Can Nigeria stem rising food prices?

Guardian Nigeria

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00:00Nigeria's food inflation rate rose 7.08% to 39.93% year-on-year on the back of higher

00:06energy and transportation costs as well as increases in the prices of staple foods.

00:10Kala Masha, Chief Executive Officer of Avankano, joins me now for more on Nigeria's journey

00:15to food security and the outlook for the grains market.

00:18Mr. Masha, thanks a lot for joining us on the show today.

00:20What's your assessment of the food inflation trajectory we've seen so far this year, the

00:24sort of print we have for the month of November, and the impact of government strategy to stem

00:29the rise in tide?

00:33Well, I think, you know, the unfortunate reality is that we have seen food inflation remain

00:41at these quite high levels for a while.

00:44I think fundamentally, unless we're able to attack the root cause of this high food

00:50inflation, which at the end of the day is driven by constraints on the supply side, I

00:55think we are it's going to be it's going to be a challenging next few months.

01:01And talking about how the outlook looks like right now, do you foresee any sort of

01:06moderation? Because we're looking at headline inflation and a forecast that we'll see

01:10moderation there. However, looking at the blend of fiscal and policy, monetary policy

01:15that might deter or slow down the sort of pace you might see here.

01:19But that's on one hand.

01:21Let's talk about the impact of some of the latest moves we've seen.

01:24For example, the African Development Bank has facilitated a 2.2 billion dollar facility

01:29for special agro industrial processing zones here in Nigeria.

01:33That's the phase two of the project.

01:35And we also have Nigeria and France also signed the 300 million euro agreement on food

01:40security. Let's talk about the scope, skill and the likely impact.

01:43Do you think these might have in the short term?

01:46Well, I think your investment in the sector in any form is direly needed, however, I

01:54think at the end of the day, the investment that you're outlining is going to actually

01:58have more of an impact on the demand side for agricultural produce, because it's focused

02:06on investing in agro processing and in terms of addressing some of the issues that we've

02:14And in terms of addressing the root cause, which is really a supply side constraint of

02:19a low productivity at the farmer level, primarily driven by a lack of financing to farmers

02:25to be able to purchase the quantity and quality of agricultural inputs they need to get

02:30higher productivity.

02:32That investment, be it as it is an important investment, is likely not going to have as

02:38big of an impact on the on the food inflation side.

02:41But now let's talk about the investments that we're seeing here right now.

02:44We also have the Greek minister talking about investment volumes, looking at genetically

02:49modified foods and how this is also critical to Nigeria's journey to food sufficiency.

02:54Do you buy into this idea around investments in GMOs?

03:02Well, I think fundamentally in investment in technology, if it's done responsibly and

03:08has good regulatory frameworks around it to ensure that we are managing any risks

03:14associated with that new technology, I think it's important that we adopt technology.

03:19This is actually quite frankly, it's new in Nigeria, but it's quite old technology.

03:25It's been used for over two decades in most parts of the world with relatively limited

03:31challenges. However, once again, I think it's great that these seeds

03:37will have the potential to increase productivity.

03:41However, the reality is that there's existing technology today that can get farmers, you

03:47know, four tons, five tons, six tons per hectare.

03:51However, yields are still at around two tons per hectare because, you know, to those,

03:57you know, when you have great seed, you need to complement that great seed with the

04:03right complements of soil health management products, weed management products, etc.,

04:09etc., which costs money, right?

04:10It costs the typical farmer about five hundred dollars per hectare for a full complement

04:15of technology to unlock the full productivity of these new seed varieties.

04:21So one without the other, you're likely not going to see a big boost in supply.

04:27But if you're able to complement them, then yes, you will see a big boost in supply and a

04:32knock on effect on fertilisation.

04:35And talking about the future as well now, how we see things panning forward, we have the

04:39latest figures from the FAO as well, talking about worsening food insecurity here in the

04:44country and the back of devastating floods and the impact so far.

