Monday, 22 May 2017

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Nigeria: How devalued Naira contribute to dilemma food prices — US Govt

Nigeria: How devalued Naira contribute to dilemma food prices — US Govt
WITH National Bureau of Statistics (NBS) reporting that Nigerians spent about 50 percent more on food and other household items in April 2017 than one year earlier, a United States Government research has
said a lack of governmental support for Nigerian farmers will continue to ensure escalation of food prices.

Estimates by Central Bank of Nigeria (CBN) and United States Department of Agriculture (USDA) put average household spending as a percentage of income as 73 percent and 65.4 percent respectively.
The April 2017 consumer price index (inflation measuring) report of NBS disclosed that food index actually rose on the average by 19.30 percent from March 2016 to April 2017.
And a highly devalued naira has been aiding rising domestic food prices while making food prices relatively cheaper for consumers in neighboring countries thus resulting in increasing demand for Nigerian grains in countries around the Sahel region.
A perusal of details along with the Selected Food Prices Watch for the same months however, revealed that prices of certain items actually increased by as much as 70 percent within the 12 months under consideration.
Bread and cereals, meat, fish, potato, yam and other tubers, milk, cheese, and eggs, coffee, tea and cocoa, garri, rice and others are in this category.
For instance, one dozen of table eggs increased year-on-year (YoY) by 41 percent; imported high quality loose rice increased by 29.98 percent during the year and further escalated from N388.46 in March 2017 to N418.71 in April while the local variety increased by 51.08 percent; and average price of one kg of yam tuber increased YoY by 42.45 percent and 2.17 percent month-on-month (MoM) between March 2017 and April of the same year.
One kg of both white and yellow garri had their prices escalate by 76.58 percent and 71.86 percent respectively between April 2016 and April 2017 to N288.45 and N320.92 respectively.
NBS also explained that prices of fresh and dried catfish increased by 24.65 and 60.17 respectively as one kg of fresh fish sold for N1009 and its dried variety was N2, 320 for the same quantity.
According to USDA Foreign Agric Service Grain Report released last month, “limited GON (Government of Nigeria) support to farmers over recent years, rising cost of farming inputs, and insecurity are limiting private efforts at increasing agricultural productivity.
“Additionally, unfavorable foreign exchange measures and weakening purchasing power combined are causing declines of local consumption and imports of food and agricultural imports.
“After USDA’s year-long efforts, its Export Credit Guarantee Program (GSM-102) has increased U.S. wheat sales to Nigeria of 216,000 tons (valued at $50 million) at the date of this report.”
While putting the combined estimates of Nigeria’s 2017/18 production for wheat, rice, corn and sorghum at about 16.3 million tons, representing a slight drop from the current 2016/17 season estimate of nearly 16.5 million tons, the ministry stated however, 2017/18 imports will likely decline by nearly three percent to 6.6 million tons from 6.8 million tons due to declining purchasing power of the average Nigerian.
The report disclosed that grain production began to stagnate with Federal Government’s lowering support to agricultural efforts over the last two years.
“The country’s devaluing currency is expected to sustain rising domestic food prices. Interestingly, the same factor makes food prices relatively cheaper for consumers in neighboring countries, resulting in increasing demand for Nigerian grains in countries around the Sahel region. These emerging developments could indicate potential threats to Nigeria’s food security.”
“Sources indicate that competition from neighboring countries has promoted informal exports of Nigerian grains by 40 percent; reportedly, the country’s highest agricultural export level over the last 15 years.
“Over the last two years, market prices have been doubling just as costs of farming inputs such as fertilizers, farm labor, and agro-chemicals.
“Declining purchasing power and GON’s lack of funds to continue with grain purchasing for strategic grain reserve are also discouraging farmers from increasing production.
On wheat, the report noted that although farmers are expected to produce 60,000 tons from the same number of hectares, U.S. exporters registered nearly 216,000 tons in the current season because production costs for local wheat have doubled to approximately $420 per ton over the last six months and Nigeria’s local wheat quality is not desirable for bread making even when it is a popular staple for traditional meal powder prepared for consumption with soup.
Also, “Sorghum prices increased nearly 90 percent from ₦80,000 ($160) per ton in 2014 to ₦150,000 ($300) per ton in 2016; current corn prices have increased nearly 300 percent from ₦40,000 ($80) per ton to about ₦154,000 ($300) over the last two years.
“The army worm (Spodoptera exempta) continues to destroy corn production across the country for the past few years.  With limited government intervention, farmers increasingly perceive corn farming as a high-risk venture.
“Farmers are also sustaining huge losses because the GON has stopped purchasing corn supplies for strategic reserves, and operators in the poultry sector, who are principal consumers, are either downsizing or closing operations”, the US report disclosed.

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