The September Consumer Price Index (CPI) reading points to a slower inflation rise, but experts have dismissed the data as deceptive, warning that a worst food crisis scenario could be lurking behind the veneer of the statistics.
The ravaging flood, coming ahead of harvest season, is seen as a new alarm bell Nigeria must keep tab on to avert a possible food crisis not witnessed in recent years.
The inflation rate, according to the CPI, stood at 20.77 per cent, a moderate increase on 20.52 per cent recorded in August. But the month-on-month (m/m) inflation, which explains the most current inflation trend, has dropped to its slowest since November, when it read 1.08 per cent.
From December to August, m/m inflation averaged 1.73 per cent, suggesting that the drop to 1.36 per cent in September was a remarkable breather. Confirming this, the m/m change in the food index, which has been the big elephant in the room, slowed to 1.43 per cent, from 1.98 per cent in August and a nine-month average (dating back to December 2021) of 1.97 per cent.
For the first time in a while, the percentage rise in the food segment was smaller than that of core inflation, which rose from 17.2 per cent to 17.6 per cent. The composite food inflation, on the other hand, moved from 23.13 per cent to 23.34 per cent, much slower than the core inflation.
But Prof. Adi Bongo of the Lagos Business School said the cooling food inflation is seasonal, suggesting that higher inflation could come on the back of increased exchange rate pass-through and imported components.
While Bongo attributed the seeming ease in the price crisis to seasonal effect, president of the Yam Farmers Association of Nigeria, Prof. Simon Irtwange, said farmers are caught in bigger dilemma as their farmlands could be completely swept off before the current flood eases. Jigawa, Kebbi, Benue, Borno, Niger, Kogi, Nasarawa and a few other states that have served as the nation’s food basket are currently underwater with an estimated two million residents displaced.
Irtwange, who lives in Benue and gets reports from his colleagues daily, told The Guardian, yesterday, that a larger number of farming communities are not accessible and may not be accessible throughout the harvest season.
“We will have challenges with availability, accessibility and affordability of food. Accessibility is a big challenge because most roads leading to rural communities are washed off. It will take some time before anybody will be able to access the farmlands. That means the food produce that is not washed away will be trapped in the farms,” the agro-economist explained.
Also speaking, Ken Ife, another professor of economics with deep interest in farm value chain investment, said a worst-case scenario could be around the corner if appropriate interventions were not adopted. He said 20 to 30 per cent of rice farmlands would have been affected by the flood, meaning that Nigeria would need to import rice paddy to avoid serious strain during December’s high demand for the staple food.
Olam Nigeria Limited, a significant player in the rice value chain, had raised the alarm that its market share was wiped off by the flood.
“The entire team from the farm worked very hard to prevent the colossal damage that arose from the dam release that broke the dikes of the farm and affected us. To a large extent, we supply about 25 per cent of Nigeria’s rice needs and that has been affected as we have already lost over $20 million,” the company’s representative said.
Irtwange added that thousands of small farm holders in Benue and Nasarrawa, who supply Olam paddies have also been affected. The Guardian also learnt from different sources that those whose farms are not submerged are also displaced or cannot access the farming settlements as flood takes over better parts of the Northern region.
Still, Godwin Owoh, a professor of applied economics, questioned the integrity of the National Bureau of Statistics (NBS), saying: “NBS is already under intense pressure to falsify and manipulate fiscal algorithms in measuring inflation outcomes. The ruling party is in deep haste to present ‘good data’ for electoral gains.
“Sound economic theory holds that the exchange rate, interest rate and inflation rate move in the same direction. There is no hope on the horizon that the exchange rate will improve, nor the interest rate, especially, in the face of the complete capture of the monetary institutions.
“Three main factors would further rebalance inflation expectations upwards – potential increased spending arising from election spending, decelerating agriculture production due to pseudo-CBN interventions and laissez faire vibes in fiscal and monetary controls. The postulated trajectory of Nigeria’s inflation is biased and very unreliable.”
He said expectations of peak levels could only be fairly estimated by end of next year.
Dr. Muda Yusuf, former director general of the Lagos Chamber of Commerce and Industry (LCCI), in his reaction, sees hope in flexible foreign exchange management and charged the Central Bank to tweak its template. Yusuf, a supply side economics advocate, charged government to incentivise the private sector and remove rigidities in monetary and fiscal space to stimulate local production.
A former President of the Chartered Institute of Bankers of Nigeria (CIBN), Uche Olowo, said: “We still have dollar rising above other currencies, insecurity is still on the rise and the exchange rate is also an issue currently.
“Other global economies are experiencing the same problem of inflation, but ours should not have been so, because we are an oil producing country and the Russia-Ukraine war has led to high energy costs, which should not be a pain to Nigeria as an oil-producing country.”
He warned that the nation’s food insecurity would worsen next year if necessary steps are not taken to tackle the present flooding challenge.
Also speaking, a professor of economics at Olabisi Onabanjo University, Sheriffdeen Tella, said: “The current inflation is caused by both local and external shocks. So, it is quite complex to control. However, the main cause is the massive depreciation of naira.
“We import most production material, there is also a shortage of products produced locally due to insecurity. Again, the high cost of energy, high-interest rates and transportation costs are negatively impacting companies’ profit. Very soon we will add the negative effects of the current flooding to our problems because this would lead to food scarcity in the near future.”
While describing the latest inflation figures as a ‘very slippery slope’, the Chief Executive Officer of Dairy Hills Limited, Kelvin Emmanuel, explained that the slow headline inflation is a response to the hike in the cash reserve ratio (CRR) from 27.5 to 32.5 per cent.
He added that while this development can appear as a reprieve that might indicate a slowdown in inflation, “it is not a sign that we are out of the woods yet. This is because the implementation of quantitative easing that has seen CBN print cash in violation of sections 38 of the CBN Act has led to a devaluation of the naira, which has made importation of food for enterprise manufacturing, and fuel oils more expensive for the people.”
Emmanuel added that with commercial and smallholder farms already destroyed by the flood, this will impact the end of the fourth quarter inflation.
Speaking, yesterday, in Abuja at the Petroleum and Natural Gas Senior Staff Association (PENGASSAN) event, Festus Osifo lamented that the root cause of inflation ravaging most countries of the world centres on energy transition. Painting a worrying picture of the forex crisis, the PENGASSAN boss revealed that Nigeria loses about 60 million dollars daily.
He said: “The world is battling inflation today, whose root cause is centred on energy availability and the need for the demand and supply mix to be always right. We have been told that gas is the transition petrol for Nigeria. How do we harness its full value? Crude oil theft and its effects cost Nigeria and its investment partners over 60 million dollars daily.”
Chairman of the Financial Reporting Council (FRC), Dr. Sam Nzekwe, said the situation would get worse because what would have been a bumper harvest has been washed away by the flood.
“Remember that many of our farmers no longer go to farm because of insecurity, which is the reason we have high cost of food in the first place, now the few that are farming have their crops destroyed by flood. I see a very tough time ahead for Nigerians.”
Also responding, the National President of All Farmers Association of Nigeria, Kabir Ibrahim, said: “The losses suffered by our farmers due to flood is likely to exacerbate the food inflation. So, I am fearful that we are likely to witness higher inflation in the coming days.
“Check out the states that are affected, they are the food-producing states. The harvest will manifest in the actual quantum redeemed after the losses due to flooding. A low harvest will adversely impact inflation or precisely exacerbate it!”
