AFEX, a commodities exchange innovating Nigeria’s agriculture, has recommended key steps the country can take to mitigate the risks to the value-chain in the commodities market posed by the coronavirus pandemic.
In its recently published report on “COVID-19 and Commodities”, the Exchange said the disease outbreak which has seen economic activities slow significantly heightens food insecurity risk and could disrupt farm incomes.
“As witnessed, prices of cashew have declined by almost 50 percent in source location across sub-Saharan Africa (SSA),” said AFEX. “The declines in farm incomes reinforce the food security fears stated earlier as farmers have lower purchasing power to procure other commodities of need not cultivated by these farmers.”
Read also: COVID 19: Terminations of rig contracts threaten Nigeria’s oil fortunes
AFEX said the range of options for governments at all levels in combating the negative effects of the COVID-19 goes beyond the palliative measures currently being undertaken, and the Exchange proposed additional measures “which reflect the challenges that could emanate subsequently,” it said.
First, AFEX recommended Structured Production Support Programmes.
With the production season about to commence with farmers already cultivating their farmlands, AFEX noted that a key concern is the availability of farm inputs and labour necessary to operate during the production season.
“We believe that strong adherence to the exemption granted to farmers and agro-allied companies will help facilitate the distribution of inputs and movement of labour,” said AFEX. “It is noteworthy to indicate that government and other developmental organizations could support local producers with input loans by leveraging on agro-allied companies with last-mile contact with the farmers.”
AFEX also recommended Trade Financing and Inventory Support for processing companies and other exporting agents as banking and non-banking financial institutions become more cautious in lending.
This means that the processing companies and other exporting agents in the ecosystem will witness a significant decline in the trade and inventory credit available to conduct business effectively, the Exchange said.
“Two key recommendations will be the provision of credit lines to companies and FMCG processors operating in the country and the execution of export credit guarantee structures,” AFEX said.
The Exchange said these solutions will provide the dual benefit of sustaining the operations of the companies and ensuring that they continue to procure the commodities needed as a nation.
Also, the provision of the export support, vis-à-vis the provision of guarantee and/or insurance to exporters operating in the country, will help to create FOREX in the system, it said.
