FAO GLOBAL INFORMATION AND EARLY WARNING SYSTEM ON FOOD AND AGRICULTURE
WORLD FOOD PROGRAMME

S P E C I A L   R E P O R T

MARKETS, PRICES, FOOD SITUATION AND PROSPECTS FOR
BENIN, NIGER AND NIGERIA

Based on a CILSS/FAO/FEWSNET/SIMA/WFP Joint Market
Assessment Mission to Benin, Niger and Nigeria

9 April 2008

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Summary

A joint CILSS/FAO/FEWSNET/SIMA/WFP Market Assessment Mission visited key cereal markets in Benin, Niger and Nigeria from 13 February- 9 March to assess the current stock and price levels as well as trade flows within and between countries, and analyze the food security implications in more vulnerable countries.

Food production, stocks and prices

Agricultural production was affected in all three countries in 2007 by an early cessation of rains in September. This was compounded in Nigeria by a lack of access to fertiliser. While the overall impact of irregular rains on production was limited in Benin and Niger, the field evaluation conducted by several Nigerian Government agencies indicated a 20 percent decline in sorghum production. Predicted losses also include 10 percent for maize, 10 percent for rice, 10 percent for cowpea and 10 percent for groundnut. Crops that are grown nationwide, concentrated in the Middle Belt and Southern Zones of the country, and less dependent on fertilizer, such as cassava, cocoyams, yams and soybeans, were not seriously affected.

As a result of reduced 2007-08 cereal output in Nigeria and other parts of the subregion, traders’ stocks are low in all three countries and cereal prices have risen steeply. In Dawanau International Grains Market in Kano (Nigeria), the biggest in the country, the price of sorghum, the most traded cereal in Nigeria jumped from NGN 2750/100 kg bag in September 2007 to NGN 5300/100 kg bag in February 2008, an increase of 92 percent in 5 months. Over the same period millet prices increased by 116 percent while the maize price in February 2008 was 96 percent above its level in August 2007. The same trend has been observed on all markets surveyed in Benin, Niger and Nigeria. For maize for example, price increases in 2008 compared to 2007 range from 3 percent in Malanville, northern Benin, to 165 percent in Minna, north central Nigeria.

Whereas in Benin and Niger demand for cereal is driven mainly by households’ effective demand and consumption, in Nigeria the demand by poultry, food processing industries and breweries is high. In the southern and north central parts of Nigeria, demand for maize and sorghum from processing companies, poultry feed companies, and breweries was reported to be very high from October to December. Demand for maize by producers of animal feed was particularly high, pointing to a significant recovery in the poultry industry.

Role of the international commodity market

Although imports of cereals by Nigeria are forecast to remain above 4.5 million tonnes in 2008 (mostly wheat and rice), this represents only 15 percent of the country’s total domestic cereal utilization. The cereal import dependence rate is even lower for Benin and Niger, around 5 percent. Moreover, both the CFA1 (Benin and Niger) and the Naira (Nigeria) have appreciated significantly in recent years, and domestic oil is subsidised in Nigeria, reducing the transmission of high international prices to the domestic economies. The impact of high international wheat, maize and rice prices on the domestic markets of these countries is, therefore, limited, although some substitution may have occurred. Domestic cereal prices are driven mainly by regional supply and demand, themselves determined:

Trans-border trade and prospects

Food markets are strongly integrated in West Africa with price levels in several countries determined to a large extent by developments in some key regional markets. In the eastern part of the subregion, a high degree of integration exists between Niger, Benin and Nigeria. In a normal year, Nigeria and Benin export cereal to neighbouring Niger’s deficit areas. In years of low output, however, Benin and Nigeria utilise a larger share of their domestic production and sometimes import grains from Niger, exacerbating the deficit in the latter country. Parity prices of imports from regional markets are, therefore, a key determinant of food supply in all countries.

