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Nigerians Decry Rising Price of Food Items

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Nigeria inflation hits six-year high

As prices of commodities surge, Nigerians have expressed displeasure especially on the quantity of food items now sold at high prices. 

Investors King reports from an online survey on the prices of food items in different regions of the country.

While residents in the west and east decried the prices of tomatoes, pepper, onions, egg, chicken and some other food items, they envied the northerners who according to them are enjoying these items in large quantities at cheaper rates.

Viewing the quantity of pepper and onions sold in Kano for N50, a dweller of the east exclaimed, “Wow! People dey enjoy for North. That Onions and Pepper go reach N400 for East. Things too cost here.”

A resident of Ogun state, showing the items she purchased at the market,  lamented that she couldn’t get all the items on her list due to the increased prices.

She said a crate of eggs which was formerly N600 and N850 is currently sold for N1800. After bargaining on the price of a basket of tomatoes, she bought it for N1500 and 5kg of chicken for N8500.

“These are some of the things I got last Saturday from the market. The price of things continues to rise on a daily basis. I couldn’t get some of the things on my list because the money wasn’t enough to cover the rest of the other items. Life isn’t getting any easier,” she said.

A resident of Benin also aired his voice, saying a crate of eggs is now 1,850 while a basket of tomatoes goes for N1,000.

“Only God can help us out. Things are expensive especially foods and food materials and some Nigerians can not boast of making $5 per day. Our leaders are there enjoying themselves. To make things worse, ‘na Poor man pikin dem go still use for rituals.’ We need your help O Lord!” he said.

Meanwhile, a dweller of Magodo in Lagos State stated that the basket of tomatoes sold for N1500 in Ogun state cannot be sold less than N2500 in his area.

“I’m still hopeful that things will get better. Nigeria has been through worse and still survived. The major problem we have is lack of consistency,” one of them expressed hope.

Samed Olukoya, a Senior Analyst at Investors King, explained that some of the factors responsible for the continuous rise in the price of commodities are scarcity caused by farmers and herders crisis, government policies and transportation costs in conveying the goods to different locations.

In his words, “Rise in the prices of food items can be attributed to scarcity caused by farmers and herders crisis, bandit and other insecurity issues. For instance, most farmers can no longer cultivate on their farms or harvest because of kidnappers or killer herdsmen. The few that managed to do so are ready to part with it for a substantial amount.

“Also, the persistent increase in costs due to government policy is another factor pressuring the price of food items. Transportation cost to the city, cost of imported fertilizer, preservatives, etc have to be added to the price of a unit item.”

Speaking on the lower price of food items in the north, Olukoya said, “The North is known for its agriculture, hence the price disparity in food items between North and other parts of the country. It is also imperative to factor in the cost of transportation from the North to other regions, warehousing and prevalent insecurities that are preventing free movement of goods across the nation.”

Olukoya added that the situation is worsened by the nation’s weak wage growth, low household income and a high unemployment rate of 33.33 percent.

In his recommendation, he charged the government to ease rising prices of food items and address insecurity in the country as well as increase financial support for farmers.

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32 Metric Tons Imota Rice Mill to Begin Operations Soon, Says Sanwo-Olu

Lagos State Government has signed a Memorandum of Understanding (MOU) with WACOT to provide technical support for Imota Rice Mill.

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Rice mill

Lagos State Government has signed a Memorandum of Understanding (MOU) with WACOT to provide technical support for Imota Rice Mill.

The much anticipated Imota Rice Mill is located in the Ikorodu area of Lagos State. It has a production capacity of 32 metric tons per hour. 

In a short ceremony which was witnessed by other government officials and representatives from Wacot Rice Limited, Lagos State Governor, Babajide Sanwolu said he will hand over the rice mill in the next few months, after which it would commence commercial operation.

Investors King learnt that ‘Wacot’ will provide operational support and manage the mill for nine months in the first instance through Joint Venture. Subsequently, the partnership could be subject to renewal. 

