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00:00Nigeria's food inflation rate rose 7.08% to 39.93% year-on-year on the back of higher
00:06energy and transportation costs as well as increases in the prices of staple foods.
00:10Kala Masha, Chief Executive Officer of Avankano, joins me now for more on Nigeria's journey
00:15to food security and the outlook for the grains market.
00:18Mr. Masha, thanks a lot for joining us on the show today.
00:20What's your assessment of the food inflation trajectory we've seen so far this year, the
00:24sort of print we have for the month of November, and the impact of government strategy to stem
00:29the rise in tide?
00:33Well, I think, you know, the unfortunate reality is that we have seen food inflation remain
00:41at these quite high levels for a while.
00:44I think fundamentally, unless we're able to attack the root cause of this high food
00:50inflation, which at the end of the day is driven by constraints on the supply side, I
00:55think we are it's going to be it's going to be a challenging next few months.
01:01And talking about how the outlook looks like right now, do you foresee any sort of
01:06moderation? Because we're looking at headline inflation and a forecast that we'll see
01:10moderation there. However, looking at the blend of fiscal and policy, monetary policy
01:15that might deter or slow down the sort of pace you might see here.
01:19But that's on one hand.
01:21Let's talk about the impact of some of the latest moves we've seen.
01:24For example, the African Development Bank has facilitated a 2.2 billion dollar facility
01:29for special agro industrial processing zones here in Nigeria.
01:33That's the phase two of the project.
01:35And we also have Nigeria and France also signed the 300 million euro agreement on food
01:40security. Let's talk about the scope, skill and the likely impact.
01:43Do you think these might have in the short term?
01:46Well, I think your investment in the sector in any form is direly needed, however, I
01:54think at the end of the day, the investment that you're outlining is going to actually
01:58have more of an impact on the demand side for agricultural produce, because it's focused
02:06on investing in agro processing and in terms of addressing some of the issues that we've
02:14And in terms of addressing the root cause, which is really a supply side constraint of
02:19a low productivity at the farmer level, primarily driven by a lack of financing to farmers
02:25to be able to purchase the quantity and quality of agricultural inputs they need to get
02:30higher productivity.
02:32That investment, be it as it is an important investment, is likely not going to have as
02:38big of an impact on the on the food inflation side.
02:41But now let's talk about the investments that we're seeing here right now.
02:44We also have the Greek minister talking about investment volumes, looking at genetically
02:49modified foods and how this is also critical to Nigeria's journey to food sufficiency.
02:54Do you buy into this idea around investments in GMOs?
03:02Well, I think fundamentally in investment in technology, if it's done responsibly and
03:08has good regulatory frameworks around it to ensure that we are managing any risks
03:14associated with that new technology, I think it's important that we adopt technology.
03:19This is actually quite frankly, it's new in Nigeria, but it's quite old technology.
03:25It's been used for over two decades in most parts of the world with relatively limited
03:31challenges. However, once again, I think it's great that these seeds
03:37will have the potential to increase productivity.
03:41However, the reality is that there's existing technology today that can get farmers, you
03:47know, four tons, five tons, six tons per hectare.
03:51However, yields are still at around two tons per hectare because, you know, to those,
03:57you know, when you have great seed, you need to complement that great seed with the
04:03right complements of soil health management products, weed management products, etc.,
04:09etc., which costs money, right?
04:10It costs the typical farmer about five hundred dollars per hectare for a full complement
04:15of technology to unlock the full productivity of these new seed varieties.
04:21So one without the other, you're likely not going to see a big boost in supply.
04:27But if you're able to complement them, then yes, you will see a big boost in supply and a
04:32knock on effect on fertilisation.
04:35And talking about the future as well now, how we see things panning forward, we have the
04:39latest figures from the FAO as well, talking about worsening food insecurity here in the
04:44country and the back of devastating floods and the impact so far.
04:48I'd like your take on that as well now, where we're also juxtaposing that to the overall
04:53strategy, the threats towards all year round farming.
