Sub-Sahara food prices soar amid high import reliance-IMF

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Nigeria records more than 100% rise in prices of Cassava, Maize

Uba Group

BY BAMIDELE FAMOOFO

Staple food prices in sub-Saharan Africa surged by an average 23.9 percent in 2020-22—the most since the 2008 global financial crisis.

The International Monetary Fund disclosed that the development is commensurate to an 8.5 percent rise in the cost of a typical food consumption basket (beyond generalized price increases).

The IMF also noted global factors are partly to blame as the region imports most of its top staple foods—wheat, palm oil, and rice—the pass-through from global to local food prices is significant, nearly one-to-one in some countries.

In Nigeria for example, the prices of both cassava and maize more than doubled even though they’re mainly produced locally. In Ghana, prices for cassava escalated by 78 percent in 2020-21, reflecting higher production costs and transport constraints, among other factors.

Prices of locally sourced staples have also spiked in some countries on the back of domestic supply disruptions, local currency depreciations, and higher fertilizer and input costs.

Using price data from 15 countries on the five most consumed staple foods in the region (cassava, maize, palm oil, rice, and wheat), IMF found that in addition to global food prices, net import dependence, the share of staples in food consumption, and real effective exchange rates drive changes in local staple food prices.

Of these, the consumption share of each staple has the largest price effect. This is due in part to income. Better-off households can afford a wider range of foods, but for the poor there are very few substitutes for staples, which make up nearly two-thirds of their daily diet.

“We estimate that a 1 percent increase in the consumption share of a staple food raises the local price by an average 0.7 percent; the effect is even bigger when a staple is mostly imported, raising the price by about 1.2 percent. When a country’s net import dependence increases by 1 percent, the local real cost of a highly imported staple is expected to increase by an additional 0.2 percent,” IMF disclosed.

IMF further noted that the relative strength of a country’s currency is another driver as it affects the costs of imported food items. We find that 1 percent depreciation in real effective exchange rates increases the price of highly imported staples by an average 0.3 percent.

Staple food prices in the region are also impacted by natural disasters and wars, rising by an average 4 percent in the wake of wars and 1.8 percent after natural disasters, depending on the magnitude, frequency, duration, and location of events.

IMF is of the opinion that improving public financial management could help free up resources for investment in well-targeted social assistance programs or in climate-resilient infrastructure. This could help stabilize prices.

“Policymakers could also help make agricultural inputs such as seeds and fertilizers cheaper by introducing structural and regulatory reforms that promote fair competition, as well as by streamlining trade procedures and better leveraging research and development to boost agricultural innovation,” IMF hinted.