Nigeria's food inflation continues to fall

Nigeria's composite food inflation index has shown a significant decline, coming in at 12.85 per cent in July, marking the 10th consecutive drop in year-on-year food inflation since September 2017. The decline has been attributed to various factors, primarily seasonal forces and agricultural production challenges. To delve deeper into the dynamics impacting Nigeria's food sub-index, CNBC Africa's Wole Famurewa sat down with Chike Nwagwu, CEO of Novus Agro. Nwagwu shed light on the weak fundamentals affecting the country's food inflation and the potential opportunities for growth and improvement within the agriculture sector. One of the key factors driving the decline in food inflation is the seasonal trend observed among farmers. Nwagwu pointed out that during the last quarter, farmers typically sell their produce to afford inputs for the upcoming planting season. This trend is heavily influenced by weather conditions and planting schedules, making it challenging to witness a sustained decrease in inflation rates. Additionally, Nwagwu highlighted the significant gap between Nigeria's agricultural production and the market demand. He noted that the country currently faces a 20% deficit in production, underscoring the need to boost output to achieve food security. The CEO of Novus Agro also emphasized the limitations posed by traditional farming methods in Nigeria. With 90% of farming activities conducted on small-scale holdings of less than one hectare, mechanization and modern farming practices are not widely adopted. This outdated system contributes to high post-harvest losses, estimated at around 40%, further straining the food supply chain. Nwagwu emphasized the urgent need for agricultural reform and increased investment in modernizing the sector to address these challenges. The issue of post-harvest losses has been a longstanding concern in Nigeria's agriculture landscape. While the government has outlined policies to tackle this issue, bureaucratic hurdles and delays have impeded progress. Nwagwu cited the underutilization of storage facilities, such as silos, as a critical example of inefficiency in the system. Despite government initiatives to concession out silos for private sector management, little progress has been made in actualizing these plans. The looming deadline for operationalizing these storage facilities indicates a persistent barrier to mitigating post-harvest losses in the near term. Looking ahead, Nwagwu expressed a cautious outlook on food inflation, suggesting that the recent decline may have bottomed out. He cautioned that external factors such as oil prices and GDP performance could influence inflation trends. However, in the absence of significant structural changes and increased agricultural productivity, prices are likely to continue rising. Nwagwu underscored the immense potential within Nigeria's agriculture sector, highlighting the untapped opportunities for export growth and market expansion. With an estimated market value of around 34 trillion naira per season, the sector presents a vast opportunity for economic development and job creation. Addressing the systemic challenges and inefficiencies in agricultural practices could unlock unprecedented growth and position Nigeria as a key player in the global food market.