The impact of flooding, devaluation of the naira, high logistics costs, and the social-political situation in the country will keep commodity prices at historically high levels, amid concerns of an impending food crisis and global recession, according to a recent report by AFEX.
AFEX, in the report, noted that the commodities declined by an average of 11.5 per cent in the 2022/23 trading season due to price-induced low fertiliser usage caused by the Russia-Ukraine war. It added that climate change realities such as flooding also had a significant effect on the market among other unfavourable conditions.
The annual commodities outlook also pointed to the fact that price pressures are exacerbated by the fact that 2023 is an election year, which could cause some market uncertainty.
For 2023, the report projected that inflationary pressures will continue to rise due to decline in the production of major grain commodities thereby reducing the supply level in the domestic market.
Providing the outlook for the global commodities market, the report predicts that maize prices will fall by 8 per cent in 2023, while prices for wheat, which were anticipated to rise by 36 per cent in 2022, will slightly decline in 2023.On the other hand, the average price of rice which decreased by 5 per cent in 2022 is forecast to remain the same this year.
In the international scene, AFEX noted that the fertiliser index which rose by 66 per cent in 2022, is projected to decline by 12 per cent in 2023 as supply disruptions gradually subside. It added that increased input costs, new sanctions on Belarus and Russia, and lengthened export restrictions by China are all positive risks to the forecast.
On a positive note, it said the commissioning of some fertiliser plants, which have not yet ramped up to full capacity in 2022, will suppress the risks.
Despite the economic slowdown, the report pointed out that the agricultural sector still shows resilience as it outperformed most sectors, including trade, oil and gas, telecoms, and manufacturing, contributing 27.6 per cent to Nigeria’s GDP in Q3 of 2022. However, food inflation rose for nine consecutive months in the year reaching an all-high 24.13 per cent in November 2022.
Speaking at the virtual report launch, David Ibidapo, head, market data and research at AFEX, said: “Every year, AFEX reviews Nigeria’s commodity market and gives an in-depth analysis of the outlook for the new year.”
Ibidapo explained the last two to three years has seen the commodities market susceptible to global shocks, as evidenced by the Covid-19 pandemic’s impact and the ongoing Russia-Ukraine crisis on supply chain and food prices.
The research analyst emphasised that it is critical to monitor the market closely and give an objective picture of these agricultural commodities which would bring transparency and clarity in a bid to ameliorate the impact of the next global shock.
Speaking on the commodities outlook for the year, Oluwafunto Olasemo, vice president, financial markets at AFEX reasoned that the shift in global commodities supply has greatly influenced the commodity market and exposed the vulnerabilities in our food system.
He, therefore, noted that developing a holistic approach to mitigate food insecurity and improve the shocks to climatic change, inadequate financing, and low access to efficient markets has become a priority.
“With this report, we seek to provide high-quality, timely, accurate, and accessible data for investors while addressing the real pressing issues of the agricultural sector in Nigeria,” he added.
AFEX, in a statement, said it has long recognized that farmers are part of the social fabric of Africa’s commodities market, hence, robust data is essential to identifying solutions that address food system challenges, build trust, and increase the capacity of supply chain businesses for farmers, processors, investors, and other key stakeholders in the value chain.
The leading commodities player stated that mainstreaming environmental sustainability, and prioritising policies that encourage public and private sector players to work together to improve farmers’ productivity and transform food systems is a key recommendation from the report to pave the way for sustainable solutions.
