Nigerians will soon buy bread, standard loaf, for N900 due to the sharp increases in prices of Diesel and Flour triggered by the ongoing Russia-Ukraine war.
“Flour and diesel are major costs components in the baking of bread, accounting for 70% and 15% of the total costs.
The price of flour and diesel spiked by 76.7% and 209.37% to N26,500/bag and N750/litre respectively in the last year. This is likely to push upwards the price of a loaf of bread from N600 two months ago to N900”, said analysts at Financial Derivatives Company, FDC, a Lagos based investment firm.
“Commodity prices are increasing at a faster pace for food items than in the non-food basket, reflecting the combined effects of seasonality, output shocks and war induced global supply chain disruptions”, the firm said, citing its recent market survey.
Based on the market survey the company projected a 17.72% inflation rate for May, indicating the fourth consecutive rise in the inflation rate.The annual inflation rate rose steadily from 15.6% in January to 16.82% in April, driven by increases in the prices of Bread and cereals, Food products e.t.c, Potatoes, yam, and other tubers, Wine, Fish, Meat, and Oils.
Also driving the inflation rate are increases in the price of Gas, Liquid fuel, Cleaning, repair and hire of clothing, Clothing materials, other articles of clothing, and clothing accessories.
To cope with the continued increase in prices, especially in the face of static wages, consumers are reducing the quantity of goods while many are switching to affordable substitutes, according to FDC.
“In some cases, as is empirically evident, we have noticed a drop in the quantity of goods demanded. Since price inflation is not a Nigeria specific phenomenon, there are indications that the price spiral is not likely to be short-lived”, the firm said.
Food crises looms
Noting that the country now faces a major food crisis as insecurity escalates, the firm, said, “The Nigerian economy is now at the verge of a major food crisis as killings and kidnappings become the order of the day. The most recent attack in Ondo state has not only left the state in dismay but also signals a major food, revenue and foreign exchange crisis.
“Ondo state is the largest producer of cocoa in Nigeria and cocoa is the country’s largest non-oil export commodity. It accounted for 1.02% of total export earnings in Q1’22. Cocoa mid-crop harvest is usually from April to June.
“With insecurity on the rise, farmers could be cautious of going to the farm, resulting in lower harvest and ultimately reduced exports.
“This has significant implications for government revenue and foreign exchange earnings. More so, it points to a potential spike in the prices of cocoa bye-products”.
