Advertisement

By Ikenna Igwe

The issue of food inflation and food insecurity have continued making the news headline in today’s Nigeria. To be fair, the issue of food insecurity is not something that is alien to Nigerians but with the current administration of President Tinubu, things seem to be going south.

Advertisement

According to the National Bureau of Statistics (NBS) reports, food inflation rates stand at 33.93% on a year on year basis, that is 10.18% higher compared to the rate recorded one year prior. According to the bureau, the rise of food inflation on a year on year basis was caused by an increase in the price of common household food items like beans and cereals, milk, eggs, yam and other tubers. The headline inflation rates increased in January 2024 when compared to the same ones in the preceding year.

Furthermore the report shows that on a month on month basis, the inflation rate in January 2024 was 2.64% which was 0.35 higher than the rate recorded in December of 2023 (2.29%). Still on the report, the food inflation rate in January 2024 quickened to 35.41% on a year on year basis, which was 11.10% higher compared to the rate recorded in January 2023 (24.32%).

This whole state of affairs became more complex after the announcements of the removal of fuel subsidy. These brought about an upward trend in the price of basic commodities as well as other products which have played a major role in weakening the naira and in the reduction of the purchasing power of many citizens.

Advertisement

Forex scarcity orchestrated by exponential demand for Dollar by Nigerians, as well as unremitted Forex backlog by the Central Bank of Nigeria have further mounted pressure on the naira.

As the inflation rate clocked a 28 year high when it rose to 29.90% in January, so many sectors of the economy were deeply affected and one of those sectors was the manufacturing industry.

The Manufacturing Association of Nigeria (MAN) has released a disturbing trend within the industry revealing that about 765 manufacturing companies have shut down while 335 experienced distress in 2023. This development is attributed to various economic difficulties including exchange rate volatility, rising inflation and a general worsening of the investment climate. These advertises have taken a toll on the manufacturing industries, significantly impacting its performance and sustainability. 

Downturn in Capital Utilization

Advertisement

The manufacturing industry, as reported by MAN stated on their report: “Capital utilization in the sector have declined to 56%, interest rate is effectively above 30%, foreign exchange to import raw material has dried up and production machinery inventory of unsold finished products have increased to N350 billion and the real growth has dropped to 2.4%. Expatriates in Nigeria currently pay more than $2,000 for CERPAC. The sector cannot afford another disincentive to increased investment and portfolio expansion”.

A country that has a shrinking manufacturing industry, Forex scarcity to import, rising inflation, growing population and a worsening food crisis and poverty, is. Country urgent need of a reform. 

Bold Step in the Right Direction

Advertisement

Senator Abubakar Kyari, the Minister of Agriculture and Food Security on the 11th March, 2024 released a statement in which he said that the Federal Government had secured a €995 million deal between the Brazilian government and the German Deutsch bank group to finance a green imperative program in Nigeria.

The program aims to create Mechanization Hubs in each of the 774 local government areas in Nigeria as part of its implementation plan. This comes as the administration of President Tinubu remains committed to ensuring food sufficiency and protecting local industry for sustainable economic growth. Part of the memorandum of understanding between the Federal Government and the John Deer group, a subsidiary of Tata Equipment clearly states: “The manufacturers have signed to deliver 10,000 units of tractors and implement in tranches of 2,000 units per annum for the next five years”.

This is a welcomed development given the fact that the Nigerian agricultural sector recorded just a miniature 0.50% of the total foreign capital import of 2023. Amidst soaring food inflation and complaints of food shortage being experienced across the country, the need to quadruple investment and efforts as regards to agricultural output can’t be overemphasized.

As we are preparing for the second quarter of the year, we are optimistic that more investments, programs, interventions and empowerments will be pushed into the agricultural sector and the manufacturing sector in order to have a sustainable economy.