04:56And when we are looking at grains, for example, powder rice and maize, wheat in terms of how
05:02the country is also positioning, what's your outlook for the market as a whole?
05:09Well, I think so to the point around all year farming, it's a huge opportunity.
05:16I think Nigeria today, roughly only about three percent of our land is irrigated and of
05:20that three percent, the reality is a good chunk of that irrigation may not be fully
05:26functioning. So it's a huge opportunity.
05:29If you look at countries like Thailand, as an example, if you look at their path towards
05:36becoming one of the world's largest exporter of agricultural produce today, over 35
05:39billion dollars, investment in irrigation was a critical piece.
05:44However, that came really as phase three in their investment strategy.
05:48First, they got farmers financing, then they got farmers very productive in the dry
05:56season. And then they started to invest in irrigation and finally in mechanisation and
06:02other things to improve labour productivity.
06:04So it's really a four step process.
06:06We're still in Nigeria in step one.
06:08And talking about the processes ahead to also have bigger impact here in the agric sector,
06:13let's talk about the sort of growth we saw in the third quarter of this year and
06:18juxtaposing that to the first half of this year.
06:20We've seen the agricultural sector growing just about a modest growth of 1.14% in the
06:27third quarter of this year.
06:28Looking into 2025 now, you've talked about the issues around FX volatility, the high
06:35cost of inputs here, fertiliser.
06:38These are still lingering challenges, insecurity.
06:41Now, in terms of the sort of print you expect for 2025, how do you see the agri sector
06:47positioning and having a larger volume of growth and contribution to the overall GDP?
06:55Well, I think the reality is today we're seeing interest rates somewhere between 30
07:01and 40 percent. You already had a sector that was starved of financing and financing
07:07has been constrained and what limited financing that's available is quite expensive.
07:12So what you've seen is most farmers as a coping mechanism are actually switching to
07:19crops that are less expensive to grow, that have lower input requirements and so on and
07:24so forth, which is actually contributing to this high inflation.
07:30The reality is that the main staples, rice, maize, so on and so forth, those crops
07:35require significant investments in fertilisers and other chemicals and farmers just
07:40don't have the capital to do that.
07:42So unless we're able to come up with solutions to to get financing quickly and at
07:50scale in a sustainable manner, it is going to be a challenging 2025.
07:58And lastly, now we're still looking at price movements as well now for you as we are
08:03wrapping up the year 2024 and looking into 2025.
08:07We have talked about wheat, paddy rice and maize for you.
08:11What sort of movements do you see here and how can Nigeria also cash in on all of this,
08:15especially on the back of the African continental free trade area, increasing the sort
08:20of trade volumes you see along the west of the continent as well now?
08:24Do you think Nigeria's position is right to cash in on all of the movements we have
08:29here?
08:30Well, I think, you know, if you look at the reality, you know, some of the you know,
08:35today we do have a significant food inflation challenge, which which can, if not
08:39checked, lead to a significant food security charge.
08:42So if you look at some of the steps that have been taken to try to constrain demand, so
08:47you're going to attack inflation by either increasing supply or reducing demand.
08:51And I think some of the efforts have been around on the demand side by limiting exports
08:57and so on and so forth. I think, you know, important in the short run to to to to
09:02manage the risk of food security, food insecurity.
09:04However, as a long term strategy, really constraining demand is can be can be actually
09:11counterproductive because it's really that demand that you get by exporting into other
09:17parts. You know, Nigeria has a huge opportunity with 60 million people market just to
09:23north of us. That's land loss that we can really dramatically serve.
09:28And so so that's an opportunity we need to harness.
09:31But we can do that once we get the supply up through dramatic increases in
09:36productivity.
09:37Well, Mr. Masha, we'll leave the conversation here for now.
09:39Thank you so much for your time on the show today.
09:41That was Kola Masha, the chief executive officer of Babankana.