2.2 How Much of Rising Global Food and Fuel Prices Are Passed on to African Consumers?

Food and fuel inflation is exacerbating food insecurity, especially among the already vulnerable. Headline inflation across many countries in Sub-Saharan Africa has remained elevated; however, the impact of food and fuel prices may vary not only across countries and over time (see box 2.2), but also across the income distribution.

Rising global food prices—which were already observed in the pre-pandemic period—have accelerated since the onset of the Russian Federation’s invasion of Ukraine and the lockdowns due to the zero-COVID-19 policy followed by China amid new COVID-19 outbreaks. Since many countries in Africa are dependent on food and fuel imports, the impact of global commodity prices on domestic food, energy, and consumer prices is likely to be large.a This box documents the recent evolution of the pass-through of global to domestic prices, measured by changes in the ratio of relative prices over two periods: (1) December 2021 versus December 2020 (2021), and (2) June 2022 versus January 2022 (2022H1).b Overall, the pass-through from changes in commodity prices to inflation behaves differently across country groups in Sub-Saharan Africa. This heterogeneity can be attributed to differences in the economic structure and coping policies to deal with food and fuel prices. For the region as a whole, the pass-through from international to domestic prices has increased over time for oil, while it has remained relatively stable for food (figure B2.2.1). The responsiveness of domestic food and energy prices to the consumer price index (CPI) is high, and it has increased slightly in the case of food (0.9 in 2021 and 0.92 in 2022H1). Across the subregions, the pass-through from global to domestic oil prices has increased over time in East and Southern Africa (AFE) and West and Central Africa (AFW). The pass-through from global to domestic food prices has increased only for AFW (figure B2.2.1). The largest increases in the pass-through of global to domestic food prices took place in Burkina Faso, Ghana, and Rwanda. The domestic food and fuel pass-through to the CPI is still high in both subregions. It has increased for fuel among AFW countries and decreased slightly for AFE countries. In the case of food, although it is still very high, the pass-through has declined substantially for AFE countries, particularly Ethiopia and Zambia. Among net food importers, the pass-through from global to domestic prices increases for fuel, while it remained high but constant over time for food (about 0.92). On the transmission to the CPI, the fuel pass-through remained high but invariant, while that of food has declined in 2022H1 versus 2021, although it remains very high. Net food importers with a declining pass-through from domestic food prices to CPI inflation include Nigeria and Sudan. For non-resource-rich countries, the pass-through from global to domestic prices increased for fuel and remains high and invariant for food, and the transmission to the CPI remains high and invariant for fuel, while it has declined for food.

BOX 2.2: How Much of Rising Global Food and Fuel Prices Are Passed on to African Consumers?