By Ayo Yusuf
Nigerians face a grim future as the prices of rice, vegetable oil, and other commodities which are import-dependent are expected to rise even more as a result of the partial ban on rice from India.
In July the Indian government took the decision to halt the exports of the popular non-basmati rice as a measure to keep prices low in the country and the ripple effects are now being felt in Nigeria.
Meristem, a prominent Nigerian asset management, stockbroking, and financial advisory firm, said apart from the ban which has already led to the closure of many rice mills in the country, higher logistic costs, poor road networks, global energy, and premium motor spirit (PMS) pump prices are other factors that will contribute to a general price increase in food and other goods and services.
Making these predictions in its recent “Macroeconomic Update: Inflation Expectation” report, the financial advisory firm said, “We anticipate a continued surge in the price of rice and oils, hinged on the partial ban on rice exports in India, which has had a substantial impact on global rice supply.
“We also expect that higher logistic costs and poor road networks in the country would further impact food prices. Thus, we expect food inflation to shoot up to 28.71%.
“Additionally, the headline index is expected to experience an uptick due to higher global energy and premium motor spirit (PMS) pump prices.”
The prominent Nigerian asset management and financial advisory company also warned that “the lingering challenges in sourcing foreign exchange (FX) and depreciating exchange rates are also expected to drive up the prices of import-dependent items like petroleum products, motor vehicles, clothing and fabrics, etc., that typically impact the core index movement.
“Overall, we expect headline inflation to increase by 129 bps to 25.37% (vs. 24.08% YoY in July 2023).”
During the week, the country’s foreign exchange crisis worsened following information that the naira traded at an average of N940 to a dollar in the parallel market.
“This is most likely to support the Meristem prediction for this month, especially as rice importation is not among the items that can get dollars from the Central Bank of Nigeria.
According to findings, the cost of a 50-kg rice bag is expected to reach N60,000 this September.
“This increase is attributed to the shutdown or reduced production capacity of small and medium-sized rice mills due to paddy shortages and elevated production expenses.
“We travel distances to get paddy, and even with that, you may not get the quantity you desire at a time. Most of the small rice mills have closed up because they cannot cope with the current paddy scarcity,” Jonathan Joshua, national vice president of the North Central Millers Association of Nigeria, said.
“Local rice prices are likely to go up to between N55,000 and N60,000. This is because of the scarcity, and a lot of it is being mopped up now as palliatives by state governors,” Joshua added.
Presently, according to nigerianprice.com, a 50-kg bag of rice is selling for a maximum of N45,000 in Abuja, while in Lagos, it sells between the range of N42,000 and N45,000. In Port Harcourt, it sells for a maximum of N46,000, and in Ibadan, it is available at a maximum of N45,500.
Nigeria and other West African countries are most reliant on rice imports from India to meet local demands. Although Nigeria has made huge efforts in cutting down its rice imports over the past few years, it still relies on imports to augment local production. In 2021, the country imported $ 5.78 million worth of rice from India.
Following the ban on rice exports in India, local rice millers have been forced to shut down production oversupply scarcity.
The Central Bank’s effort to ensure the country meets its local demand for rice saw the processing capacity rise from 350 thousand metric tonnes in 2015, to almost 3 million metric tonnes in 2022.
However, in the past few months, the price of rice has increased by as much as 29% within two months
