The Relationship Between Electricity Tariff Hikes and The Price of Food

The recent increase in electricity tariff and the removal of the fuel subsidy in Nigeria has begun to affect the sale of goods and services in local markets within the country.

Careful observation revealed that local marketers and traders are beginning to add between N10 to N500 to the prices of selected foodstuffs following an increase in bills, transportation and fuel as they are a major component in buying and preserving food products.

Recall that Electricity Distribution Companies across the country have commenced the implementation of a new electricity tariff which came into effect on the 1st of September 2020. The Nigerian Electricity Regulatory Commissioner had reportedly directed DisCos to maintain a Four Naira tariff for all customers consuming less than 50kWh of energy per month.

Barely 24 hours after the implementation, the Pipeline and Product Marketing Company announced an increase in fuel pump price from N148 to N151.56 per litre. However, there are reports that since the new hike, some filling stations are selling between N151 and N160 per litre.

In a recent development, the presidency has maintained that there is no going back in the recent tariff increase, explaining that the economic impact of the coronavirus pandemic led to insufficiency in funds to finance the budget.

In the market

Local producers of bread are adding at least N10-N20 to the price of loaves. This, according to Mr Kayode (a local bread producer) is the result of the increase in the prices of flour, sugar and butter. 

“We [used to] buy flour for N12,000. Now they are selling [between] N15,000 to N18,000. The same increase in sugar and butter. The prices of fuel have increased. We cannot continue to sell at the usual price if not we will run into a loss.”

Agricultural products like rice, beans, garri, yam, onion, tomatoes, oil, potatoes and eggs are selling at an increased price.

“A crate of egg sells for N1100 -N1200; a bag of rice is sold for N30,000 from the previous N27,000; a bag of beans sells for N20,000, tops, depending on the type; a tuber of yam sells for N500, tops, depending on size; palm oil sells for N2700 while red oil for N2100.

”A cup of sugar increased to N350 from N300, a bag of Semovita increased from N1700 to N1850, a plastic of garri is sold for N750 from N700. Frozen products like chicken, fish, turkey and meat also increased in carton and kilo prices. 

”A carton of chicken laps rose from N11,800 to N12,200, a carton of fish from  N10,600 to N11,000, Titus fish from N20,100 to N20,350.”

Mr Goodluck, a trader, said: “Since last week’s increase, we cannot sell at normal prices again. If you observe, the prices of goods started rising since the lockdown, now that market activities are functioning, prices are barley coming down but with the recent increase in electricity and fuel, we buy at an expensive rate and have to sell at such.”

In July, the National Bureau of Statistics had placed the inflation rate in Nigeria at 12.82%. This is a 0.26% increase from June and a 0.42% increase from May 2020. Selected food price watch, according to the NBS, had also increased month on month from 15.03% in April to 15.04% in May and 15.18% in June.

The increased rates were caused by the suspension of economic activities after the pandemic as well as the closure of land borders. With a staggering economy, despite the commencement of economic activities, the increment in electricity tariffs and pump price may push inflation to 13% by September and food price to 15.25% in the same month.