Rising food prices will worsen Nigeria’s poverty situation – LCCI

The Lagos Chamber of Commerce and Industry has said the rising food prices in Nigeria will worsen the poverty situation in the country.

The LCCI noted with concern the continued uptrend in domestic consumer prices as headline inflation further accelerated to 16.47 percent in January 2021, the highest since May 2017.

It said in a statement that the uptick in domestic prices was largely driven by the persistent food inflationary pressures, with food inflation hitting a record 20.57 percent, the highest level since the 2009 Consumer Price Index series began.

The LCCI noted that the core inflation, which captures prices of non-food commodities and services, rose to a three-year of 11.85 percent in January, buoyed by price increase in housing, water, electricity, gas, and other fuel component and transportation component.

“The naira exchange rate depreciation and the forex liquidity challenges were also major drivers of core inflation pressures,” it added.

According to the chamber, the consistent rise in domestic prices have profound implications for entrepreneurs and the larger investing community.

The Director-General, LCCI, Dr Muda Yusuf, said, “Higher prices translate to increased production costs for manufacturing companies, with consequent impact on their bottom-line since it is not in all situation that higher inputs costs can be transferred to consumers.

“This weakens the capacity of corporates to deliver value to shareholders via dividend payment amid dim profit prospects.”

He said rising food prices would see most low and middle-income households spend more on food commodities, with little amount to save and/or invest.

“Persistent rise in food prices, if unresolved, would worsen Nigeria’s poverty situation, thereby pushing more Nigerians below the poverty line,” it added.

According to him, rising domestic prices mean deepening negative real returns on investment securities such as treasury bills and bonds, even as yields on these instruments are unattractive relative to emerging market peers.

“Government authorities at national and sub-national levels should address security concerns in the country, due to its scale of importance as far as food production is concerned in Nigeria,” Yusuf said.

He highlighted the need to ease logistics costs in the economy and to stabilise the foreign exchange market to reduce liquidity concerns and associated uncertainties and disruptions in the economy.

He stressed the need to expeditiously resolve port challenges and related bottlenecks, which he said was negatively affecting production flows in the country.

Yusuf called for strict adherence to the statutory limit of Central Bank of Nigeria overdrafts to the government.