How will commodity prices swing in 2024?

Nigeria is bracing for a surge in commodity prices in 2024, with expectations of a decline in production and increasing demand for processing and exports. Abdulkadir Ajia, an Associate in Logistics and Supply Chain at Afex, highlighted the factors contributing to this projection in a recent interview with CNBC Africa. Ajia pointed out that climate change, high costs of inputs such as fertilizers, post-harvest losses, and insecurity are key drivers of reduced agricultural output in Nigeria. The irregular rainfall patterns and skyrocketing prices of fertilizers have made it challenging for farmers to achieve optimal harvests. Additionally, the ongoing security concerns in regions like Zanfara and the northwest are hindering farming activities, further exacerbating the food production challenges in the country. Ajia emphasized that the mismatch between demand and supply is likely to push commodity prices significantly higher in the near future. To address these challenges and support the agricultural sector, Ajia proposed several solutions. One of the initiatives currently underway is a government-subsidized program in northern states like Jigawa and Kano, providing subsidies on inputs like fertilizers to encourage farmers to engage in dry season farming. While such programs aim to alleviate financial burdens on farmers, Ajia stressed that addressing security concerns is paramount to ensure that farmers can safely cultivate their land and utilize the provided resources effectively. Moreover, Ajia highlighted the importance of operational refineries to support local production and reduce transportation costs. The recent development of the Dangote refinery and its anticipated impact on diesel and aviation fuel production could potentially ease transportation challenges in the agricultural supply chain. Looking ahead, Ajia discussed the federal government's plan to allocate 200 billion Naira for rice, maize, wheat, and cassava cultivation. He expressed optimism about the potential impact of this investment on enhancing food production and stabilizing prices for these staple commodities. Ajia underscored the significance of these crops in Nigerian households and projected that increased production could lead to improved accessibility and affordability for consumers. Despite current concerns about rising prices and food insecurity, Ajia urged patience and highlighted the need to give policy interventions time to yield results. He suggested a six-month timeframe to assess the effectiveness of government initiatives and monitor changes in commodity prices. Overall, the discussions with Ajia shed light on the complexities facing Nigeria's agricultural sector and the critical steps required to ensure sustainable growth and food security in the country.