The danger of rising food prices despite Naira surge

The beginning appreciation of the Naira against the dollar as a result of the positive policy formulation from the Monetary Policy Meetings (MPC) is a welcome development by the steering team led by the Governor of the Central Bank of Nigeria (CBN), Yemi Cardoso.

His tenure, marked by decisive action and strategic foresight, has seen the Naira navigate through turbulent waters, eventually finding a steadier course amidst a sea of economic challenges. The measures implemented under his leadership exemplify a blend of courage, innovation, and a steadfast commitment to the economic well-being of Nigerians.

Cardoso’s approach to the crisis was multi-faceted, addressing both immediate and structural issues with precision and authority. One of the first challenges he tackled was the speculation and arbitrage activities that significantly contributed to the Naira’s depreciation.

By identifying and acting against entities such as Binance Nigeria Ltd and various unregistered bureau de change operators, Cardoso cut off a significant source of pressure on the Naira. This action, along with the forensic auditing of forex obligations carried out by Deloitte Management Consulting, showcased his resolve to ensure transparency and accountability in the forex market.

The Naira has appreciated from February’s low of N1,915 per USD to N1,255 per USD, representing N660 gains for the Naira, which is significant by all measures.

However, Nigerians are worried that despite the intervention by the apex Bank in collaboration with the Economic and Financial Crime commission in camping down on the activities of Bureau De Change operators that led to the surge in Naira, commodities in the market

In what has been adjudged the highest inflation rate in 26 years, the Consumer Price Index (CPI) which measures the rate of change in prices of goods and commodities, increased by 1.80 percent to 31.70 percent in February compared to 29.90 percent in the preceding month.

We understand that the CPI by the National Bureau of Statistics (NBS) is for February which was at the height of dollar upward gyration, and high prices of goods and services. Therefore, the figures for headline inflation and food inflation are not surprising. Even if there had been immediate intervention, figures for the month would still have been high. But the latest figure should nonetheless be another wake-up call for the administration of President Bola Tinubu. It is dangerous for prices of food to keep rising.

More worrisome is that food inflation rose to 37.92 percent, year-on-year, representing an increase of 13.57 percent when compared to 24.35 percent in February last year. Month-on-month food inflation increased to 3.79 percent, representing 0.58 percent rise over 3.21 percent in January. The rise in the food index on an annual basis was attributable to increases in prices of bread and cereals, potatoes, yam and other tubers, fish, oil and fat, meat, fruit, coffee, tea, and cocoa.

To be sure, hunger has been a daunting challenge in Nigeria for years. The United Nations World Food Programme (UNWFP) has warned repeatedly that millions of Nigerians are at the risk of hunger as prices of foodstuff skyrocket. The situation is compounded by the unending security challenge in most of the areas regarded as the nation’s food belt.

As of December 2023, a World Bank report showed that Nigeria’s poverty level had taken a notch higher. Recent data compiled by an international e-commerce organisation also revealed that the average Nigerian household spends about 60 percent of its income on food, the highest in the world.

It is important to arrest soaring prices going forward, with immediate, medium- and long-term measures. That Nigerians are yet to see the direction of the administration on the issue accounts for the concerns. There have been proposals for the government to remove or slash tariffs for a brief period on a few food items that we still import, but the approach has been to share grains for free and go after food hoarders. We hope they see things differently and act more swiftly.

It is noteworthy that more than a month ago, President Bola Tinubu directed the Ministry of Agriculture and Food Security to release 42,000 metric tonnes of maize, millet, and other grains in its strategic reserve. The grains, according to the Minister, Abubakar Kyari, will be released to the National Emergency Management Agency (NEMA).

Today, vulnerable Nigerians are still waiting for a fulfilment of the promise, and raises questions about the capacity of the administration to deal with the challenge at hand. Meanwhile, the impact of recent policy decisions has left Nigerians reeling from soaring prices of basic foodstuffs with hunger now a common staple in many homes.

Driving down the prices of some staple foods should be a major priority of the government now. With angry citizens expressing their frustrations about the daily hikes of foodstuffs, transportation costs, school fees, house rent and other inescapable expenses that are becoming increasingly impossible to finance, the federal government and authorities in the 36 states must wake up to the reality of the daily struggles of a vast majority of the people.

One of the boldest moves by Cardoso was at the maiden Monetary Policy Committee (MPC) meeting under his chairmanship in February 2024, raising the Monetary Policy Rate (MPR), a benchmark interest rate to 400 basis point to 22.75% from 18.75%,the asymmetric corridor around the MPR to +100/-700 basis point from +100/-300, the Cash Reserve Requirement (CRR) to 45% from 32.5% but retained Liquidity Ratio at 30%,signaled a strong commitment to taming inflation and stabilising the economy.

These measures, while tough, were necessary to curb the excessive money supply contributing to inflation, demonstrating Cardoso’s readiness to make difficult decisions for the greater good

It is important that government agencies like the Federal Competition and Consumer Protection Commission (FCCPC) roll out its arsenal in clamping down on traders who are bent at extorting people by all means and those that are hoarding commodities should be brought to book to face the punishment of sabotaging federal government effort.