AFEX expects pressure on food prices to continue in 2022

AFEX Commodities Exchange, a key player in Nigeria's agricultural sector, has projected that the pressure on food prices in the country is expected to persist through 2022. The exchange attributes this forecast to a combination of factors including a deficit in the production of commodities and escalating demand. Akinyinka Akintunde, the Chief Operating Officer at AFEX, shared insights on the challenges facing the industry and the opportunities for investment during an interview with CNBC Africa. Akintunde highlighted that the imbalance between the production and demand for commodities is a significant driver behind the elevated food prices in Nigeria. He emphasized that the production growth rate is lagging behind the increasing demand, leading to heightened pressure on harvested commodities and subsequently driving up prices. In 2021, there was a notable spike in commodity prices, and this trend is expected to continue into the new year. Large-scale manufacturing companies have been stockpiling commodities to gain a competitive edge, further straining the existing supply constraints. Despite efforts by various stakeholders, including the government, to boost production, the impact is anticipated to be more long-term than immediate. The lack of sufficient storage infrastructure exacerbates the situation, compounding the pressure on food prices. Akintunde pointed out that investments in storage infrastructure are crucial for enhancing the country's food security and stabilizing prices over the long term. While this may require significant capital, there are other investment opportunities across the agricultural value chain that present more immediate benefits. One such opportunity lies in improving farmers' access to inputs and financing. Many farmers currently face challenges obtaining timely access to inputs, hindering their production capacity. Addressing this bottleneck through improved distribution networks and accessible financing can help enhance production levels and mitigate price spikes. Financing costs, particularly in light of rising fuel prices, directly impact agricultural operations. Lowering financing costs for farmers can help offset the effects of price hikes and ensure food remains affordable for consumers. AFEX Commodities Exchange is set to engage with around 200,000 farmers in 2022 to provide them with essential inputs to boost production. The exchange is also focusing on facilitating access to financing for both producers and consumers to reduce production costs and stabilize food prices. By aligning these efforts, AFEX aims to contribute to a more predictable and sustainable agricultural ecosystem in Nigeria. Additionally, Akintunde addressed the prospects for agricultural exports in Nigeria. While there is potential for value addition and processing of goods for export, challenges such as inadequate infrastructure and high costs hinder this progress. In the short to medium term, exports of basic commodities are expected to continue, but there is a growing trend of local players processing goods for domestic consumption and export. The sector requires patient capital and sustained investments to enhance its capacity for value addition and processing. Overall, the focus on financing, both short-term working capital and long-term infrastructure, is crucial to bridging the gaps in the agricultural sector and fostering growth and stability.