According to Special Adviser (SA) on Agriculture to the Governor on Rice Initiative, Mr Rotimi Fashola, the need to produce quality and competitive rice for Lagosians necessitated the partnership with Wacot Rice Limited.

Additionally, Imota Rice Mill will be completed by December 2022 as stated by the special adviser.

At full operation, Imota Rice Mill will employ and empower thousands of people both directly and indirectly. Imota Rice Mill is built to produce quality rice and also influence price mechanisms.

“There is a need for the Government to put the rice mill on the path of sustainability. We need to give it to a handler that will project quality.

We sourced to have a partnership in the rice production business that has a stable brand and an eye for efficiency. This brings forth this Joint Venture and technical support agreement with WACOT”.

Meanwhile, Group Managing Director of TGI Group, Rahul Savara, said Lagos Government found a great partner in the firm. WACOT Rice Limited is a subsidiary of TGI Group.

He pledged that the company would be deploying standard technology and services in managing the rice mill. 

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Allianz Economic Outlook: African Commodity Exporters in a Better Position

In 2023, the energy crisis and rising interest rates will drag global GDP growth down to just +1.5%, as slow as it was in 2008

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In 2023, the energy crisis and rising interest rates will drag global GDP growth down to just +1.5%, as slow as it was in 2008. It’s the latest forecasts provided by Allianz Trade, which operates through the Allianz Global Corporate & Specialty license in South Africa. 

Since June, global macroeconomic conditions have considerably worsened. Deep and long-lasting ruptures in energy markets and the negative impact on business confidence will push the manufacturing sector in most countries into recession. At the same time, rapidly rising interest rates and falling real disposable incomes will induce a housing recession in the US.

After contracting by -0.6% in the second quarter of 2022, global growth will return to negative territory in Q4 (-0.1% q/q) and is not likely to recover before mid-2023. Overall, we have cut our 2023 forecast to +1.5% (-1.0pp compared to our Q2 forecasts).

Africa: Commodity exporters in a better position

Commodity exporting countries have a more positive outlook, helped by better terms of trade prospects.  GDP forecast for 2023 is as follows: Africa (2.7% from 3.2% in 2022), South Africa (1.5% from 1.8%), Nigeria (unchanged at 2.3%), Ghana (unchanged at 2.5%), and Kenya (4.4% from 4.9%). However, domestic issues are limiting. In South Africa, energy rationing, and logistical bottlenecks – aggravated by flood damage to the port of Durban in April hamper growth while in Nigeria, the oil sector continues to struggle.

Eurozone and US forecast

Eurozone growth is likely to plunge to -0.8% in 2023 due to soaring energy prices and negative confidence effects. Consumer sentiment has already plunged to record lows and business confidence continues to deteriorate rapidly, which will hold back consumption and investment. Increased fiscal support to the tune of 2.5% of GDP on average and limited monetary easing after mid-2023 will help make the recession shorter and shallower, and limit the risks of social unrest.

The US will register a -0.7% fall in GDP, mainly due to rapidly tightening monetary and financial conditions, which will significantly cool the housing market, coupled with a negative external environment and low fiscal support after the mid-term elections.

China’s economic recovery will be difficult 

After a very low level of growth in 2022, China’s economic recovery will be difficult. We have significantly cut our growth forecasts to +2.9% in 2022 (from +4.1%) and +4.5% in 2023 (from +5.2%) based on four factors: the short-lived post-omicron reopening boost, the likely continuation of the zero-Covid policy until Q2 2023, which is weighing on business and household confidence, risks in the property sector and extreme weather currently pressuring energy supply. In addition, lower external demand will limit export growth, which had been a tailwind throughout 2020-2021.

Global inflation outlook

Inflation will remain high until Q1 2023 after energy prices have peaked, with food and services adding upside pressure. We expect global inflation to average 5.3% in 2023 (after close to 8% in 2022). Eurozone inflation should peak at 10% in Q4 2022 and then average 5.6% in 2023. In the US, inflation is likely to have peaked already but should remain above 4% until Q1 2023, falling below 2% only after Q3 2023 (averaging 2.9% in 2023).

