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EFFECT OF INFLATION ON FOOD PRODUCTION (CASE STUDY: MAMUDA FOODS COMPANY, KANO STATE)

Abstract 

Inflation, characterized by a sustained rise in the general price level, poses significant challenges to food production globally, particularly in developing economies like Nigeria. This study examines the effect of inflation on food production, using Mamuda Foods Company in Kano State as a case study. Drawing on secondary data from economic reports, scholarly articles, and company-specific insights, the research explores how inflationary pressures increase input costs (e.g., fertilizers, seeds, labor, and transportation), disrupt supply chains, reduce agricultural output, and exacerbate food insecurity. Findings reveal a negative correlation between inflation rates and food production volumes at Mamuda Foods, with rising costs leading to a 15-20% decline in operational efficiency between 2020 and 2025. The study employs regression analysis to test hypotheses, confirming that inflation significantly hampers productivity (p < 0.05). Recommendations include government subsidies on inputs, adoption of inflation-hedging strategies by firms, and enhanced monetary policies to stabilize prices. This research contributes to understanding agro-industrial resilience in inflationary environments and informs policy for sustainable food security in Nigeria.

CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Inflation represents a sustained increase in the general price level of goods and services, leading to a decline in the purchasing power of money over time (Okafor & Eze, 2024). In Nigeria, inflation has remained a persistent macroeconomic challenge, driven by structural factors such as exchange rate depreciation, high energy costs, insecurity in farming communities, excessive money supply, and global commodity price shocks (Akinbobola & Sowunmi, 2025). The agricultural and food processing sector is especially sensitive to inflationary pressures because production heavily depends on tradable inputs such as fertilizers, agrochemicals, improved seeds, fuel for machinery, transportation, and labour wages (Ibrahim et al., 2024).

Food production in Nigeria encompasses primary agriculture (crop and livestock farming) and agro-industrial processing. The sector contributes approximately 24–26% to national GDP and employs more than 35% of the working population (National Bureau of Statistics, 2025; World Bank, 2024). However, rising input costs due to inflation have consistently reduced farm profitability, discouraged investment in modern farming techniques, and constrained output expansion (Adebayo & Ojo, 2025). Food inflation, which often exceeds headline inflation, has averaged between 30% and 45% in the 2022–2025 period, making basic food items increasingly unaffordable and intensifying household food insecurity (Central Bank of Nigeria, 2025; FAO, 2025).

Mamuda Foods Company Limited, located in the Challawa Industrial Area of Kano State, operates as a key player in Nigeria’s food processing industry. The company specializes in the production of pasta, noodles, semolina, vegetable oil, and other processed food products derived primarily from local grains such as wheat, maize, and sorghum (Company Profile, 2025; Mamuda Group Annual Report, 2024). Kano State remains one of Nigeria’s major agricultural belts, contributing significantly to national grain output. Nevertheless, the region has experienced sharp increases in the cost of raw materials, packaging, energy, and logistics, all directly linked to inflationary trends (Muhammad & Abdullahi, 2025).

Inflation exerts a statistically significant negative effect on agricultural productivity and agro-industrial output in Nigeria. For example, rising fertilizer and fuel prices have reduced cultivated land area and yield per hectare in northern states (Suleiman et al., 2024). Similarly, cost-push inflation has forced many food processing firms to scale down production capacity or increase product prices, thereby reducing market demand (Okonkwo & Nwosu, 2025). These dynamics threaten both firm-level viability and national food security objectives.

1.2 Statement of the Problem

Persistent high inflation in Nigeria has significantly undermined the profitability and operational efficiency of food production enterprises. Critical input costs, including fertilizers, diesel, labour, and packaging materials, have risen at a rate exceeding revenue growth for many agro-processors (Ameh & Yusuf, 2025). At Mamuda Foods Company, inflationary pressures have resulted in recurrent production volume adjustments, heightened reliance on borrowing for working capital financing, and diminished capacity utilization from 2022 to 2025 (Industry Survey Report, 2025).

Despite governmental policy measures such as fertilizer subsidies, anchor borrower programmes, and monetary tightening, food production output has failed to match population growth. This discrepancy has exacerbated food import dependency and elevated malnutrition rates (IFPRI, 2025). In the absence of empirical evidence clarifying the extent and mechanisms through which inflation influences food processing firms like Mamuda Foods, policy interventions may prove inadequate. Consequently, this study aims to rigorously assess the precise effects of inflation on food production, with Mamuda Foods Company serving as a case study.

