Imported food inflation in Nigeria rose to its highest level, reaching 29.8% in February 2024 from 26.3% recorded in the previous month, which represents a 352 basis points increase.
This is according to an analysis by Nairalytics, the research arm of Nairametrics.
Further analysis showed that imported inflation has increased consecutively for over 4 years, largely driven by both internal and external factors.
The external factors include global supply chain shocks following the Covid-19 pandemic and Russia-Ukraine war, and a surge in global oil prices amongst others, while the domestic front is largely due to FX scarcity and subsequent depreciation of the local currency.
According to Nairalytics, the Naira depreciated by 37.7% and 17.3% in January at the official and parallel market to close at N1,456/$ and N1,470/$ respectively. Year-to-date, the naira has depreciated by 43.4% and 24.7%, closing last at N1,602.75/$ and N1,614/$ respectively.
Consequently, the headline inflation rate rose to an almost 28-year high of 31.7% in the review period, driven by both the core and food components of the index.
Food inflation rose by 251 basis points to 37.92% while core inflation (all items less farm produce and energy) increased by 154 basis points to 25.13%.
According to the NBS, food and non-alcoholic beverages contributed 16.42% to the headline inflation, mostly driven by an increase in the prices of bread and cereals, yam and tubers, fish, oil and fat, meat, fruit, and coffee amongst others.
In the same vein, the increase in the core component was driven by a surge in road transport costs, accommodation, medical services, as well as pharmaceutical products.
The surge in Nigeria’s inflationary pressure is despite several policies implemented by the CBN to tame the rising rate of inflation and manage FX volatility.
Before February, the CBN had increased the benchmark interest rate (MPR) by over 700 basis points between April 2022 and January 2024, in a bid to tackle the money supply, which was unabated. A move that had no significant positive impact on inflationary pressure.
The administration of President Tinubu has insisted on the importation of food into the country. This stance was reiterated during a recent meeting with the Forum of State Chairmen of the All Progressives Congress (APC), where the president emphasized the need to address food inflation.
The continued reliance on imports within the Nigerian economy has significantly strained the exchange rate and trade balance.
According to data from the National Bureau of Statistics (NBS), Nigeria imported agricultural goods valued at N2.28 trillion in 2023, marking a substantial 22.3% increase from the previous year’s figure of N1.87 trillion.
While the president has maintained its stance against food importation, the CBN recently announced to allocation of 2.15 million bags of fertilizer, valued at over N100 billion, which was handed over to the Ministry of Agriculture and Food Security, aimed at improving food production capabilities and foster price stability within the agricultural sector.
The President had initially directed the release of 42,000 metric tons of maize, millet, and other commodities from the reserve by the Ministry of Agriculture and Food Security towards addressing the rising cost of food in the country.
The CBN is set to hold its second MPC meeting for the year next week, where the Committee will be deliberating a hold or a hike stance following the 400 basis points increase in the previous week.
The CBN’s body language has indicated an aggressive contractionary policy direction towards improving the differential between interest rate and inflation, which is currently at a deficit of 8.95%.
Meanwhile, it is expected that the CBN may either hike rates albeit at a slower rate or give time for previous rate hikes to have an effect.