Nigeria: Inflation to Rev Up Commodities' Prices This Year - AFEX

28 January 2022

AFEX said the situation could be complicated by 2022 being a pre-election year in Africa's most populous nation, hinting at the risks that could bring.

Commodities prices could attain higher levels this year, with a mix of macroeconomic factors notably inflation driving the spike, commodities exchange AFEX said in its forecast for 2022 on Wednesday in Lagos.

Uncertainties around the timing for petroleum subsidy abolition, an uptick in demand for commodities and "possible naira devaluation in the parallel market" may also steer the costs of grains northward in the 2021/2022 season.

AFEX said the situation could be complicated by 2022 being a pre-election year in Africa's most populous nation, hinting at the risks that could bring.

Inflation accelerated to 15.63 per cent in Nigeria last month, having slowed for eight months in a row, in what the statistics bureau have linked to heavy demand for food around the festive season.

The Central Bank of Nigeria's vow to tame inflation to single digit since 2016 has been unrealisable amid government's decision to shut its land borders to food imports, a policy shift that spiked the cost of living for nearly two years until late 2020 when the blockade was lifted.

"The report's primary objective is to close a data gap in Africa's commodity sector and to give solid market intelligence to major stakeholders in the commodities value chain," said Oluwafunto Olasemo, AFEX's vice president for financial markets.

The exchange's review of the agriculture industry in 2021 noted a 1.60 per cent growth January through September, helped by easing coronavirus lockdowns. The sector accounted for 25.4 per cent of Nigeria's GDP for the year, AFEX stated.

"Among other commodities, sesame seeds, fermented cocoa beans, cashew nuts, ginger, crude palm kernel oil, soybean, frozen shrimps and prawns drove overall agriculture exports between 2016 and 2021 and agriculture exports generated N1.79 trillion cumulatively for the country."

"During the same period, Nigeria's overall agriculture import cost was N3.78 trillion with a trade imbalance of N1.99 trillion, making Nigeria still a net food importer."

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