Nigeria and other developing countries that depend on commodities ought to pursue diversification strategies to address the adverse effects of price volatility in international markets, said speakers at UNCTAD's meeting of experts on commodities and development in Geneva, Switzerland, recently.
Indeed, UNCTAD defines a country as dependent on commodities when these account for more than 60% of its total merchandise exports in value terms.
Today, 67% of developing countries (91 out of 135 countries) are dependent on commodities, a situation that has changed little in the last two decades, UNCTAD Deputy Secretary-General, Isabelle Durant, told attendees.
Least developed countries are even more dependent, as more than 80% of their export earnings come from commodities.
"Heavy dependence on commodities makes these countries vulnerable to shocks and price fluctuations," Ms. Durant said, adding that a decline in commodity prices can have a negative impact on export and fiscal revenues and may slow down economic growth and development.
As in previous years, commodity prices in 2018 were volatile, but generally followed a downward trend, with variations between commodities, said UNCTAD's commodities head, Janvier Nkurunziza.
Overall, agricultural products saw falling prices, a trend that began when the most recent commodity boom ended in 2011. Mineral prices, for their part, dropped after an upturn in 2016 and 2017 for ores such as gold, nickel and zinc.
The prices of crude oil and natural gas fuels were the exception in 2018. The price index for energy products increased, particularly from its low level in 2016.
As a result of the downward trend of most commodity prices, countries have been losing crucial import/export revenues.
"The continued fall in commodity prices since their peak in the early part of the decade has affected the ability of countries dependent on these commodities to ensure their socio-economic development," Nkurunziza said.
Many commodity-dependent developing countries rely heavily on the production and export of a few commodities with minimal value addition and even fewer forward and backward linkages with other sectors of the economy.
Commodity-dependent countries need to pursue diversification strategies to address the longstanding risks associated with continuous price volatility, Ms. Durant added.