How Nigeria can stem rising food inflation

Nigeria is grappling with soaring food inflation rates as AFEX predicts further increases in the prices of food commodities near term. Data from the National Bureau of Statistics revealed a concerning rise in food inflation to 31.5% year-on-year in October, painting a bleak picture for consumers and the overall economy. Yusuf Ogunbiyi, Head of Sales Operations at AFEX, shed light on the report's implications and provided insights on the food commodity market outlook. One of the primary drivers of the escalating food inflation is the persistent supply chain issues plaguing the agricultural sector. Ogunbiyi emphasized that the ongoing struggles with the availability of inputs and farmers' challenges in cultivating their lands, exacerbated by sporadic instances of insecurity, have created a widening deficit in food production. These underlying factors continue to fuel the increase in food prices, with the situation expected to persist and possibly worsen in the near future. While there may be a slight deceleration in month-on-month food inflation during the harvest season, concerns loom regarding processing volumes. Ogunbiyi highlighted that processors' apprehensions about acquiring sufficient volumes for production could lead to heightened buyer enthusiasm, potentially resulting in price hikes beyond the anticipated slowdown. This dynamic underscores the delicate balance in the food commodity market, where short-term trends may mask underlying pressures. Core inflation remains a critical concern, maintaining a stubborn rate of 22.6% year-on-year, signaling challenges for consumer prices and service sectors. Ogunbiyi projected a continued upward trajectory for core inflation, driven by the ripple effect of escalating prices on goods and subsequent services. As the economy heads into the festive season, heightened consumer demand and cost pressures are anticipated to further elevate core inflation rates, overshadowing any modest slowdown in food inflation. Looking ahead, Ogunbiyi shared his full-year headline inflation expectation, ranging between 28 and 30%, with a potential to breach the 30% mark in adverse scenarios. Addressing the multifaceted issue of inflation demands a holistic approach, with monetary authorities tasked with the crucial role of constraining money supply through interest rate adjustments. While the monetary side addresses some aspects, Ogunbiyi stressed the paramount importance of tackling underlying challenges, particularly security in the food belt and enhancing the processing value chain. The potential of Nigeria's agricultural sector lies not only in catering to domestic consumption but also in driving exports to reduce the food import bill and stabilize the economy. Ogunbiyi highlighted the need for concerted efforts from both public and private entities to harness export opportunities, emphasizing the role of agencies like the Nigerian Export Promotion Council. Despite existing challenges, including policy uncertainties, Ogunbiyi remained optimistic about unlocking export potentials across agro-commodities, solid minerals, and gas. In navigating Nigeria's rising food inflation, the imperative lies in adopting a strategic blend of policies and initiatives that address the structural deficiencies in the agricultural and processing sectors. While the road ahead may present obstacles, the concerted efforts of stakeholders and proactive measures can pave the way for a more sustainable and resilient food commodity market in Nigeria.