a monthly basis.
The National Bureau of Statistics released the inflation data for October which indicates that inflation has risen to 11.61 from 11.24 in September.
That’s about 3.2 per cent higher than it was in September and 5.4 per cent higher than it was in August. This is perceived as a direct effect of the closure of land borders in August by the Federal Government.
The Central Bank of Nigeria apparently had hoped the initiative would improve both the demand and supply of locally manufactured commodities such as rice. The effect was soon to be noticed by Nigerians when food prices started increasing in the market.
According to a report by Proshare, the price of a 50kg bag of imported rice, which was selling at N14,500 before the closure of the border, now sells for N27,000. Locally produced rice has not been left out of the party as the price of Lake Rice, a product of an alliance between Lagos State and Kebbi State, has increased by 22 per cent to N16,500 from N13,500 before the closure of the border. There are those who sell it at as high as N19,000.
The spike in the price of rice in the market is linked to the principle of demand and supply. A restriction on the importation of a commodity translates into dipping supplies. This then leads to an increase in price because of unmet demands. As a result, a single commodity such as rice which is a staple food can push the headline inflation high if not taken care of appropriately.
According to the United States Department of Agriculture (USDA), Nigeria is still unable to meet up with its local rice demand. Nigeria’s local production for 2017/2018 is 4.73 million metric tons while it imported 2.1 million metric tons and its domestic consumption was estimated as 6.9 million metric tons.
In 2018/2019, Nigeria’s local production increased to 4.79 million metric tons, while its import rose to 1.8 million metric tons and its domestic consumption increased to 7.0 million metric tons.
On the 15th of October, CBN governor, Godwin Emefiele called on Rice Millers Association of Nigeria and other stakeholders in the rice production sector not to increase the price of rice due to border closure. He claimed that the border closure is meant to benefit Nigerians and promote the growth of the country’s economy. A further claim was made that the policy will ensure Nigeria is self-sufficient in rice production.
This looks like a clear attempt to shift the blame of a bad policy on the millers and stakeholders.
In a recent tweet by the apex bank, it claimed that “CBN Intervention funds to farmers will bring down the cost of production. “Price hike on rice is a temporary phenomenon that will fizzle out soon,” the tweet says. The CBN acknowledges price hike as a result of the border closure which has had a ripple effect on the inflation rate on all items.
To take cues from India, the Asian country is known for its great onion crisis. Local production of onions doesn’t meet up with its demand and this has caused more than a 200 per cent surge in onion prices. This, of course, had an adverse effect on Indian headline inflation. To fix the crisis and curb increasing prices, India planned to import 100,000 tons of onions to increase the supply and distribution of onions to meet up with its demand. This strategy will surely place an ease on the price of onions in India and improve the distribution of onions in the country.
Nigeria still has a long way to go in terms of enhancing local production and meeting up with its demand and local consumption. If it must continue to close its borders, it must put in place strategies to increase supply and reduce the cost of production.