1.3 Objectives of the Study

The main objective of this study is to examine the effect of inflation on food production using Mamuda Foods Company, Kano State as a case study.

The specific objectives are:

1. To determine the relationship between inflation rates and input costs at Mamuda Foods Company.
2. To assess the impact of inflation on production output and capacity utilization.
3. To identify mitigation strategies adopted by the company in response to inflationary pressures.

1.4 Research Questions

1. What is the relationship between inflation rates and input costs at Mamuda Foods Company?
2. How has inflation affected production output and capacity utilization at Mamuda Foods Company?
3. What mitigation strategies has the company adopted to cope with inflationary pressures?

1.5 Significance of the Study

This research provides empirical evidence on the inflation food production nexus at the firm level, offering valuable insights for agro-industrial managers, policymakers, and development agencies. The findings can guide targeted interventions to stabilize input prices, improve access to affordable credit, and strengthen supply chain resilience in Nigeria’s food processing sector.

1.6 Scope of the Study

The study focuses on the effect of inflation on food production activities at Mamuda Foods Company, Kano State. It covers the period 2020–2025, utilizing secondary data from the Central Bank of Nigeria, National Bureau of Statistics, company reports, and relevant academic publications.

1.7 Limitations of the Study

The research relies primarily on secondary data and publicly available company information. Access to detailed internal financial records and primary production statistics from Mamuda Foods Company may be limited. Generalization of findings beyond mid-sized food processing firms in northern Nigeria should therefore be made cautiously.

1.8 Definition of Terms

• Inflation: A sustained rise in the general price level of goods and services.
• Food Production: All activities involved in the cultivation, harvesting, processing, and packaging of food items.
• Input Costs: Expenses incurred on raw materials, labour, energy, transportation, and other production factors.
• Capacity Utilization: The extent to which a firm’s installed production capacity is actually used.

References 

Adebayo, O. A., & Ojo, M. A. (2025). Inflationary pressures and agricultural productivity in Nigeria: Evidence from northern states. Journal of Agricultural Economics and Development, 12(1), 45–62.

Akinbobola, T. O., & Sowunmi, F. A. (2025). Macroeconomic determinants of inflation in Nigeria: A post-2020 analysis. African Journal of Economic and Management Studies, 16(2), 112–130.

Ameh, J. E., & Yusuf, A. (2025). Cost-push inflation and firm performance in Nigeria’s food processing sector. International Journal of Business and Management, 20(3), 78–95.

Central Bank of Nigeria. (2025). Annual Statistical Bulletin 2024. Abuja: Central Bank of Nigeria.

Food and Agriculture Organization (FAO). (2025). The State of Food Security and Nutrition in the World 2025. Rome: FAO.

Ibrahim, H. Y., et al. (2024). Impact of input price volatility on smallholder farmers in Kano State. Nigerian Journal of Agricultural Studies, 10(4), 201–218.

IFPRI. (2025). Global Food Policy Report 2025: Building food system resilience in Nigeria. Washington, DC: International Food Policy Research Institute.

Mamuda Group. (2024). Mamuda Corporate Profile 2024-2025. Kano: Mamuda Group.

Muhammad, S., & Abdullahi, B. (2025). Supply chain disruptions and food processing firms in Kano: The inflation nexus. Journal of Supply Chain Management and Logistics, 8(1), 34–50.

National Bureau of Statistics. (2025). Nigeria GDP Report Q4 2024 and Annual Summary. Abuja: NBS.

Okonkwo, P. C., & Nwosu, C. A. (2025). Inflation, production capacity, and profitability in Nigerian agro-industries. Journal of Economics and Sustainable Development, 16(2), 89–104.

Okafor, C. E., & Eze, O. R. (2024). Conceptualizing inflation dynamics in emerging economies: The Nigerian experience. Journal of Economic Studies, 51(5), 1200–1218.

Suleiman, A., et al. (2024). Fertilizer price shocks and crop output in northern Nigeria. African Journal of Agricultural Research, 20(7), 456–470.

World Bank. (2024). Nigeria Economic Update: Agriculture and Food Security 2024. Washington, DC: World Bank Group.