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Analysts: Tackling forex key to averting food crisis

Unless Nigeria effectively addresses challenges such as foreign exchange risks, infrastructure deficit and insecurity, the chances of the country eventually experiencing a severe food crisis, should not be completely ruled out, analysts at United Capital Research have said.

The analysts, who stated this in  a note released over the weekend, however, stressed that “the probability of a disastrous food crisis in the short term is minimal.”

In the concluding statement of its Article IV Mission to Nigeria, released on November 18, the International Monetary Fund (IMF) predicted that the country might experience a food crisis citing the recent flooding and higher costs of farming inputs. The Fund’s position, was, however, rejected by the Federal Ministry of Agriculture and Rural Development, which emphasised that there was no need for panic among Nigerians as it had put in place several  measures to prevent a food crisis in the country.

But the United Capital Research analysts, in their note, pointed out that while measures introduced by both the fiscal and monetary authorities have helped to boost agricultural production, they do not address the key factors hindering the growth of the sector.

The analysts said: “Despite, legacy challenges, the Agricultural sector has continued to witness sustained growth. In Q2-2022, the sector grew by 1.2 per cent y/y and contributed 23.2 per cent of the nation’s GDP.

The growth in the sector has been driven by sustained improvement in food demand and various government interventions (such as tax and duty-free holidays for agricultural production and processing in Nigeria, interest-free  agricultural loans and zero-tariff rates on the importation of agrochemicals).

“In addition, the CBN has provided capital through various facilities such as the Anchor Borrowers Programme (disbursed N1.1tn) and Commercial Agriculture Credit Scheme (disbursed N745.3bn), among others.

The recent growth in the sector is threatened by the after-effects of the floods in major agricultural basins, which are estimated to result in an average decline of 11.5 per cent in production across commodities like maize, paddy rice, sorghum, and cocoa.

In addition to the recent flooding, rising costs to agriculturalists, exacerbated by a depreciating Naira, have had negative knock-on effects on food prices. “However, the Minister of Agriculture and Rural Development, Mahmood Abubakar, disclosed that the Federal Government received $249.0 million for flood impact mitigation and food production.

The FG aims to moderate prices through the strategic release of commodity reserves, distribution of early maturing seeds and subsidised agricultural inputs, among others. “The probability of a disastrous food crisis in the short term is minimal.

However, these stop gaps and initiatives by the government will be insufficient in the medium and long term if the foreign exchange risks, infrastructure deficit, insecurity, post-harvest losses and the absence of significant private investment in the sector are not addressed.”

 

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