Agric Commodities in Nigeria Showed Resilience Amidst Recession, COVID-19 - Ayodeji Balogun


Wednesday, January 27, 2021 / 4:29PM / Nifemi Taiyese for WebTV / Header Image Credit: WebTV

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Agriculture commodities despite experiencing a dip in activities did not fall as steeply as other asset classes and witnessed a faster recovery amidst the recession and COVID-19 pandemic.


Mr. Ayodeji Balogun, CEO, AFEX Nigeria disclosed this at the presentation of the "AFEX 2021 Commodities Outlook" organized to provide insight on the direction of the commodities market to stakeholders. 


Continuing his review, Balogun said that the current policy stance of the government would sustain increased production and encourage growth in the agricultural sector in the short to medium-term.


"Nigeria's easing of restrictions on some borders across the country has had a significant impact on cross border trades," Balogun said.


The CEO, AFEX, explained the contrast in the behavior between gold and crude oil, post-pandemic, noting that there were capital reversals between the two asset classes. He believed the success of a COVID-19 vaccine would guarantee a rally of crude oil prices.


He informed stakeholders that Coffee and Cocoa were affected by the pandemic and lockdowns across countries. "People believe that the upswing in cocoa prices are arbitrary and traders are currently trading at a discount to international prices".


Balogun mentioned the fact that food prices continue to rise because many countries are imprisoned in protectionist mindsets as they strengthen their strategic reserves. From available data, analysts note that the agricultural sector's contribution to GDP in Q3 was 31%, and was primarily driven by crop production. The data suggests that between 27% and 28% of GDP revolves around the success of farmers cultivating on their farmland and includes factors such as climate-induced risk, "availability of fertilizers, and quality of seeds," Balogun said.

From a recent survey which was a result of AFEX interviewing 10,000 farmers, the following trends and developments were highlighted:

  • Increased land use contributes to the volume of the output.
  • More fertilizer usage to yield more productivity.
  • Allocation of land between smallholder farmers and larger farmers.


Balogun's presentation focused on a review of 2020 global commodities positions, the Nigerian commodities landscape-the state of play, and the 2021 commodities outlook (see chart 1 below showing trends in 2020 commodity prices).

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Chart 1: M-0-M Price Movement for Maize, Cocoa, and Ginger(Jan- Dec) 

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 Source: AFEX, Proshare Research


Balogun observed that the current domestic inflation rate has been caused by the expansionary stance of monetary policy centred on getting Nigeria out of a COVID-19-induced recession. He equally argued that increase spending by the private sector and the fiscal and monetary policy stand of driving funds to the bottom of the population pyramid increased aggregate consumption.


According to him, factors that would shape the commodities market in 2021 include:

  • Exchange rate
  • Cross border and trade policies
  • CBN dry season cultivation of maize and rice
  • Cash liquidity and availability of alternative investment instruments.


Balogun said AFEX supports a market-led approach to achieving a competitive commodities market. He also spoke on flooding and noted that due to global warming ocean, sea, and river water levels were rising and this was posing a palpable threat to arable land farming, he said AFEX had designed climate-based insurance products that cover nature-induced losses farmers may incur, he, however, advocated for the effective use of natural resources sustainably.

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