This year, Nigeria has experienced an unbearable hike in commodity prices, and it shows no sign of slowing. The economic situation of the country is forcing citizens to empty their pockets to meet basic needs.
In its quarterly SBM Jollof index report for Q3 2021 titled Jollof Index: Prices be Swingin, SBM Intel, a geopolitical research firm, revealed the cost of making a pot of jollof rice for a family of five in Nigeria has risen by 4.98 per cent. The index’s data is collected monthly from 13 markets across six geopolitical zones in Nigeria, except in December due to seasonal spikes caused by year-end celebrations.
The Jollof Index covers major food items used in preparing a pot of jollof rice such as rice, curry, thyme, seasoning cube, groundnut or vegetable oil, turkey or chicken, beef, pepper, tomatoes, salt, and onions. In Q3 of 2021, Jollof rice, one of Nigeria’s favourite delicacies, costs an average of N8007.50 to prepare, 4.98 per cent higher than N7,618 reported in Q2. In Q1, the average cost of making a pot of jollof rice was N7400. Preparing jollof rice is most expensive in Nyanya, Abuja at N10,050, and cheapest in Akwa, at N6,910.
In comparison, the reasons identified for the high cost of food in Q1 2021 are not significantly different from what the Q3 report reveals. There are only a few new contributing factors. Prolonged border closure, increased energy tariffs, exchange rate fluctuations, insecurity, coronavirus pandemic, EndSARS protest, and the restrictions of forex for the importation of items are some reasons why food prices were high in Q1 2021. While these factors remain valid in the Q3 report, new factors include the ban on the sale of foreign exchange to Bureau de Change (BDC) operators and the high cost of cooking gas.
In August, the Central Bank of Nigeria (CBN) stopped the sales of foreign exchange to Bureau de Change (BDC) operators, and soon after, the CBN clamped down on websites like AbokiFx offering parallel rates. According to the report, because there was no centralized method of determining parallel rates, most forex traders raised their prices as a precaution. This affected the prices of some ingredients like rice and turkey, which are often imported, due to the low production rate in the country.
Also, the cost of cooking gas has risen steadily in the past three months. “Our interviewees said gas sold by gas retail outlets rose from N500 per kg in June to N700 per kg in September. Retailers have consistently reduced the refill weight per visit to gas refill plants, and there is no long-term solution in sight,” the report said. Things are bound to worsen as the National Association of Liquefied Petroleum Gas Marketers (NALPGAM) warned that the refilling price for a 12.5kg gas cylinder might hit ₦10,000 before December.
Insecurity and climate change
The index identified insecurity as the foremost cause of food price increase and volatility in Nigeria. In the north, farmers are being killed, kidnapped, or forced to pay a ransom, leading to the abandonment of farmlands. An insurrection and sit-at-home orders in the southeastern states have also complicated food security issues as they disrupt the supply chain in the area.
Flood and drought have also greatly affected production quantities in recent years. In a previous survey by SBM, 52.6 per cent of farmers agreed that their harvest was affected by adverse weather conditions of flooding and drought. In August 2021, floods destroyed 6,000 hectares of farm and N900 million ($1.6 million) worth of property in Bauchi State.
Improvement in market information is the first recommendation the report said should be of concern to the government. The lack of unified market information on parallel rates raises the cost of forex, which is passed on to the final consumers.
The Nigerian government should collect data on current levels of production to help with policy decisions. The government must not only invest in agricultural interventions but also monitor their impact in the agricultural sector.
Finally, the government has to invest in food storage infrastructures to reduce post-harvest losses and remove import restrictions for essential food items to salvage the situation of increased food prices.
Written by Agbetiloye Adekunle