Inflation outlook in Africa

Inflation is set to continue increasing driven by costlier food and fuel prices with Africa forecast to finish 2022 averaging 14.7% and then 9.6% in 2023, Nigeria (18% and 15%), South Africa (6.8% and 5%), Ghana (31.3% and 20.3%) and Kenya (6.5% and 5.5%). Heightened food security risks in North Africa and many parts of sub-Saharan Africa where the role of agriculture and the tendency to rely on imported food products makes the countries particularly vulnerable to the agricultural shock caused by the geopolitical conflict.

Global trade

Global trade growth in volume will also remain low at +1.2% in 2023 as advanced economies face a domestic demand-led recession. The return of credit risk is to be expected as this recession will be triaging the good, the bad and the ugly of corporate vulnerabilities. The rebound in business insolvencies gained momentum during 2022 (+18% q/q in Q2 2022, from +5% in Q1). The largest acceleration happened in Western Europe (+26% y/y YTD). Though we are still witnessing historically low numbers of bankruptcies in the US (-19% YTD as of Q2), China (-14% as of August) and Germany (-4% as of June), Spain, the UK and Switzerland already show pre-pandemic insolvency numbers. The trifecta of lower demand, prolonged production constraints (input prices, labor shortages and supply-chain matters) and increasing financing issues (access and costs) is mechanically pushing up expectations in business insolvencies, notably for European countries and sectors most exposed to energy issues. The -0.8% decline in Eurozone GDP has the potential to accelerate the rise in insolvencies by +25pp in 2023 (to more than +40%), with Germany up +16%, France up +29%, Italy up 31% and Spain up 25%. This increases the probability of seeing the extension of and new (targeted) state aid measures.

South Africa

Evidence that South Africa’s economy is faltering has continued to build. June hard activity data came in well below consensus expectations with retail sales as well as manufacturing and mining production dropping back in m/m terms. We expect the economy to have contracted sharply in Q2 as the hit to output from severe flooding was probably not recouped and as load shedding intensified once again. More timely indicators suggest that activity has remained weak in Q3. Scarce energy availability has continued to weigh on energy-intensive sectors; the manufacturing PM declined from 52.2 in June to a one-year low of 47.6 in July. And successive falls in consumer confidence probably dampened retail sales further with elevated inflation taking its toll.  Inflation rose from 7.4% y/y in June to a 13-year-high of 7.8% y/y in July on the back of mounting fuel and food price pressures. Core inflation, at 4.6% y/y, remained close to the midpoint of the 3-6% target band. Uncomfortably high inflation, currency weakness, and Fed tightening will probably keep monetary policymakers in a hawkish mood, even as the economy struggles.

Nigeria

Nigeria’s economy expanded by a better-than-expected 3.5% y/y in Q2, up from 3.1% y/y in Q1. The pick-up in headline growth was largely due to the contraction in the oil sector easing, while growth in the non-oil economy held up well. In seasonally-adjusted terms, GDP rose by around 0.9% q/q. More timely indicators suggest that activity picked up further at the start of Q3. The MI rose from 50.9 in June to 53.2 in July. And private sector credit growth reached 21.3% y/y in July. But production in the key oil sector remained very low, essentially unchanged from June at 1.18mn bpd in July. Meanwhile, the currency weakened against the US dollar, both on the Nafex exchange rate and the black market. Inflation jumped from 18.6% y/y in June to 19.6% y/y in July, the highest since September 2005. The main driver behind the increase in the headline rate was another sharp rise in food inflation, although price pressures rose in other categories too. Elevated inflation is likely to push policymakers to continue raising interest rates.

