The Stability of Food Supply Chains Faces an Even Greater Threat.

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March 13, 2024/CSL Research

The Manufacturers Association of Nigeria (MAN) has signaled its intention to potentially halt the operations of its members engaged in the supply and distribution of food due to insecurity. The Director-General of MAN Mr. Segun Ajayi-Kadir, emphasized the precarious situation faced by members who transport food items across long distances. He underscored that attacks on these haulage operations have inflicted substantial losses on food manufacturers.

Consequently, MAN is contemplating withdrawing its members’ activities unless the federal government addresses the pressing issue of insecurity. Recently, there has been ongoing unrest in the country, with some individuals resorting to attacking trucks belonging to food companies in response to rising hardship, hunger, and poverty.

The rising costs of food and cost of living in general have been fueling public discontent and leading to incidents such as looting of government warehouses and hijacking of food-laden trailers by hoodlums. Failure to address these issues could potentially result in further attacks on warehouses across the country and directly impact the stability of food supply chains and contribute to public unrest. Food supply in Nigeria has over the years been impacted by many factors such as climate change, global conflicts, the border closure, and more recently, impact of removal of the subsidy on petrol and the steep devaluation of the Naira.

That said, insecurity remains the most serious of the sector’s problems. Till date, farmers, even those in the southern region complain of attacks on their farms by herdsmen. Many farmers have been hacked to death on their farms while trying to stop the herdsmen from destroying their crops, making others afraid to go to their farms. This has significantly reduced food production. The current attacks on food trucks and warehouses present a different dimension to the security threats.

Food inflation, a major driver of headline inflation jumped by 10ppts to 33.93% in 2023, reflecting risks like insecurity and high input costs. On the latter, Nigeria primarily relies on imports of Muriate of Potash (MOP), a crucial ingredient for blending agricultural inputs, which is sourced from Russia. However, due to the web of sanctions imposed on Russia, this essential supply chain has been disrupted.

Another layer of pressure stemmed from the elevated AGO prices, which touched an all-time high. From our research, we understand that most types of Agric equipment and trucks are AGO powered. Food inflation has started to rise in 2024, up by 148 basis points in January to reach 35.41% from December 2023’s 33.93%. Considering the current situation in the country, it is anticipated that this upward trajectory will persist in the short term. We forecast food inflation will reach 36.86% in February, pushing headline inflation to 30.95%.

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