Nigeria’s Weak Naira Causes Imported Food Inflation to Soar to 36.38% in June 2024

Nigeria’s inflation rate for imported food increased by 1.55% points to 36.38% in June 2024 from 34.83% the month before.

The average price index for imported food increased to 806.0 in June 2024 from 591.0 in the same month the previous year, according to Consumer Price Index (CPI) statistics for June 2024 from the National Bureau of Statistics (NBS).

Following the Central Bank of Nigeria’s (CBN) unification of all segments of the foreign exchange (FX) market, the naira declined, leading to a considerable increase in Nigeria’s import food inflation from the 19.10% reported in June 2023.  

The naira had a sharp devaluation as a result of the unification process in June 2023, which was intended to create a more transparent and effective foreign exchange market.

What the data indicates

The NBS data on the inflation of imported food from January to June 2024 demonstrates a steady and unsettling pattern of growing prices.

• With a high import food index and a notable inflation rate of 26.29% in January, the cost of imported food is already high for the start of the year.
• The inflation rate for imported food rose to 29.81% in February 2024, a significant increase of 3.52% points from January.   
• March’s imported food inflation rate increased by 3.08% points from February to 32.89%, indicating that the trend is still rising.
• The rate of inflation grew by 1.12% points from March to 34.01% in April, indicating a modest slowdown in the rate of increase.
• With an imported food inflation rate of 34.83% in May, the trend appears to be continuing upward. The rate of inflation has increased by 0.82% since April.
• The rate of inflation for imported food increased by 1.55% points from May to 36.38% by June.

Even though the overall trend is rising, there is evidence that the rate of inflation increase slowed down from March to May before increasing once more in June. 

Imported food inflation surpasses headline inflation

From 33.95% in May 2024 to 34.19% in June 2024, Nigeria experienced a sharp increase in inflation. The headline inflation rate increased from 22.79% in June 2023 to 11.40 percentage points in June 2024. The headline inflation rate increased by 0.17% points from May 2024’s rate of 2.14% to 2.31% in June 2024 on a month-over-month basis.

This suggests that compared to May 2024, the average price level rose more quickly in June 2024.

In June 2024, headline inflation was recorded at 34.17%, indicating that the country’s import food inflation rate, which was 36.38% for the same period, was greater.

But for the same time this year, overall food inflation is higher at 40.87%.

In May 2024, the food inflation rate was 40.66%, whereas in the month under review, it was 40.87% year over year. Compared to the rate of 25.25% reported in June 2023, this is 15.62% points higher.

The rate of food inflation in June 2024 was 2.55% on a month-over-month basis, which was 0.26% higher than the rate of 2.28% in May 2024. The rising costs of goods like groundnut and palm oils were the main cause of the month-over-month increase in food inflation.

Things to note

Recall that The News Chronicles reported that Nigeria’s exchange rate closed June 2024 at N1,503.3/$1, marking a 1.3% monthly depreciation.

Nigerians are still subjected to protracted periods of unstable currency rates because the naira fell by 40% between the end of December 2023 and June.

After experiencing several volatilities throughout the year, the exchange rate ended 2023 at N907.11, ending the first half of the year at N1,503/$1.

TNC also revealed that the Nigeria Customs Service (NCS) exchange rate for import duty collection increased to N1,508/$1 in the first week of July, the highest in the previous three months dating back to March 21, 2024, when the exchange rate was N1,572/$.

Imported food prices are directly impacted by this type of devaluation, which raises the cost of commodities priced in foreign currencies in local currency. 

The Trade Union Congress (TUC) has requested the Federal Government to start the immediate importation of necessary food goods as a mitigating step in response to the growing pressure of rising food prices.

Minister of Information Mohammed Idris confirmed this opinion when he revealed that the government was considering importing food as a stopgap measure to address the skyrocketing costs of food supplies.

President Bola Tinubu, on the other hand, opposed the importation policy, highlighting the administration’s dedication to fostering domestic food production capabilities and arguing for Nigeria’s capacity to attain self-sufficiency.

In its analysis, the International Monetary Fund (IMF) identified an overreliance on imported goods as the primary cause of the severe food crisis that is currently plaguing Nigeria and other sub-Saharan countries. 

The federal government has allowed a 150-day duty-free window to allow the importation of maize, husked brown rice, and wheat in an attempt to reduce the nation’s soaring food inflation.

The federal government’s intention to import food has drawn criticism from Dr. Akinwunmi Adesina, President of the African Development Bank (AfDB), who called the idea “depressing.” He asserts that Nigeria cannot depend on food imports to keep prices stable and that doing so would undermine the nation’s agriculture strategy.

Additionally, Arc. Kabir Ibrahim, National President of the All Farmers Association of Nigeria (AFAN), stated that the advances earned in local maize, rice, and wheat production will be eroded by duty-free food importation.

He urged governments to make investments by giving subsidies for commodities like chemicals, machinery, and fertiliser so that the nation might have a sustainable food system.