Kenya

Uncertainty surrounding elections held earlier in August has continued to linger. The official tally showed a tight victory for William Ruto, but runner-up Raila Odinga challenged the results in the courts, reversing some of the gains in Kenya’s sovereign dollar bonds since the start of the month. Nonetheless, the Supreme Court ruled the election was free and fair and William Ruto was sworn in as President on September 13. Defeated Raila Odinga did not attend the inauguration. Shoring up the economy is likely to be a key priority for the new President. The public debt burden stood at 67% of GDP as of June. And the external position is in a poor state too; in May, the trade deficit was the widest since at least 2000 as imports surged by more than exports grew. Activity probably deteriorated further since; the PMI dropped from 46.8 in June to 46.3 in July. Meanwhile, the currency has continued to weaken (-6% vs. USD as of mid-September). This has contributed to the rise in price pressures; headline inflation increased to a five-year high of 8.3% y/y in July, above the central bank’s inflation target range. After keeping interest rates unchanged in July, the central bank is likely to tighten again before long. We have penciled in a +150bps increase in the benchmark rate, to 9.00%, by year-end.

Ghana

Ghana entered talks with the IMF in July, but this has failed to soothe investors ‘concerns about the public finances. Sovereign dollar spreads have continued to widen, and the cedi has fallen further – it is now down by 37% against the dollar year-to-date. Given the large amount of sovereign FX debt, the fall in the cedi will only make the job of putting the debt position on a sustainable footing more difficult. Two credit rating agencies lowered Ghana’s long – term foreign currency rating further into junk territory.  A sovereign default is by no means imminent given that the FX debt repayment schedule is light over the next couple of years. But an IMF deal, including a firm commitment to fiscal consolidation, will need to be secured soon to soothe investors’ concerns. Meanwhile, the weaker cedi will add fuel to inflation, which came in at a stronger-than-expected 31.7% y/y in July – close to a 19-year high. All of this prompted the central bank to call an emergency meeting and hike interest rates by 300bp, to 22%, this month. Against this backdrop, economic activity is suffering. GDP growth slowed to just 3.3% y/y in Q1 and more timely indicators show that both business and consumer confidence have slumped. The risks to our below-consensus forecast for Ghana’s economy to expand by 3.0% this year lie firmly to the downside.

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Monetisation of Gas Flare to Drives Nigeria Towards Climate Neutrality

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Oil

Nigeria LNG, a liquefied natural gas-producing company, said monetizing over 60% of flared gas through its various liquefied natural gas plant will drive Nigeria on the path to achieving climate neutrality, which is the country’s energy transition goal.

Climate neutrality is referred to as net zero greenhouse gas emissions.

According to the firm, energy transition, just like Rome, doesn’t happen overnight, adding that a step-by-step process of taking out dirty fuels and flare reduction is the right path to achieving transition goals.

NLNG’s Managing Director, Philip Mshelbia, stated that in a country with huge energy deposit, the reduction of carbon starts by building cleaner alternative energy sources for a population that majorly depend on dirty fuels.

According to Philip, monetizing gas will help Nigeria reduce flares, provide thought leadership on the “Decade of Gas” agenda, generate funds for investment in essential infrastructures and enhance the well-being of the citizens.

Investors King had previously reported that Dr. Zainab Gobir, who represented the Executive Director, Economic Regulations and Strategic Planning, Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), said different initiatives and plans are in place to facilitate the shift to a gas-based economy including the declaration of the ‘Decade of Gas’, to foster economic growth and industrialization driven by gas.

Speaking at this year’s ongoing GASTECH event in Milan, Italy, Philip revealed that in line with NLNG’s objective, the company was equally determined to supply 100 percent of its Liquefied Petroleum Gas (LPG) output to the domestic market to drive the growth of LPG utilization in the country and help decrease the health, safety and environmental risks attributed with the use of other domestic fuel sources.

He further stated that through the supply of LPG, NLNG prioritized the supply of clean energy in Nigeria, while working hand in hand with the government to heighten LPG consumption as part of national journey to a clean energy future.

“We also expanded our capability in running our plants to generate electricity. We generate over 300MW of electricity to power our community on the Island from where we operate,” he added.

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