Agric Minister’s Farm Produce Mop-up Fuels Inflation
The ongoing stockpiling of some agricultural produce by the Federal Ministry of Agriculture and Rural Development is contributing to the inflationary pressure facing the country, findings by THISDAY have revealed.
THISDAY gathered that the Minister of Agriculture, Mr. Mohammed Nanono, recently awarded contracts to some organisations to mop up some commodities, including maize, sorghum and rice.
In addition, THISDAY also learnt the Humanitarian Affairs, Disaster Management and Social Development Minister, Ms. Sadiya Farouq, has also been mopping up some agriculture commodities.
The policy has led to the increase in the price of maize as a bag now goes for N31,000, far higher than the range of N17,000 – N20,000 it used to be; while a bag of rice sells around N28,000.
The contract was awarded to two companies based in Katsina and Kano States respectively.
The arrangement, which is being done under what the ministry termed, ‘Emergency Procurement,’ contradicts efforts by some policymakers in the country to tame inflation.
The Consumer Price Index (CPI), which measures inflation stood at 17.93 per cent (year-on-year) in May compared to 18.12 per cent in the preceding month, according to the National Bureau of Statistics (NBS).
Also, food inflation in Nigeria has remained high at 22.28 per cent, which the policy by the agriculture minister could worsen.
One of such letters by the Ministry seen by THISDAY, titled: “Award of Contract for the Emergency Procurement of 4,843.16MT of Maize,” dated May 26th, 2021 was addressed to the Managing Director, DJG Integrated Farm Limited, Katsina State.
The letter was signed by the Deputy Director, Procurement on behalf of the minister.
It read: “I am directed to inform you that the management under the emergency situation wishes to convey the presidential approval for the emergency procurement of 4,843.16MT of maize to your company at the contract sum of N1, 380,266,697.88 only, with a delivery period of eight weeks, with effect from the date of this letter.
“You are therefore required to indicate in writing within three days of receipt of this letter, your acceptance to the Office of Director, Procurement, Federal Ministry of Agriculture and Rural Development, Abuja, otherwise the offer would be considered lapsed.
Thereafter, you are to liaise with the Director (Food and Strategic Reserve) for adequate supervision of the contract and the Director (Legal Services) for the signing of the contract agreement.
“Please note that the contract is not transferable and the cost is fixed, firm and request for price variation will not be entertained.”
Also, another company, Zuhala Nigeria Limited, was awarded a contract of N292,375,982.50 under the arrangement for emergency procurement of 1,051.75MT of sorghum.
Commenting on the development, a source who pleaded to remain anonymous, said the policy was against the normal practice, adding that it contradicts efforts by the monetary authorities to cage inflation.
“The minister is buying during planting season, which is not the normal practice. The normal practice is for the ministry to buy from the farmers to save in the reserves during harvest season. The situation is contributing to the inflationary pressure facing the country,” he explained.
The Central Bank of Nigeria (CBN) last week approved the release of 50,000 metric tonnes of maize to 12 major producers to control the price of the commodity.
The bank had explained that the rollout of the commodity from the Strategic Maize Reserve (SMR) under the Anchor Borrowers’ Programme (ABP) to companies was its third intervention in recent times.
It had stated that the release of the grains was aimed at checkmating the activities of middlemen hoarding the product to cause artificial scarcity.
CBN spokesman, Mr. Osita Nwanisobi, had expressed optimism that the release would crash the price of maize, reduce pressure on the market, and make the product directly available to feed producers, thereby reducing the price of poultry feed.
He added that as part of the bank’s financing framework, the CBN would continue to facilitate the funding of maize farmers and processors through the ABP commodity association, private/prime anchors, and state governments, Maize Aggregation Scheme (MAS) as well as the Commercial Agricultural Credit Scheme (CACS).
Meanwhile, a report by Washington Post has stated that surging food prices had put staple meals out of the reach of a lot of Nigerians. It also cited the situation in some other countries.
It noted that at Nyanya Market, near Abuja, the price of the rice that forms the base for the dish went up by 10 per cent.
“A small tin of tomatoes 29 per cent costlier. And the onions? Their price jumped by a third, according to a Nigerian research firm.
“In Russia, an increase in pasta prices left President Vladimir Putin boiling. In India, it’s cooking oil, and in Lebanon, bread. In meat-loving Argentina, the cost of some cuts of beef has doubled, and beef consumption is at an all-time low.
“The issue has made headlines the world over, including in the United States, where inflation has climbed to five per cent, the highest level in 13 years.
“Even relatively well-off people complain about how food prices are seemingly on an unstoppable tear,” the report quoted Feyi Fawehinmi, a Nigerian author and analyst based in Britain, to have said.
The United Nations Food and Agriculture Organisation said its food price index, which measures the global price of select foods, had in May hit highs not seen since 2011, up 40 per cent year-on-year.
A variety of factors are to blame, including a surge in orders from China, fluctuating oil prices, a sliding U.S. dollar, and looming above all: the pandemic, and in some places, reopening.
But experts said in the face of growing populations, globalisation and climate change, higher prices might not be a blip.
“This is telling us something about the global food system not being adequate,” said Cullen Hendrix, a professor at the University of Denver and senior fellow at the Peterson Institute for International Economics.
Around the world, the way people eat could change, the report noted.
SBM Intelligence has been tracking the prices of ingredients for jollof rice in Nigeria since 2015, in a “Jollof index” that factors in the price of turkey, chicken, beef, seasoning, rice, tomatoes, onions and others.
In its latest quarterly report, the company announced that it had tracked an increase of 7.8 per cent in the Jollof index between March 2020 and March 2021. But the price increases were unevenly spread.
Although a few markets saw small declines, others, such as Nyanya, saw the price of a potful jump by nearly 16 per cent. In Lagos, the cost of a bag of onions at a market doubled as producers complained of heists targeting the valuable vegetable.
Fawehinmi said the problem has only become worse. “I have had people I would never have expected ask me for money to buy food recently,” he said.
Nigeria has struggled economically over the past year, with low global oil prices hurting one of its key exports. Unemployment hit 33 per cent in 2020, while inflation has reached more than 18 per cent for the past two months.
And “militias have taken over major farmlands and key agricultural transport corridors” in northern states, said Ese Oikhala, a researcher with SBM Intelligence.
Other factors include border closures during the pandemic, designed to stop the smuggling of goods including rice, and the devaluation of Nigeria’s currency, the naira.
The World Bank recently warned that high food prices could force seven million Nigerians into poverty and food prices have become a rallying cry for grass-roots opposition leaders.
The FAO’s food index price last hit this high in 2011. Some analysts have linked sharply rising bread prices in countries including Egypt and Syria to the unrest that took place during the Arab Spring.
But the relationship between international food prices and unrest is affected by numerous factors. Global prices, like the FAO index tracks, and the price that a consumer pays are rarely in sync.