Rice, Oil Prices To Rise Further Due To India Export Ban – Meristem

Meristem has warned that Nigerians should expect the price of rice, vegetable oil, and other commodities that are import-dependent to rise much further this month as a result of a partial ban on rice exports in India.

It also added that higher logistic costs, poor road networks, global energy, and premium motor spirit (PMS) pump prices are other factors that will contribute to this imminent rise.

It made this prediction in its recent “Macroeconomic Update: Inflation Expectation” report.

The report read, “We anticipate a continued surge in the price of rice and oils, hinged on the partial ban on rice exports in India, which has had a substantial impact on global rice supply.

“We also expect that higher logistic costs and poor road networks in the country would further impact food prices. Thus, we expect food inflation to shoot up by 173 bps to 28.71% for August 2023.

“Additionally, the headline index is expected to experience an uptick due to higher global energy and premium motor spirit (PMS) pump prices.”

The prominent Nigerian asset management and financial advisory company had warned that “the lingering challenges in sourcing foreign exchange (FX) and depreciating exchange rates are also expected to drive up the prices of import-dependent items like petroleum products, motor vehicles, clothing and fabrics, etc., that typically impact the core index movement.

“Overall, we expect headline inflation to increase by 129bps to 25.37% (vs. 24.08% YoY in July 2023).”

On Thursday, the country’s foreign exchange crisis worsened following information that the naira traded at N945 to a dollar in the parallel market. This is most likely to give credence to the Meristem prediction for this month, especially as rice importation is not among the items that can get dollars from the Central Bank of Nigeria.

According to findings, the cost of a 50-kg rice bag is expected to reach N60,000 in September. This increase is attributed to the shutdown or reduced production capacity of small and medium-sized rice mills due to paddy shortages and elevated production expenses.

“We travel distances to get paddy, and even with that, you may not get the quantity you desire at a time. Most of the small rice mills have closed up because they cannot cope with the current paddy scarcity,” Jonathan Joshua, national vice president of the North Central Millers Association of Nigeria, said in an August BusinessDay report.

“By September, local rice prices are likely to go up to between N55,000 and N60,000. This is because of the scarcity, and a lot of it is being mopped up now as palliatives by state governors,” Joshua said.

Presently, a 50-kg bag of rice is selling for a maximum of N45,000 in Abuja, while in Lagos, it sells between the range of N42,000 and N45,000. In Port Harcourt, it sells for a maximum of N46,000, and in Ibadan, it is available at a maximum of N45,500.