04:48I'd like your take on that as well now, where we're also juxtaposing that to the overall

04:53strategy, the threats towards all year round farming.

04:56And when we are looking at grains, for example, powder rice and maize, wheat in terms of how

05:02the country is also positioning, what's your outlook for the market as a whole?

05:09Well, I think so to the point around all year farming, it's a huge opportunity.

05:16I think Nigeria today, roughly only about three percent of our land is irrigated and of

05:20that three percent, the reality is a good chunk of that irrigation may not be fully

05:26functioning. So it's a huge opportunity.

05:29If you look at countries like Thailand, as an example, if you look at their path towards

05:36becoming one of the world's largest exporter of agricultural produce today, over 35

05:39billion dollars, investment in irrigation was a critical piece.

05:44However, that came really as phase three in their investment strategy.

05:48First, they got farmers financing, then they got farmers very productive in the dry

05:56season. And then they started to invest in irrigation and finally in mechanisation and

06:02other things to improve labour productivity.

06:04So it's really a four step process.

06:06We're still in Nigeria in step one.

06:08And talking about the processes ahead to also have bigger impact here in the agric sector,

06:13let's talk about the sort of growth we saw in the third quarter of this year and

06:18juxtaposing that to the first half of this year.

06:20We've seen the agricultural sector growing just about a modest growth of 1.14% in the

06:27third quarter of this year.

06:28Looking into 2025 now, you've talked about the issues around FX volatility, the high

06:35cost of inputs here, fertiliser.

06:38These are still lingering challenges, insecurity.

06:41Now, in terms of the sort of print you expect for 2025, how do you see the agri sector

06:47positioning and having a larger volume of growth and contribution to the overall GDP?

06:55Well, I think the reality is today we're seeing interest rates somewhere between 30

07:01and 40 percent. You already had a sector that was starved of financing and financing

07:07has been constrained and what limited financing that's available is quite expensive.

07:12So what you've seen is most farmers as a coping mechanism are actually switching to

07:19crops that are less expensive to grow, that have lower input requirements and so on and

07:24so forth, which is actually contributing to this high inflation.

07:30The reality is that the main staples, rice, maize, so on and so forth, those crops

07:35require significant investments in fertilisers and other chemicals and farmers just

07:40don't have the capital to do that.

07:42So unless we're able to come up with solutions to to get financing quickly and at

07:50scale in a sustainable manner, it is going to be a challenging 2025.

07:58And lastly, now we're still looking at price movements as well now for you as we are

08:03wrapping up the year 2024 and looking into 2025.

08:07We have talked about wheat, paddy rice and maize for you.

08:11What sort of movements do you see here and how can Nigeria also cash in on all of this,

08:15especially on the back of the African continental free trade area, increasing the sort

08:20of trade volumes you see along the west of the continent as well now?

08:24Do you think Nigeria's position is right to cash in on all of the movements we have

08:29here?

08:30Well, I think, you know, if you look at the reality, you know, some of the you know,

08:35today we do have a significant food inflation challenge, which which can, if not

08:39checked, lead to a significant food security charge.

08:42So if you look at some of the steps that have been taken to try to constrain demand, so

08:47you're going to attack inflation by either increasing supply or reducing demand.

08:51And I think some of the efforts have been around on the demand side by limiting exports

08:57and so on and so forth. I think, you know, important in the short run to to to to

09:02manage the risk of food security, food insecurity.

09:04However, as a long term strategy, really constraining demand is can be can be actually

09:11counterproductive because it's really that demand that you get by exporting into other

09:17parts. You know, Nigeria has a huge opportunity with 60 million people market just to

09:23north of us. That's land loss that we can really dramatically serve.

09:28And so so that's an opportunity we need to harness.

09:31But we can do that once we get the supply up through dramatic increases in

09:36productivity.

09:37Well, Mr. Masha, we'll leave the conversation here for now.

09:39Thank you so much for your time on the show today.

09:41That was Kola Masha, the chief executive officer of Babankana.

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