August 13, 2024/CSL Research
A Business Day survey revealed significant price reductions in tomato and habanero pepper prices across various regions. In Lagos State, tomato prices were down by about 58% with a standard basket trading at N50,000 at the end of July 2024, down from N120,000 in January 2024. Habanero pepper prices have also declined significantly to N13,500 per basket from a peak of N35,000 per basket in H1 2024.These price declines, primarily attributed to the new harvest season and improved weather conditions, is bringing relief to consumers. Tuta absoluta, a highly destructive pest affecting tomato crops, was the primary cause of soaring tomato prices across Nigeria. The abundance of tomatoes due to the new harvest has created a surplus, driving prices down and we expect this to have a slightly mitigating effect on food inflation.
Food inflation in Nigeria has been driven by several factors over the years. Violent conflicts, such as the insurgency in the North East, armed banditry in the Northwest, and persistent farmer-herder clashes in the North Central and South West, have significantly disrupted food production. Additional contributors to rising food prices include high input costs, poor implementation of agricultural policies, and expensive transportation. Climate change also plays a critical role, with the increasing incidence and severity of floods affecting food production, availability, and affordability. Recently, an infestation of tomatoes by Tuta absoluta further exacerbated the situation, leading to a sharp spike in prices and pushing food inflation to a record high of 40.87% y/y in June.
We expect headline inflation to start moderating from July, primarily due to the base effect. The decline in tomato prices and the government’s decision to suspend duties, tariffs, and taxes on the importation of key commodities such as maize, husked brown rice, wheat, and cowpeas for the next 150 days should help offset further price triggers. These triggers include additional currency depreciation in July and higher fuel costs resulting from the recent PMS scarcity. Overall, we anticipate that headline inflation will decrease by 76 basis points, bringing it down to 33.43% in July 2024.
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