Consumer prices followed their turn-of-the-year increases which was reflected in the last SBM Intelligence report with a continued surge in the new survey period, which covered the months of June to August 2016, fuelled in large part by the following factors:
- the increase in pump price of petrol from ₦87/Litre to ₦145/Litre, driving transportation costs up
- the Central Bank of Nigeria abandoning a 16-month currency peg and authorising a managed float of the naira on June 20.
The upward march in consumer prices, which has continued almost unabated since 3Q 2015, has put a lot of pressure on Nigerians already grappling with other negative social factors as delayed (and in some cases, unpaid) salaries, a one time increase in the pump price of petrol as well as other petroleum products that has been complied with mostly in the breach, rolling power shortages – culminating in a record 17 shut-downs in the national grid this year – and in certain parts of the country, rising insecurity in parts of the country among others. The overall picture, despite public reassurances by government officials, will not turn positive in the short term. Our last consumer price report in May predicted a fall in the purchasing power of the average Nigerian and a chorus of economic data has only served to confirm that.
In the period under review, a combination of the seasonal farming effect, an overall reduction in food production, higher logistics costs and an almost 40 percent drop in the naira’s value ensured that a trend stretching to the beginning of the year continued over the period under review.
The price of pepper in Lagos is driven by the Mile 2 market, and transportation costs have significantly increased, the burden of which is being passed on to the consumer. The cost of transportation was not driven by the petrol prices, but by prevailing road conditions. SBM enquires detail a pattern of truck drivers consistently failing to make deliveries on time because road conditions have worsened with the onset of the rainy season coupled with traffic diversions brought on by ongoing road construction works.
It is worth noting that beans is still significantly cheaper to purchase in both western cities than the national capital which is closer to the crop’s main production centres. On another hand, our inquiries indicate that garri prices may be rising to keep up with rising demand. More businessmen are buying up cassava assets, either to substitute for more expensive wheat flour, or to process same for export.
The overall outlook remains tricky. The Nigerian consumer remains squeezed by a host of well documented and acknowledged but yet to be satisfactorily addressed factors. The incidence of widespread lay-offs and cutbacks, falling and in many cases delayed wages and pockets of unrest in key farming regions will continue to show up on the shelves of the open-air market and the decreasing range of choice available to ordinary families.
Policy makers will need to play an intelligent role in curtailing the persistent rise in consumer commodities, especially in areas that it can exert substantial influence over such as infrastructure development, which can ease the logistical challenges all economic actors currently face, and by encouraging small scale farming across the country. Government also needs to invest in agricultural extension programs to enable the nation’s farmers – a full 30% of the population are ushered into the 21st Century. Critical to increased production is securing the stability of the food growing North East and the North Central regions, and increasingly, the South West and the delta regions. Government urgently needs to address the country’s persistent and varied security challenges so that farmers can return to planting.
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Government also needs to invest in new, as well as upgraded storage infrastructure and further encourage trade, taking advantage of local food growing comparative advantages, thus elongating the availability of key farm products and ultimately contributing to bringing down their prices. More resources should be allocated to agricultural research and development in order to raise productivity levels in such things as plant yield, improved seed varieties and average production per hectare, as well as deploying technology to give farmers access to market information and modern techniques of crop development in order to help them lay the foundation for a more sustainable growing and developing economy.
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