AFEX, Nigeria’s commodities exchange, has projected that the year 2022 will continue to witness inflationary pressures which will drive up the prices of commodities during the year.
According to its ‘Annual Commodities Outlook report for 2022,’ the combination of rising inflationary pressures amid the expectant end of petroleum subsidy would increase the price of grains during the new 2021/2022 trading season.
In addition, it added that a possibility of naira devaluation in the parallel market and increased demand pressure on commodities in the country would push up the price of commodities during the period.
What they are saying
Speaking at the launch of the report, Oluwafunto Olasemo, Vice President, Financial Market at AFEX explained that the primary objective of the report is to close the data gap in Africa’s commodity sector and to give solid market intelligence to major stakeholders in the commodities value chain.
Notably, the report pointed to the fact that the Nigerian agriculture sector expanded by an average of 1.60% in the first three quarters of the year, but the expansion was lower than the 1.72% recorded in 2020.
In its outlook for the year 2022, however, it said that the new Omicron variant will have negligible impact on Nigeria’s commodity supply chain, also pointing to the fact that prices across commodities started the current season at a higher minimum base price than the previous season, owing to increased demand that has surpassed supply levels.
Similarly, the report shows that the naira’s depreciation against the US dollar and the French CFA has raised the demand for most staple commodities, particularly sorghum which will help to boost export commodities including cocoa, sesame, ginger, and cashew.
Commenting on the report, David Ibidapo, senior research analyst at AFEX said that in 2022, there would be a rally in some of these commodities driven by heightened demand and also a relatively bleak outlook for the FX market coupled with the increasing cross border trade in the country pressuring the currently available supply of these commodities.
He said, “In the global space especially, the first quarter for me would be the Russia-Ukrain crises, which if it worsens, would have an effect on energy prices and fertilizer prices and ultimately on input prices and the cost of input and production this year. I think it’s an upward trend for commodity prices.
“For investors, we believe this is one of the best times to come into the market. We believe the commodity market provides a safe entry for currency valuation and there is a strong correlation in that state and also commodity has a hedge against inflation as seen in the last two to three years.
What you should know about AFEX
On track to impact one million producers; providing services in productivity and value capture and access to finance and markets, AFEX, since its inception in 2014 says it has developed and deployed a commodities exchange model for the West African market.
Its infrastructure and platform investments work to unlock capital to power a trust economy in Africa’s commodities markets whilst driving financial inclusion for rural communities, developing technology for data collection and market access, and enabling capital deployment.