Thread by @StearsBusiness

Over the past week, many have noticed the spike in food prices, and as usual, we’re here to make sense of it.

This thread isn’t just a story about “why food prices are rising”, but it’s also about “ why food prices seem to be rising more than official numbers suggest”

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So why is this the case?

The main thing to note is that inflation rates capture price increase across a wide range of goods across the entire country.

But for context, let’s look into how they are calculated.

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The @nigerianstat calculates food inflation by getting price information about certain food items from over 10,500 informants across the country.

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The @nigerianstat then attaches weights to the prices (the weights have been determined based on how much Nigerians consume the items) and then some average price increase is measured.

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According to the inflation report, we see that the current food inflation rate is at 16.6%, similar to 2016 figures, during the recession.

But what consumers face at the market at a particular instance can look different from the overall inflation number.

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For example, 1kg of Garri has risen by over 50%, from ₦170 to ₦260, in less than a year

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Looking at monthly price increases gives a picture that is slightly closer to reality. In September, monthly food inflation was high as 1.9%, the highest in over three years.

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Looking at the @nigerianstat selected food price watch report, we notice that staple foods like rice, onions, yam and potatoes have increased by as high as 40% (in the case of yam) in the last few months.

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This report appears closer to reality because the prices are calculated for each food and without weights, so it is more glaring that prices have been higher than usual. At the same time, the report shows the many items that have not seen prices rise as much.

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Everyone is affected by the uptick in inflation. According to the @nigerianstat, over 89% of households surveyed in July 2020 complained of a sudden increase in food prices.

So now the elephant in the room: Why are the prices so high?

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It started last year when the Federal government closed the land borders indefinitely, causing food prices to see a significant bump.

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First was the Covid-19 pandemic. The virus led to ailments and deaths but also affected food. It was an indirect impact from lockdown measures. Food couldn't be produced in various states.

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When the seeding season began in April, states’ borders were shut, and movement was restricted, leading to a double whammy—farmers could not sell their harvest and could not get supplies to plant new crops.

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This disrupted food supplies. Climate change then made matters even worse. The rainfall did not come as usual in April, so crops did not grow as expected. Then when the rains came, farmers lost their crops to floods.

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Rice farmers, in particular, reported that they lost almost two million tonnes of rice to severe floods at the beginning of September. For context, that is about 30% of the total amount of rice Nigeria produces in a year.

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Considering that we banned rice imports, and the borders are closed, this explains why rice prices increased by 30% at the end of September alone.

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So how long is this going to last?

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Based on experience, food prices are usually the lowest in August and September, and they begin to increase from November, till the next year. If history is anything to go by, we expect the same to happen this year.

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Food prices are likely to continue rising till next year, primarily because of the festive season and unless there is a sudden increase in supply, either by the federal government allowing imports or distributing food from its grain reserves.

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If imports are allowed, which is highly unlikely given the shortage of foreign currency in Nigeria, food prices might not drop significantly because of the high exchange rate. Even if the price of the imports are low, in naira, it is still expensive.

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The other option is for the government to give out food or cash supplies to the most vulnerable in the society, but we’re all familiar with sky-high stacks of food supplies that never get to those who need them.

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So people are most likely going to have to fend for themselves. A survey by @nigeranstat and @worldbank gives us a glimpse into how Nigerians react to such situations.

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17% of Nigerians receive help from friends and family, and 10% are forced to reduce the amount of food they eat. On the whole though, most Nigerians (70%) do nothing.

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Regardless of what we do to get through this time, except the government makes drastic changes, we're in this for the long haul.

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