February 13, 2024/FBNQuest Research
The World Bank has recently released the updated edition of its Food Security report. The report provides an in-depth discussion of recent developments and trends in the agricultural market, globally. The latest report cited several headwinds to global food security, including trade restrictions, extreme climatic conditions, high energy costs and geopolitical tensions which could disrupt global food supply chains.
In comparison to the Dec ’23 update, the agricultural, cereal and export price indexes all saw increases of 3% m/m, 1% m/m, and 7% m/m, respectively. Within the cereal index, maize and wheat prices increased by 1% m/m and 4% m/m, respectively.
Notably, the bank noted that low, middle, and high-income countries continue to experience soaring food inflation.
The report highlighted the increased frequency of shipping interruptions along vital global trade routes, which have raised worries regarding the transportation of essential goods, particularly grains, from Europe, Russia, and Ukraine.
For instance, shipping disruptions in the Red Sea is negatively impacting major wheat exporters, such as the European Union, Russia, and Ukraine.
Furthermore, the bank expressed concern that continued trade disruptions in the Red Sea region will exacerbate already precarious global food security.
On the domestic scene, the bank projects that several states in the northern Nigeria will experience a food crisis in 2024 mainly due to insecurity and conflicts.
Nigeria’s food inflation has remained elevated because of structural supply-side factors which have continued to cause shocks to food supplies.
A secondary factor is the pass-through effect of higher transportation costs caused by the increase in petrol prices and the continued depreciation of the Naira.
Food inflation, which is the most significant component in Nigeria’s CPI inflation basket, has risen consistently since Mar ’22, except for a brief pause in Dec ’22.
The NBS inflation report for December ’23 showed that food prices surged by 109bps to 33.93% y/y, up from 32.84% y/y the previous month.
To address the rising cost of food prices in the country, the federal government ordered the supply of food items from the strategic food reserves to the country’s food market.
Although we commend the FG’s initiative, we see it as a near-term measure which may not significantly improve the current food crisis being experienced in the country
