- Border Closure to Trigger Food Inflation in Coming Months -FSDH
Despite the progress recorded in consumer prices this year, the ongoing border closure is expected to increase the pace of price increase in the near-term as prices of food items surged.
In the FSDH macroeconomic review for October 2019, the FSDH stated that while the border closure will create an opportunity for local producers of rice, vegetable oil, palm oil and other agricultural produce in terms of sales, it will also lead to shortages in the short term.
This, the report attributed to the supply-demand gap of these commodities as well as the time required to cover this gap.
Since President Muhammadu Buhari closed Nigerian land borders in August, the price of a 50kg bag of rice has risen more than 70 percent from N14,000 to N25,000 in October.
This has also impacted local rice as local producers took advantage of the deficit to hike price.
“The border closure creates an opportunity for local producers of commodities such as rice, vegetable oil, palm oil and other agricultural produce to increase production and meet local demand. Local rice producers will take advantage to increase production,” the report stated.
According to the USDA estimates, local rice demand stood at 7.3 million metric tonnes (MT) while local production was 4.8 million MT per annum, representing a deficit of 2.5 million MT per annum.
Therefore, the surge in the price of food items across the country will trigger food inflation in the near-term pending when local produce will bridge the supply-demand gap.
In September, inflation rose from 11.02 percent in August to 11.24 percent in September for the first time since May. Suggesting that price increase has started crystalising.
Food inflation rose to 13.5 percent in the same month and expected to reflect the recent pressure in the month of October.