Although prices increased significantly across the subregion, this varied from market to market and from country to country, leading to significant changes in trade patterns. While millet prices have increased in Matameye and Maradi border markets (in Niger) by 23 percent and 32 percent respectively in February/March 2008 compared to the same period in 2007, the price of the same commodity has risen by 78 percent in Dawanu regional market in northern Nigeria leading to unfavourable import parity prices in Niger. Moreover, much higher prices in central and southern Nigeria meant that southward trade within Nigeria became more attractive, limiting trade flows between Niger and Nigeria. Imports of cereals continue to take place from northern Benin to south-western Niger, reflecting lower grain prices in northern Benin. As a result, the central and eastern parts of Niger, which depend more on imports from Nigeria, are hardest hit by grains shortfall and high prices. The lowest cereal prices in Niger are currently recorded in Gaya region (West), while eastern Zinder and Diffa regions experience the highest prices.

Food security implications and recommendations

In northern Nigeria, some farming households which normally produce enough food may face shortages before the next harvest due to poor rainfall. With high prices due to reduced supply, access to food by vulnerable people, notably in the Far North, is expected to be difficult.

In Niger, although livestock prices have remained relatively high, the central and eastern parts of the country may experience acute food insecurity if the upward trend in food price continues. From April on, the eastern regions will be most affected, unless targeted and timely actions are taken. In view of the current food supply situation and unfavourable prospects for imports from Nigeria, the Mission believes that the situation is both serious and likely to deteriorate in these parts of Niger. Therefore,

1. Introduction

Markets are highly integrated in West Africa and price changes due to supply or demand shocks are easily transmitted among neighbouring countries. Especially, any reduction in Nigeria’s cereal production, by far the largest economy and agricultural sector in the region, usually pushes up regional cereal prices, seriously affecting food security in neighbouring countries.

In 2007 cereal production declined significantly in northern Nigeria due to several factors including late and poorly distributed rains as well as inadequate supply and high prices of fertilizers. Ghana also experienced significant crop losses due to a long dry spell followed by floods during the 2007 cropping season. In the Sahel region, although cereal output was estimated to be above average in most countries, localised crop losses due to floods or irregular rains affected farmers’ livelihoods in several areas.

The market effects of these weather-induced production shocks have been exacerbated in 2007-08 by the current commodity price rise on the international market, leading to a tight food market in the subregion. Right from the time of harvest, in September 2007, significant increase in prices of grains was already observed across the subregion, raising serious concerns over the food security outlook. Consequently, a joint CILSS/FAO/FewsNet/SIMA/WFP Food Market Assessment Mission visited key cereal markets in several West African countries from 14 February- 9 March to assess the current stock and price levels as well as trade flows within and between countries in order to analyze the food security implications in more vulnerable countries.

The mission was split into three teams. The first team covered northern Benin and Niger as well as cross-border markets in Nigeria. The second team covered mainly the maize, millet and sorghum belt of Nigeria comprising North-Central States, Kaduna and Kano; as well as some markets in the Southern part of the country where there is high demand for cereals and cowpea. The third team assessed market situation in Mali and Burkina Faso.

In each country, the Mission visited major cereals markets where discussions were held with key stakeholders including traders, producers and consumers in order to collect relevant data and information on price levels, stocks position, demand and supply situations and trade flows. The Mission also met with several Government officials and local representatives of Agriculture, Livestock and Food security. This report presents a summary of the findings of the assessment teams that visited northern Benin, Niger and Nigeria, with a focus on prospects for cross-border trade to Niger, the most vulnerable country.

2. Food production in 2007

Agricultural production was affected in all three countries in 2007 by an early cessation of rains in September, which was compounded in Nigeria by the lack of access to fertiliser.

- In Benin in spite of the impact of irregular rains on yield in parts of the country, aggregate cereal production in 2007 has been estimated at a record 1.2 million tonnes, some 14 percent above average.

- In Niger an early end of the rains in September 2007 affected cereal crops in several areas but the overall impact was limited. Following release of the final 2007 cereal production figures, the aggregate cereal production is estimated at some 3.778 million tonnes, which is lower than the bumper crop of 2006 but some 7 percent higher than the average for the previous five years.

