New Telegraph

Rising food inflation undermines Nigeria’s economic growth

An unrelenting uptick in food inflation appears to cast a shadow on the recent positive indicators emerging from the Nigerian economy.

Reports from the National Bureau of Statistics show that the Nigerian economy is on a growth trajectory, while there is also a marginal drop in inflation for January 2022.

The bureau had reported that the GDP grew by 3.4 in 2021, the highest growth rate since 2014.

However, analysts are concerned about the poor reflection of this growth on the lives of average Nigerians against the backdrop of the escalating cost of food and other consumer goods.

There is no letting up for food prices and every other cost of items consumed by the common man, Rasak Buraimoh, an independent researcher told our correspondent.

“The rising GDP and cost of living for the average Nigerian are two parallel lines that are not meeting yet.

“If economic theory is to hold true, as growth rises and inflation drops, standard of living is supposed to be better but that is not the case in this economy at the moment.

“Maybe things will change later in the year, but for now, it’s a struggle to feed for many Nigerian families,” he said.

The World Bank, in its six months update on development in Nigeria, said although Nigeria’s economic growth had resumed after the COVID-19 shock, food inflation, heightened insecurity and stalled reforms were slowing down growth and increasing poverty.

Lead economist for Nigeria of the World Bank, Marco Hernandez, said inflation, especially in food prices, was exacerbating poverty and food insecurity, noting that food accounted for almost 70 per cent of Nigeria’s total increase in inflation over the past year.

He said the COVID-19-induced crisis was expected to push over 11 million Nigerians into poverty by 2022, taking the total number of people classified as poor in the country to over 100 million.

In an article about the January 2022 inflation, the Centre for Promotion of Private Enterprises, observed that food inflation had a significant impact on the poor.

CPPE, an economic and business advocacy think tank, said in the article signed by its Chief Executive Officer, Dr Muda Yusuf, that food inflation, which had a significant impact on poverty and the poor, remained elevated at 17.13 per cent, even though there was a marginal drop of 0.8 per cent in headline inflation.

Referring to the NBS report, which stated that headline inflation had dropped from 16.47 per cent in January 2021 to 15.60 per cent in January 2022, the article noted that food prices had nevertheless increased by 1.62 per cent between December 2021 and January 2022, indicating that the uptrend in food prices was yet to abate.

There was also an increase in core inflation and a general increase  in prices, the report noted, adding that this was a reflection of the impact of the depreciation of naira and liquidity issues in the foreign exchange market.

The implications of these high inflationary pressures, according to the report, include ecalation of production and operating costs for businesses, leading to erosion of profit margins, drop in sales, decline in turnover and weak

manufacturing capacity utilisation, high food prices which impacts adversely on citizens welfare and aggravates poverty.

Others are weak purchasing power, which has implications for aggregate demand and price volatility, which undermines investors’ confidence.

The report concluded that key drivers of inflation in the economy had remained unchanged despite the improvement in economic growth.

They include high exchange rates, insecurity, climate change effect on agriculture and food production, high transportation and energy cost, among other factors.

 

To curb the inflationary pressure, CPPE recommended addressing security concerns which disrupt agricultural activities, reforming the foreign exchange market and addressing the challenge of high transport cost, among other recommendations.

While agreeing that things are still tough despite the fact that Nigeria is recording the highest growth rate in seven years, a professor of Economics, Sherifdeen Tella, expressed hope that the cost of living for the average Nigerian will gradually drop as the growth continues on a sustainable level.

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