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Nigeria’s food inflation shows urgency of cross-border trade - THE AFRICA REPORT

FEBRUARY 23, 2021

By David Whitehouse

Nigerian food inflation, now at its highest since 2008, shows that food security is the country’s overriding problem.

January’s overall inflation rate of 16.5% was the highest since mid-2017, lifted by food inflation which accelerated to 20.6%.

Inflation will “certainly remain elevated over the medium term, and may actually rise in 2021,” says John Ashbourne, emerging markets economist at Fitch Solutions in London. “Until the government abandons its efforts to cut down on food imports, we are unlikely to see a real change.”

President Muhammadu Buhari closed land borders with Benin, Niger, Chad and Cameroon in August 2019 to prevent food smuggling and encourage local agricultural production.

READ MORE Benin-Nigeria border: Buhari tells Talon to stop the smuggling

Food inflation continued to climb with Nigerian farmers unable to keep up with domestic demand. The government partially reopened the borders in December 2020, but trade flows have not returned to normal.

READ MORE Nigerians hungrier now, thanks to Buhari’s policy on food imports

Since September 2020, the government has also banned official market dollars from being used to pay for imports of items including food. This means that dollars have to be obtained at higher rates on the parallel market, driving up prices.

Low earners are currently spending more than 50% of their income on food, this is likely to get worse, says Moses Ojo, chief economist at PanAfrican Capital Holdings in Lagos.

Herder conflicts

Price pressures are likely to increase further in coming months, argues Jacques Nel, head of Africa macro at NKC African Economics in Cape Town. He sees inflation averaging about 16.4% this year, with the danger that food inflation could spread to other categories if the central banks loosens its grip on the naira.


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