- In Nigeria, production was affected in 2007 by three main factors:

First, several States in the northern part of the country witnessed an unfavourable pattern of rainfall characterized by prolonged dry spells followed by an abrupt cessation of rains (notably in the far North) during the first week of September when most of the crops, maize and sorghum in particular, were yet to mature for harvest. Torrential rains and flooding of farmlands particularly in the North Central Zone also resulted in localized crop losses. The productions of cereal crops and grain legumes (sorghum, millet, maize, rice, groundnuts and cowpea) which are predominantly cultivated in these parts of the country have been most affected.

Secondly, productivity of cereal crops continues to be negatively affected in Nigeria by inadequate supply of fertilizers and improved seeds, as well as the poor timeliness of supply and distribution of agricultural inputs. Distribution of subsidised fertilizer by federal and state governments covers less than 30 percent of requirements. This usually disrupts the market, creates scarcity and leads to high prices. The problem has been compounded last year by higher international prices of that input. Prices of Urea and NPK went as high as NGN 3500 and NGN 3000 per 50 kg bag in 2007 respectively, and by February 2008 the average price of these fertilizers got up to NGN 5000 per 50 kg bag. Consequently, production of the highly fertilizer sensitive crops such as maize, rice and sorghum was adversely affected.

Third, the devastating effect of avian influenza on the poultry industry during 2006 led to a drastic fall in demand for poultry products which in turn prompted a decline in demand for maize, which usually constitutes some 80 percent of poultry feeds. This together with good cereal production in neighbouring Sahel countries meant that cereal price remained low through September 2007. Although this did not result in lower plantings of maize, input use may have been affected.

As a result of these negative developments, 2007 food production in Nigeria was significantly reduced. The joint field evaluation survey conducted by the National Agricultural Extension and Research Liaison Services (NAERLS), the National Food Reserve Agency (NFRA) and the Federal Department of Agriculture in 2007 and subsequent Field reports received by NAERLS in December 2007 indicated a 20 percent decline in sorghum production. Predicted losses also include 10 percent for maize, 10 percent for rice, 10 percent for cowpea and 10 percent for groundnut. Crops that are grown nationwide, concentrated in the Middle Belt and Southern Zones of the country, and less dependent on fertilizer such as cassava, cocoyams, yams and soybeans, were not seriously affected.

3. Stock levels and food supply situation

As a result of the reduced cereal output in Nigeria and other parts of the subregion, traders’ stocks are low in all three countries.

- Maize: Although production of maize was adequate in Benin, the quantity produced in that country is not enough to offset the large deficit experienced in Nigeria. This has led to very low stock of the commodity in Niger and in Nigeria. In the latter country, stocks of maize are particularly low, estimated at about 50 percent of average in Pushit (Jos), Lafia (Nassarawa) and Mile 12 ( Lagos). Stocks are relatively low in Mina and Guiya. Available stocks of maize will not be sufficient to meet the strong demand from breweries, processing companies, feed companies and households.

- Millet: Millet production was satisfactory in both Niger and Nigeria2 because it is more drought resistant and also early maturing. However, in Niger the Mission observed very low stock level in the markets in Maradi, Zinder, Gaya and other major producing areas of the country. Significant stock could be found only in some rural markets in Dakoro and Tanout but not enough to offset the deficit at national level. In Nigeria the stock of millet in the markets was also lower than usual except in Gombe, Borno and Nassarawa where adequate stocks of millet were found. Stocks were very low in border markets in Mai Gatari, Ilela, Mai Adua and Jibia.

- Sorghum: Sorghum production suffered in all three countries although a good harvest was gathered in a few areas including parts of northern Benin and Borno State in Nigeria, especially areas within Lake Chad Basin. As a result, stock levels were extremely low in most of the markets visited in Niger. In spite of popular preference for millet, the acute sorghum shortfall may affect calorie intake of some consumer groups.

