- Insecurity, Logistics Drive Prices Of Foodstuff Through The Roof
Following the partial closure of the Third Mainland Bridge for six months for maintenance, the Financial Derivatives Company, FDC has projected that Lagos State will lose a whopping N4.6tr due to traffic congestion that will ensue.
Bismarck Rewane, Chief Executive Officer (CEO) of the FDC made this known in the FDC Economic Bulletin released recently.
“The metropolis loses about N4.6trillion on an annual basis due to traffic congestion. The closure of the Third Mainland Bridge will further reduce labor productivity, increase revenue losses and widen price differential across markets” he stated.
Read also: Oil Price Crisis: Demand May Surpass Supply This Month, Says Goldman Sachs
Recall that the Federal Government had recently announced plans to shut down the Third Mainland Bridge for maintenance work from July 24, 2020, for six months. The bridge is the longest of three bridges connecting Lagos Island to the Mainland.
Similarly, the report posited that the effect of the partial closure and the attendant traffic congestion will lead to an increase in the prices of food items in Nigeria thereby pushing food inflation higher.
“A major concern is the adverse effect of the 3rd Mainland Bridge closure on commodity supply and prices. According to a recent report by the Lagos Business School, 1,600 of 25MT, 5,060 of 8MT, and 13,500 of 3MT trucks bring foodstuff into Lagos state on a daily basis. The closure of the Bridge implies that vehicles will have to use alternative routes, thereby increasing traffic. The resulting impact will be disruption in the commodity supply chain and an increase in food inflation which currently stands at 15.18%. There will also be a reduction in the average food consumption as consumers rationalize their spending” the report stated.
The report also looked at various reasons that are responsible for the increase in food inflation.
Read also: APC: Tinubu’s Continued Stay ‘ll Diminish Yorubaland, Says Ayo Adebanjo
“One of them is insecurity. One major threat to food security is the herdsmen crisis and insurgency in food-producing states. The fear of being assassinated has prevented farmers from operating at their full capacity. The resulting impact of this is a shortfall in commodity supply, which creates some sort of market disequilibrium, thereby pushing up prices.
Logistics costs have consistently remained a threat to commodity prices. This was compounded by the 18 percent increase in the pump price of Premium Motor Spirit, PMS. In the last four months, the average cost of transportation has increased by over 50 percent.
This is weighing on profits and further pushing prices up” the report from FDC stated.
Weak demand and poor storage facilities were also fingered as factors responsible for the rising costs of food.
“There has been reduced demand due to a fall in consumer disposable income as a result of the COVID 19 induced economic paralysis. Consumers are rationing income to effectively meet their daily needs.
Poor storage facilities especially for perishables like tomatoes and pepper is also a major constraint to supply. This coupled with seasonality, production constraints, and weak demand, are widening the gap between the actual and equilibrium price” the report added.
