Nigeria continues to face severe financial and food security challenges as a result of ongoing conflict and economic downturn. In June, the Central Bank allowed the country’s exchange rate to float. According to the Nigerian Market Monitoring Bulletin released last week by FEWS Net, since that time, the Nigerian Naira (NGN) has depreciated by more than 40 percent.
The country’s exchange rate has also steadily risen since June, with both the Oanda rate and the Bureau de Change rate rising to over 300 NGN/USD in July. Nigeria’s inflation rate in July was at 7.1 percent, according to the report.
The depreciation of the Naira has increased the cost of imported cereals and livestock, reducing household purchasing power. This is particularly troublesome because Nigeria depends heavily on these imports, particularly for rice consumption. In addition, higher prices for imported goods have caused a substitution effect toward locally produced goods; this in turn has substantially increased the price of local products.
Regional relative prices have also been impacted by the depreciation of the Nigerian currency, leading to increased cereal exports from Nigeria to regional markets.
Conflict continues to disrupt markets in the northeastern part of the country; parts of Northern and Central Borno and Southern Yobe have seen limited or no market activity since early 2015, FEWS Net reports. In addition, cereal production in the northeast regions was below average in the 2015-2016 marketing year, and many of the worst-affected areas (again including Borno, Yobe, and Adamawa) have not produced any significant amount of cereal for three consecutive years.
However, the report does point out that cereal production in Nigeria as a whole and in the broader region was above average for 2015-2016 and that these stocks could be effectively mobilized for humanitarian efforts in the northeast region of the country. According to a country brief published in July by GIEWS, more than 3 million people in this area are in crisis-level food insecurity.
By: Sara Gustafson