We began releasing an annual commodity review in 2020 to provide a trusted source of information for participants in the commodities market in Nigeria. Our annual commodity review report for 2019 allowed us look at the data points that we collected in the course of our work through the year, and arrange them in a way that helped the market understand the price dynamics in the commodities market and make informed decisions. Our new report – the 2021 Commodities Outlook – features the AFEX 2020 Commodities Review and 2021 Outlook all in one.
AFEX 2020 Commodities Review
The outbreak of the novel coronavirus, COVID-19, in 2020 brought about some unprecedented shocks to the global economy. The effect of the pandemic was unique given its adverse impact on supply chains and global demand of commodities. The global commodities market saw prices of some global commodities like oil and metals plunge in the first half of the year before experiencing a rebound in the second half of the year.
For Brent crude oil, low demand amid supply glut saw prices slump 71 percent in the first four months of the year to $19.33 per barrel. However, price almost doubled since April’s 5-year low, supported by sharp oil supply cuts by OPEC+ and the gradual easing of lockdown measures across economies, reviving demand. The rebound in crude oil prices drove recoveries seen in Energy prices. However, the recovery in prices stalled in September amid renewed outbreaks of COVID-19 in some key economies.
For metals, especially copper, aluminum and iron ore, net gains in 2020 surpassed levels in 2019 driven by supply disruptions major producing countries and China’s increased trade activities and metal demands for bridges, roads etc., spurred by huge stimulus packages aimed at spurring a V-shaped recovery for China’s manufacturing sector.
For non-Energy commodities especially agricultural commodities, prices modestly trended downwards on lower demand for agricultural commodities. In the first seven months in 2020, global prices of agricultural commodities, especially Cocoa, Maize and Soybean saw prices plummet. Cocoa recorded the biggest decline by 19 percent. Maize by 11 percent and Soybean fell marginally by 2 percent according to World Bank Commodity Price Data (The Pink Sheet).
The Nigerian commodities space was likewise not immune to the ravaging impact of the COVID-19 pandemic amid some fiscal policies geared at boosting growth in the sector ahead of the commencement of the African Continental Free Trade Area agreement. Although resilient when compared with some other sectors of the economy, the agriculture sector suffered decelerated growths in the second and third quarters of the year 2020. Business activity growth slowed by 1.58 percent in Q2 as against 2.20 percent in Q1 and slowed further by 1.39 percent in Q3, respectively.
The outbreak of the novel virus played an especially important role in determining prices of commodities in the domestic market in 2020. The disruption in supply chain activities coupled with the effect of the border closure policy of the Federal Government on prices saw prices of major food items surge during the period.
Although we expected more output across crops in 2019/20 wet season, our crop production survey revealed access to finance as a key factor affecting productivity for farmers despite increase in private organizations and other financial institutions’ providing access to finance for farmers. Also, access to inputs (fertilizers, seeds and CPPs), although critical, was greatly limited. We believe this provides a guide to policy direction and intervention in the Nigeria agriculture space. Meanwhile, land use, fertilizer usage and weather conditions were significant in determining output in 2020 across commodities surveyed as detailed in this report.
Analysis of farmers responses captured in the survey informed our estimation for at least 4 percent increase in output in 2019/20 wet season period across surveyed commodities. In 2021, we expect the global economy on the path of recovery given the announcement, approval, and distribution of COVID-19 vaccines and positive impact on the global commodities market in terms o higher prices. Also, the Joe Biden led administration looks positive for global trade.
Outlook for domestic commodities varies across crops but will be largely dependent on key systemic factors like outcomes of the COVID-19 outbreak, distribution of vaccines, fiscal and monetary policies and AfCFTA.
Access the full report Here.