AFEX Commodity Exchange, a commodities market player, has predicted a decline in the production of grains including sorghum during the 2023 farming period.
Mr. David Ibidapo, Head of Market Data and Research at AFEX, said this during a virtual meeting on the 2023 Annual Commodities Outlook on Tuesday.
He said inflationary pressures would continue to rise in 2023 due to a decline in the production of major grain commodities, thereby reducing the supply level in the domestic market.
“On the outlook for the global commodities market, Maize prices will decrease by eight per cent in 2023, while prices for wheat, which were anticipated to rise by 36 per cent in 2022,
will slightly fall in 2023.
“Meanwhile, the average price of rice which decreased by five per cent in 2022 is forecast to remain the same this year.
“In the international scene, the fertilizer index which rose by 66 per cent in 2022, is projected to decline by 12 per cent in 2023 as supply disruptions gradually subside.
“Increased input costs, new sanctions on Belarus and Russia, and lengthened export restrictions by China are, however, positive risks to the forecast,” said.
Ibidapo said the projection followed the impact of flooding, devaluation of the Naira and high logistics costs.
He also said the social-political situation in the country would keep commodity prices at high levels, amid concerns of impending food crisis and global recession.
He said, “every year, AFEX reviews Nigeria’s commodity market and gives an in- depth analysis of the outlook for the new year.
“The surge in prices is attributed to the low production volume of maize, paddy rice, sorghum, and cocoa.
“These commodities declined by an average of 11.5 per cent in the 2022 and 23 trading season due to price-induced low fertilizer usage because of the Russia-Ukraine war.
“Climate change realities such as flooding also had a significant effect on the market among other unfavorable conditions.
“Also, price pressure is being exacerbated by the fact of 2023 is an election year, which could cause some market uncertainty,” he said.
The Head, Market Data and Research said commodities market susceptible to global shocks as evidenced by the COVID-19 pandemic in the last three years.
He said food inflation rose for nine consecutive months, reaching an all-high 24.13 per cent in November 2022.
Ibidapo said in view of the numerous factors responsible for the 2023 outlook, it was important “to monitor the market closely to help ameliorate the impact of the next global shock.”
Ibidapo, however, said in spite of the economic slowdown, the agricultural sector still showed resilience, adding that it outperformed most sectors in 2022.
According to him, the agriculture sector outperformed trade, oil and gas, telecommunications and manufacturing, contributing 27.6 per cent to Nigeria’s Gross Domestic Product(GDP) in quarter three of 2022.
Mr Oluwafunto Olasemo, Vice President, Financial Markets AFEX said shift in global commodities supply had greatly influenced commodity market and exposed vulnerabilities in the food system.
He said, “there is a growing imbalance between the food supply and the demand of the growing population, putting upward pressure on prices.
“Developing a holistic approach to mitigate food insecurity and improve the shocks to climatic change, inadequate financing, and low access to efficient markets is a priority.
“With the 2023 outlook, 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 said.
Olasemo said AFEX had long recognised that farmers were part of the social fabric of Africa’s commodities market.
He said in view of that, robust data was essential to identifying solutions that addressed food system challenges.
The Vice president added that robust data was essential to build trust, increase supply capacity of chain businesses for farmers, processors, investors, and other key stakeholders in the value chain.
He said there was a need to mainstream environmental sustainability and prioritise policies that encourage public and private sector players to work together to improve farmers’ productivity and transform food systems.
