Staple food prices in sub-Saharan Africa soared by an average 23.9 percent between 2020-22, its highest since the 2008 global financial crisis, also known as “The Great Recession”, according to a recent report published by the International Monetary Fund (IMF).
The report disclosed that the food hike is commensurate with an 8.5 percent rise in the cost of a typical food consumption basket, beyond generalised price increases in other regions of the world.
The IMF attributed the sharp increase in food items to the region’s high import dependency, stating that the region imports a large volume of its five most consumed staple foods including wheat, palm oil, cassava, maize and rice.
The international financial institution further explained that prices of locally sourced food items also surged in many countries in the sub-Saharan region on the back of domestic supply disruptions, local currency depreciations, and higher fertiliser and input costs.
“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,” the report noted.
Using price data from 15 countries on the most consumed staple foods, the report noted that in addition to global food prices and net import dependence, the share of staples in food consumption and real effective exchange rates impacted changes in local staple food prices.
Of these,the IMF stated that the consumption share of each staple has the largest price effect. This, it explained, is due in part to income as “better-off households” can afford a wider range of foods, while the poor are forced to consume 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,” the report explained.
“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,” it said.
The relative strength of a country’s currency was also identified as another factor driving food inflation in the region as it affects the costs of imported food items.
“We find that a 1 percent depreciation in real effective exchange rates increases the price of highly imported staples by an average 0.3 percent,” the report stated.
Natural disasters and wars were also considered factors that impacted prices of staple food in the region.
The report also observed that food prices rose by an average of 4 percent in the wake of wars and 1.8 percent after natural disasters, depending on the magnitude, frequency, duration, and location of events.
Policy framework to the rescue
The IMF, in its study of the variation in prices between countries, determined that those with stronger monetary policy frameworks are better at curbing direct and second-round food price inflationary pressures, and in turn, better positioned to curb overall inflation. In contrast, food prices were observed to be higher in countries with weaker fiscal management and elevated public debt.
The IMF recommended a mix of fiscal, monetary, and structural reforms to help lower food inflation.
It stated that improving public financial management could help free up resources for investment in well-targeted social assistance programmes or in climate-resilient infrastructure and, in turn, help stabilise prices.
Policymakers were also advised to help make agricultural inputs such as seeds and fertilisers cheaper for local food producers 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.
