Food Inflation: The Impact of COVID-19 on Food Demand and Supply in Nigeria.

Food inflation is said to occur when the total demand for food within a given period exceeds supply, leading to an upsurge in the price (Qayyum and Sultana, 2018). It is a reduction in the purchasing power per unit of money as it applies to food, implying too much money chasing too few food items. In simpler terms, food inflation occurs when the value/quantity of food items a consumer can purchase declines as a result of increased prices. While research has shown that food inflation may favour export-driven economies that will benefit from increased prices, it remains a major challenge for countries that depend on imports. Worse hit are developing nations where a shock in food price volatility translates to more persons going hungry and without food. 

According to reports released by the National Bureau of Statistics (NBS) in April 2020, food inflation in Nigeria increased to 14.98% in March 2020 - the highest rate year-on-year since March, 2018. This report was released prior to changes that came with the COVID-19 lockdown measures initiated by the Nigerian government in parts of the country from 30th March 2020. 

Although the Food and Agriculture Organisation (FAO) reported a sharp decline in the world prices of food items such as vegetable oil, cereals, sugar and dairy products except for rice, because of “demand-side contractions associated with the COVID-19 pandemic and the decline in crude oil prices”. The same cannot be said of domestically produced and consumed food items like staples in Nigeria. This is due to a spike in demand and interrupted supply hinged on logistical issues associated with the restrictions in movement. It is expected that demand for food may continue to increase or reach a sustained peak for as long as the full or partial lockdown persists, with production almost unaffected for as long as farmers remain uninfected and are encouraged to continue with farming activities. But sustained supply related issues from both ends of agricultural inputs to farmers and output commodities to consumers despite continued production may lead to an upsurge in Consumer Price Index (CPI) which will lead to higher rates of food inflation if left unattended.

Therefore, the likelihood of a COVID-19 induced food inflation to occur would be hinged on containment measures, inhibiting supply and consumer panic behaviour, increasing demand. This is a deviation from the conventional causes of food inflation such as climate change, high oil prices, and world trade policies. Consequently, if adequate measures are not put in place, food inflation may become a term synonymous with the world’s current order – a period described as the “new normal” and characterized by never-before-seen challenges and the need to develop new survival strategies. 

The need for countries to look inwards is imperative. This could be achieved by intensifying local production, opening up reserves, researching on improved ways to manage supply chains domestically and across borders for countries highly dependent on imports. Achieving this provides more opportunities for farmers who are able to take advantage of increased demand for staples as full and/or partial lockdowns are in effect. Some measures to manage the current situation and prevent more spikes in food prices would be the implementation of food price stability by the government, linking farmers to market programmes, deliberate efforts to support the supply of agricultural commodities as well as the intensification of research and knowledge sharing amongst relevant stakeholders.

PS: At the point of publishing this article, the National Bureau of Statistics’ latest report revealed that food inflation in Nigeria for April spiked to 15.03% from 14.98% in March as local markets in some parts of the FCT - the country’s capital - are running out of stock of fresh food items mostly imported from the far North as restrictions on inter-state movements persist. Although the increased inflation rate is only about 0.05% increase from March to April as against a 0.08% increase from February to March 2020, measures still need to be put in place to prevent a sustained increase.

References:

Food and Agriculture Organisation (2020): World Food Prices Drop in March. Available at http://www.fao.org/news/story/en/item/1269050/icode/

National Bureau of Statistics (2020): Selected Food Prices Watch, March 2020. Available at https://nigerianstat.gov.ng/elibrary

National Bureau of Statistics (2020): CPI and Inflation Report, April 2020. Available at https://nigerianstat.gov.ng/elibrary

Trading Economics (2020): Nigeria Food Inflation:1996-2020 Data | 2021-2022 Forecast | Calendar | Historical. Available at https://tradingeconomics.com/nigeria/food-inflation 

Qayyum, A. and Sultana, B. (2018): Factors of Food Inflation: Evidence from Time Series of Pakistan. Journal of Banking and Finance Management, 1 (2), 22 – 30

The Author

Ogbole Esther.

''As an agricultural enthusiast, I have long had a passion for contributing my quota to the growth and development of the Nigeria agricultural sector and this birthed an interest in research to see what and how precisely agricultural strategies are implemented in developed economies of the world and how they can be adapted to suit the Nigerian scenario''.