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In June 2016, FEWS NET released an alert describing the national and regional implications of declining global crude oil prices on the Nigerian economy and subsequent currency depreciation since 2015. Within the context of this national economic shock, more than 3 million people in Northeast Nigeria already face significant food insecurity due to the Boko-Haram conflict. The Nigeria Market Monitoring Bulletin provides a summary of emerging market trends in Nigeria and the broader region.
Nigeria reported its first COVID-19 cases at the end of February and cases continued to steadily increase through June. The government has implemented various control measures including, placing affected cities under lock-down for two to four weeks at a time, restricting interregional transportation, closing borders, and restricting public gatherings.
After about three years of economic improvement, Nigeria currently faces the threat of “twin shocks” from the COVID-19 pandemic and the associated fall in international crude oil prices. Crude oil prices, the main source of foreign exchange earnings, contributing about 95 percent, have dropped drastically since the beginning of the year, negatively impacting foreign exchange reserves. Macroeconomic indicators have timidly improved following the 2015/16 recession and food prices have stabilized. Since March, however, the falling international crude oil prices and export earnings led to significant depreciation and inflation.
Earlier in the year, both interbank and market (Bureau de Change) rates of the Nigerian Naira (NGN) vis-à-vis US dollar (USD) were about stable compared to last year, but well below the previous five-year average. Since March, the value of NGN decreased vis-à-vis USD, more sharply on the parallel market. By mid-June, the market rate increased to NGN 450 per dollar, further widening the gap between the two rates. With decreasing foreign exchange reserves, crude oil prices, and government revenues, the inter-bank and market (Bureau de Change) rates will continue to play important roles in the macroeconomy.
Prices of staple foods such as maize, rice, millet, sorghum, and yams are currently above their respective 2019 and five-year average levels across major markets due to increased transportation costs with COVID-19 restrictions, increased demand, border closures, and higher imported food prices due to the depreciation of the Naira. Increased security checks during lockdown and rules restricting movement continue to negatively impact supply. Demand continues to increase due to prolonged below-average agricultural production and an early onset of the lean season for most households due to the ongoing Boko Haram conflict. Staple food prices in northeastern Nigeria therefore continue to increase with increased demand and reduced market supply.