April 5, 2024/FBNQuest Research

The World Bank, in its recent publication of the Food Security report, provided an outlook on agricultural commodities globally. Specifically, the report provides current developments and expectations for the global agricultural market and highlights regional peculiarities. Citing severe food insecurity in some regions, particularly in Africa, the Bank pointed out the urgent need for external food assistance in these affected regions. Furthermore, the report indicates that shortages in food production, the rising cost of living, and regional conflicts were the leading causes of the food crisis

• Referencing the Food and Agriculture Organization (FAO) monthly report on food prices, the Bank states a global decline in the prices of major cereals in February.
• The reduction in cereal prices was attributed to improved supplies and intense competition among exporters, leading to a price drop.
• Prices of global maize also declined markedly, particularly with export quotations from Argentina and Brazil, driven by expectations of abundant harvests.
• Similarly, wheat prices reduced during the period due to a healthy harvest in 2023 and substantial carryover inventories.
• Despite the recent improvement in global food prices, domestic food prices remain high in most countries, mainly due to climatic weather conditions, conflicts, security challenges, and exchange rate depreciation.
• The Bank further noted that higher import costs stemming from supply challenges caused by disruptions in shipping routes, particularly in the Panama Canal and the Red Sea, continue to exert upward pressure on domestic food prices.
• For countries like Nigeria and Ghana, the bank noted that sluggish growth, currency depreciation, and a high inflationary environment continue to squeeze household wallets.
• While Ghana’s headline inflation declined slightly from 23.5% to 23.2% in February. Nigeria’s headline reading trended upward during the same period, driven by elevated food and core inflation.
• For context, the country’s headline inflation accelerated by 180bps to 31.7% y/y in February, compared with 29.9% the previous month.
• In response to the rising inflationary pressures and currency depreciation, the Monetary Policy Committee (MPC) raised the MPR by +600bps to 24.7%, increased the CRR ratio to 45% from 32.5%, and adjusted the asymmetric corridor around the MPR to +100bps/-300bps from +100/-700bps in Q1 ’24.
• While we commend the MPC’s hawkish stance in curbing stubbornly elevated inflation, we share the CBN Governor’s view that tackling persisting security challenges in food-growing areas is paramount to taming inflationary pressures in the country.