In Nigeria the stock of sorghum was also low, but not as low as for maize. Adequate stocks were found in Gombe and Dawanu International market in Kano. Although stocks of sorghum and millet are relatively higher than for maize in Nigeria, shift from maize to sorghum and millet for consumption and processing purposes will accelerate the depletion of the existing stocks and result in higher prices of these commodities. Stock of sorghum in Benin was adequate but lower than the level of last season.

- Cowpea: There is good stock of cowpea in all three countries due mostly to huge stock from the previous years harvest. In Nigeria, huge stock of the commodity was observed in Kano, Gombe and Borno States.

In addition to trader’s stocks observed in markets, substantial grains stock was reported outside the market as follows:

4. Demand and prices

Whereas in Benin and Niger demand for cereal is driven mainly by households’ effective demand and consumption, in Nigeria the demand by poultry, food processing industries and breweries is high. As a result, the cereal sector is becoming increasingly commercialized in the latter country leading to the establishment of big grain markets in different areas, which provide easy links between millions of scattered and remotely located smallholder farms where the grains are produced and buyers within and outside Nigeria. Figure 1 shows the average monthly grain prices between 2003 and 2008 in Dawanu International Grains Market in Kano, the biggest in the country. Prices of coarse grains and cowpea have risen significantly since October 2007 at the harvest period. The price of sorghum, the most traded cereal in Nigeria jumped from NGN 2750/100 kg bag in September 2007 to NGN 5300/100 kg bag in February 2800, an increase of 92 percent in 5 months. Over the same period millet price increased by 116 percent while maize price in February 2008 is 96 percent above its level in August 2007.

Even in real terms price changes are substantial. Between August 2007 and January 2008, real prices of maize and sorghum jumped by over 80 percent and 54 percent respectively. As a result of these developments, average inflation in Nigeria, which is estimated to have fallen to 5.4 percent in 2007 due to lower food prices and improved monetary policy, has started picking up. The year-on-year rate of inflation was estimated at 8.6 percent in January 2008, driven mainly by price increases in the food sector where year on year rate of inflation jumped from -0.10 percent in January 2007 to 12.60 percent in January 2008. Food price is a major factor in the rate of inflation, with a very high weight in the consumer price index across the subregion.

The same trend has been observed on all markets surveyed in Benin, Niger and Nigeria. For maize, price increases in 2008 compared to 2007 range from 3 percent in Malanville, northern Benin to 165 percent in Minna, north central Nigeria (see figure 2). Some other interesting patterns emerge from figure2. Markets located in northern Benin (Malanville, Nikki) experienced the lowest price increase while the strongest surge in price occurred in the southern and north central parts of Nigeria (Minna, Abuja, Kaduna, etc). Maize price rose also steeply in Niger major markets of Maradi and Zinder but not as much as in the southern and north central parts of Nigeria where demand for maize and sorghum from processing companies, poultry feed companies, and breweries was reported to be very high from October to December. Demand for maize by producers of animal feed was particularly high, pointing to a significant recovery in the poultry industry. From January to February 2008, both sale and demand of maize, sorghum, millet and cowpea are lower than the previous months due to reduced stocks and high prices.

The price differential between Niger, northern Nigeria and Southern Nigeria, combined with higher effective demand in the latter regions, means that more cereal is moving in the southward direction from the Central North and Far North than toward Niger. This explains partly why the highest prices in Niger are recorded in the Centre and East of the country which usually trade with northern Nigeria. The lowest prices are recorded in the West with trade ties with Benin.

5. What are the main causes of the high food prices in the subregion  What is the role of the international commodity market

In Nigeria, cereal imports have trended upwards in recent years, due mainly to high urban population growth, changing consumption patterns, increased feed use in the rapidly growing poultry sector and the continued expansion of the country’s milling capacity. In spite of the tightening of controls on illegal rice and wheat inflows, the negative effects of the avian flu epidemic on the poultry sector and the high level of cereal prices on the international market, imports of cereals are forecast to remain above 4.5 million tonnes in 2008, mostly wheat and rice. Yet, this represents only 15 percent of the country’s total domestic cereal utilization. The cereal import dependence rate is even lower for Benin and Niger, around 5 percent. Moreover, both the CFA3 (Benin and Niger) and the Naira (Nigeria) have appreciated significantly in recent years, and domestic oil is subsidised in Nigeria, reducing the transmission of high international prices to the domestic economies. The impact of high international wheat, maize and rice prices on the domestic markets of these countries is, therefore, limited, although some substitution may have occurred. Domestic cereal prices are driven mainly by regional supply and demand, themselves determined:

