Q3 Jollof Index: Inflation jumps off the border

Q3 Jollof Index: Inflation jumps off the border

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Jollof rice is the one meal that is common to all parts of Nigeria. The SBM Jollof Index is a composite index that tracks how much it will cost to make a pot of jollof rice across 12 markets in seven states in the six geopolitical zones for a family of five or six, the average rural and urban family size in Nigeria.

In the July 2019 edition of the SBM Jollof Index, we chronicled the trend of the index over the three years from July 2016 to June 2019. In the last quarter, a landmark policy impacted significantly on some of the components of the index. In August, Nigeria announced the closure of its land border with the Benin Republic in order to tackle cross border smuggling of rice, the major component of the Jollof Index. The result of this has been a sharp increase in the price of rice as well as of frozen turkey and chicken across the country. The impact of this spike is more marked in relatively richer parts of the country, as demand for these items have remained high while supply is affected by this policy.

Q3 Jollof Index: Inflation jumps off the border

Q3 Jollof Index: Inflation jumps off the border

In Q3 2019 rice, groundnut oil, turkey and chicken were the major food commodities that increased by market price, as at July and August 2019 a bag of rice cost 5,000 while a cup rice cost #220 – #250 but in September 2019 the price for a bag of rice increased by 21 % at #19,000 and 29% to #300 – #350 for a cup of rice. Before the border closure a bag of imported rice cost #14,500-#15,000 while a bag of locally produced rice cost #13,500 but after the border closure, a bag of imported rice now cost #26,000 and a locally produced bag of rice cost #18,000 #19,500. The border has been indefinitely closed it is projected that the prices will continue to hike as the total demand for national consumption is at 7.3 million tonnes but available production is at 4.9 million tonnes.

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Q3 Jollof Index: Inflation jumps off the border

In July and August 201 9, a kilo of turkey cost, 500 but increased to #l, 900 in September of the year while a carton of turkey cost in July, #8,500 in August and in September. In July and August of 201 9, the price for a kilo of chicken was stable at #1,000 and the carton price at but the price rose to, 400 per kilo and per carton in September. In July and August 5 litres of groundnut oil but increased to – in September while the price for a litre #700 -#750.

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Q3 Jollof Index: Inflation jumps off the border

These factors contributed to the trend reversal observed on the Jollof Index. Since mid-2018, there had been a general decline in the Jollof Index as the effects of the recession receded, and the inflation is driven highs of 2016/2017 abated, bringing some respite to Nigerians who already spend as high as 60% of their income on food. In some cases, as we found in this SBM study, some Nigerians already spend more than what they earn monthly on just food alone, making any policy that impacts on food prices extremely important.

Q3 Jollof Index: Inflation jumps off the border

Since April 2019, there has been a slow rise in the Jollof Index. Even during the Sallah festivities, this slow increase trend continued. However, from late July and August, the Jollof Index has been driven to the highest it has ever been, eclipsing even the 2016/2017 highs, fuelled by the drastic measures the government took to curb smuggling of rice and inadvertently poultry and vegetable oil. On average, Nigerians pay 60% more for the family pot of Jollof today than they did three years ago. This, of course, must be placed in the context of the drop in the purchasing power of most Nigerians due to the devaluation of the currency from ₦199 to ₦360 for the dollar.

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Q3 Jollof Index: Inflation jumps off the border

On 14 October 2019, the government announced a total closure of Nigeria’s land borders to all goods. This is bound to exacerbate this trend, as shown by the appeal, on the same day, by the Governor of the Central Bank of Nigeria to rice growers and millers not to increase prices of the product. The CBN governor’s appeal indicates that the government is aware that local capacity is grossly inadequate to meet demand, and accordingly, prices are bound to be driven even higher as producers seek to profit from the situation, regardless of appeals to patriotism.

Another way to look at the data is to compare the Jollof Index in the same month across years, similar to the method used for inflation comparison where it is compared with the previous month but also compared with the same month in a previous year. The chart below shows clearly that prices while not dropping anywhere near 2016 figures were beginning to drop to at least 2017 levels by early 2018. August 2019 is higher than August 2018 reversed the trend, correlating with the border closure.

Download the complete SBM INTEL Q3 JOLLOF RICE INDEX report

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