Earlier, the NBS released inflation figures for October 2020 with food inflation printing at 17.38%y/y. Recall that the Nigerian authorities shut its land borders in Aug-2019 citing illegal smuggling of staple food items, drugs and ammunitions as key reasons behind the decision.
However, domestic supply shortages which followed the decision has continued to pressure food prices over the last 15months. While this decision has bolstered revenues for domestic food processing companies, the overall net effect has worsened the general cost of staple food across the country.
Further analysis indicated that beyond border closure, supply chain disruptions caused by the civil unrest that followed the peaceful #EndSARs protests across the country in October further exacerbated pressure on food prices. Also, flooding in key food-producing states compounded the woes of farmers who had anticipated a bumper harvest that could potentially improve food supply and consequently reduce prices.
Finally, higher cost of transportation, the poor state of the road networks, inadequate storage facilities, FX pressure and insecurity in the north-east, all weighed on supply and worsened the situation.
Going forward, we are of the opinion that the FGN needs to re-examine its overall strategy for domestic food supply, lest the situation devolves into a full-blown food crisis. With year-end festivities approaching, we imagine that food prices will remain pressured amid the border closure and supply constraints which continue to dog the food sector.