From Cyriacus Nnaji, Lagos
New evidence has warned that weak competition may be causing unfair food prices for consumers in Nigeria, as retail prices rise significantly faster than wholesale prices.
According to the research, food products such as yams, garri, and groundnut oil are flagged as markets of concern; national authorities are urged to investigate and act.
Consumers International (representing consumers across the world) and Nigerian consumer organisations (Consumer Advocacy and Empowerment Foundation, and Consumer Awareness Organization), made the disclosure in a release, adding that it uses data from sources such as the National Bureau of Statistics and FEWS NET to track the relationship between food prices at different stages of the supply chain in Nigeria, and to highlight where investigation and action may be needed from government.
It said experts in Nigeria and globally are warning that some market actors are making record profits in this time of food crisis, at the expense of overcharged consumers and underpaid farmers.
A new tool created by consumer organisations has highlighted the risk of unfair food prices in Nigeria, driven by insufficient competition in national and global food supply chains. The Fair Food Price Monitor warns how rising prices for Nigerian consumers are potentially being caused not only by factors such as increased fuel costs and currency depreciation, but also by dominant market actors taking advantage of this crisis to increase prices excessively.
On growing evidence of unfair prices, the research stated that the key outcomes from the first analysis using the Fair Food Price Monitor have shown that for several important food items, retail/consumer prices have risen substantially faster than wholesale/market prices. For example:
between January 2022 and August 2023, the retail price of yams increased by 74%, while the wholesale price rose by just 60.3%.
In the same period, the retail price of groundnut oil increased by 56.3%, while the wholesale price of groundnuts rose by only 35.3%.
The research further disclosed that the retail price of maize increased by 19.2% throughout the course of 2022, while wholesale prices in fact fell by 4.1%.
This shows that while costs are increasing for all market actors, consumers are bearing an unfair and excessive burden. The Fair Food Price Monitor explores several potential explanations for this divergence in retail and wholesale prices – such as rising fuel costs and a weakening exchange rate – but finds that while these factors may have contributed, they do not appear to be sufficient explanation for the excessive rise in retail prices.
When the cost of producing and importing food increases, it is inevitable that consumers will have to pay higher prices. However, in a competitive national market, it is expected that profit margins will also decrease slightly, as the burden is shared between food producers, traders, retailers, and consumers. If the margin between retail and wholesale prices remains consistent (or even increases) in times of crisis, this is a sign that stronger competition would result in fairer prices for consumers.
According to the UN Food and Agriculture Organization’s Global Food Price Index, global food commodity prices have been consistently decreasing since March 2022; yet consumers worldwide are still facing food price rises. According to Nigeria’s National Bureau of Statistics, monthly food price inflation hit a 17-year high of 29.3% in August, 2023.
The causes of rising food prices are complex – disruptions to international trade caused by climate crisis, conflict, and COVID-19, all play a part – but many global experts have warned that food prices are rising excessively and unfairly.
The UN Conference on Trade and Development (UNCTAD) noted in their 2023 Trade and Development Report that “in the context of cascading crises, there is a stark contrast between growing risks to the food security of millions, and profiteering by corporations”.
Proferring solustion, the Consumer organisations recommend a range of actions that the government can take to tackle this threat of unfair food prices. In particular, it is highlighted that while authorities in Nigeria are committed to taking action against unfair prices, they need stronger support to enable enforcement – from financial resources to political mandate, to high-quality data.
This can enable more decisive action to strengthen competition in the marketplace, such as by sanctioning anti-competitive practices, tackling monopolies, and supporting small and medium-sized businesses.
Consumers International is the global membership organization for consumer groups, bringing together over 200 member organizations in more than 100 countries to empower and champion the rights of consumers everywhere. Consumers International represents the voice of consumers in international policy-making forums and the global marketplace to ensure they are treated safely, fairly, and honestly.
Consumers International – with the support of The Rockefeller Foundation – is working with consumer organisations across Africa to raise the alarm on this threat, and to collaborate with authorities to take decisive action. The project, Consumer Voice for Fair Food Prices, aims to strengthen the evidence base and facilitate multi-stakeholder collaboration on this critical issue.
