AFEX, a commodity trade solutions company, has recommended measures for the federal government to address price volatility in the food sector to stabilize the economy.
The AFEX 2024 wet season report had projected a 13 per cent decline in the production of some staple foods, which could drive up prices in 2025.
The report noted that Nigeria’s food system is under immense pressure, facing a combination of factors such as insecurity, macroeconomic instability, and the escalating impacts of climate change.
Earlier, the Cadre Harmonisé Report for October projected that at least 33.1 million people in 26 states and the FCT would face a food and nutrition crisis between June and August 2025.
AFEX noted that price volatility is prominent in the agricultural sector, where unexpected production shortfalls (supply shocks), pests and diseases, geopolitical crises, concentrated production in specific regions, trade restrictions, exchange rates, global macroeconomic conditions, and climate change contribute to food insecurity and price instability.
As one of the countries most vulnerable to climate change, Nigeria frequently experiences natural hazards, including floods and droughts in both its northern and southern regions, which further strain its agricultural sector.
This vulnerability, AFEX said, is reflected in Nigeria’s low ranking of 152nd out of 187 countries on the Notre Dame Global Adaptation Initiative Index, which measures susceptibility to climate change.
“Excessive price volatility has severe consequences, particularly regarding hunger, malnutrition, and poverty, which, in turn, escalate food insecurity.”
“The broader economic effects are also significant, influencing fluctuations in exchange rates, capital flows, terms of trade, and revenue streams. These disruptions can hinder agricultural commodities markets, where farmers, agribusinesses, and consumers are at high risk in today’s economy.”
“These challenges have led to food scarcity, malnutrition, health crises—especially among children—and rising food prices, worsening the country’s food insecurity,” AFEX said.
AFEX emphasized the need to address these issues to manage commodity price volatility effectively.
Given Nigeria’s current food insecurity and the likelihood of global shocks in the coming years, it is crucial to adopt strategies that mitigate these impacts, it said.
The report outlined solutions and urged the federal government to implement the “Derivatives, Commodity Exchanges, and Commodities-Linked Bonds” approach.
On derivatives, the report stated, “Financial contracts whose value is derived from the performance of an underlying asset can help Nigeria manage the risks associated with commodity price volatility. These contracts involve an agreement between two entities to buy or sell the underlying assets at a specific date and price. Derivative contracts include forwards, futures, options, and swaps.”