(Source: African Energy Chamber)
November 30, 2022/United Capital Research
According to the Q3-2022 GDP report released by the National Bureau of Statistics (NBS), the agricultural sector grew by 1.3% y/y in the period, 14bps more than in Q2-2022, up from the 1.2% y/y growth recorded in Q3-2021. This growth was as a consequence of the early harvest season and sustained impact of Central Bank interventions in the sector. That said, it also came in the face of major headwinds including insecurity, rising cost of inputs, and worsening route to market. This growth due to its meagre nature has not percolated to Nigerian households who spend way more on food today than just a year ago, as food demand continues to surge.
Most recent National Bureau of Statistics (NBS) data showed that food inflation printed at 23.7% y/y, its highest since Oct-2005. This is primarily driven by obstacles in food supply, such as the country’s unique logistical challenges, insecurity that has prevented farmers in key food-producing from returning to farms, and the impact of recent floods on food-producing regions. More specifically, staple foods are increasingly beyond reach. The average price of kilo of rice rose 17.5% y/y to N487.47 in Oct-2022, with some states recording N630.66/kg. The price of other staples such as Tomatoes, Yam tubers, Garri and Beef now cost N454.46/kg (+30.8% y/y), N564.69 (+17.95% y/y), N317.90/kg (+8.7% y/y), and N2,266.24 (+28.12% y/y) respectively. This is despite Nigeria being the world’s largest producer of yam tubers and cassava, 5th largest producer of vegetables, and 14th largest producer of rice. Most significantly, this occurs as record inflation and currency depreciation (-36.0% YTD to N775.0/$ in the parallel market) are taking their toll on Nigerians purchasing power.
Looking ahead, we expect robust food demand in Q4-2022 as a result of year end festivities. This will drive sector growth but also increase food prices as food supply struggles to catch up with demand. Also, legacy issues concerning route-to-market and insecurity in food producing regions, and farming methods will remain obstacles to growth. There seems to be little respite for the Nigerian consumer.