6. Trans-border trade and prospects

Food markets are strongly integrated in West Africa with price levels in several countries determined to a large extent by developments in some key regional markets. In the eastern part of the subregion, a high degree of integration exists between Niger, Benin and Nigeria. In a normal year, Nigeria and Benin export cereal to neighbouring Niger’s deficit areas. Malanville market in Benin along with Jibia, Illela and Mai Adua markets in Nigeria significantly influence over 75 percent of the markets in Niger according to a recent study (Akker, 20074). In years of low output, however, Benin and Nigeria utilise a larger share of their domestic production and sometimes import grains from Niger, exacerbating the deficit in the latter country. Parity prices of imports from regional markets are therefore a key determinant of food supply in the different countries. In 2007 and early 2008 prices varied across markets in Benin, Niger and Nigeria as follows:

In an effort to restrain the continued increase in food prices and mitigate the impact on consumers, the Federal Government of Nigeria has decided to release grains from its Strategic Grain Reserve (SGR) silos to markets across the country. About 80 000 tonnes are anticipated to be sold by the federal government over the next three months (April-June). The operation is expected to target the northern states and populations hardest hit by crop losses as well as poultry farmers and feed millers. Several State Governments are expected to do the same. The situation of cross-border trade in the coming months will depend on price behaviour after release of cereals from the SGR stocks to the market. If, as expected, cereal prices in Nigeria decline, export to Niger would resume.

7. Food security implications and recommendations

In northern Nigeria, some farming households which normally produce enough food may face shortages before the next harvest due to poor rainfall. With high prices due to reduced supply, access to food by vulnerable people, notably in the Far North, is expected to be difficult. However, the production of root and tuber was not seriously affected which allows for some substitution. Moreover, if the Government price stabilisation intervention targets the northern states and populations most hit by crop losses and if prices decline as expected, the food security impact of the food shortage and high prices should be limited.

In Niger, although livestock prices have remained relatively high, the central and eastern parts of the country may experience acute food insecurity if the upward trend in food price continues. From April on, the eastern regions will be most affected, unless targeted and timely actions are taken. In view of the current food supply situation and unfavourable prospects for imports from Nigeria, the Mission believes that the situation is both serious and likely to deteriorate in these parts of Niger. Therefore,

Annex

Cereal prices in key markets in Benin, Niger and Nigeria


 

This report has been prepared by Jean Senahoun under the responsibility of the FAO Secretariat with information from official and other sources based on a CILSS/FAO/FEWSNET/SIMA/WFP Joint Market Assessment with the participation of the following: Maty Ba Diao (CILSS), Jean Senahoun (FAO), Ibrahim Laouali (FEWSNET Niger), Tahirou Yahaye (FEWSNET Nigeria), Lawan Tahirou (WFP Niger), Laouali Sani Addoh (SIMA Niger), Goye (NAMIS Nigeria) and Alphonsus Onwuemeka (FAO Nigeria). Since conditions may change rapidly, please contact the undersigned for further information if required.

Henri Josserand
Chief, GIEWS, FAO
Fax: 0039-06-5705-4495
E-mail: giews1@fao.org

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1. The CFA is pegged to the euro (655.955 CFA = 1 euro) and the euro has appreciated dramatically against the dollar in recent years.

2. Benin’s production of millet is limited, estimated at about 45 000 tonnes a year.

3. The CFA is pegged to the euro (655.955 CFA = 1 euro) and the euro has appreciated dramatically against the dollar in recent years.

4. Aker, Jenny. 2007. Monitoring regional markets for early warning of food crises in western Africa. Paper presented at a workshop organized by FAO in Rome in December 2007.