Continuous flooding in Nigeria’s Middle Belt has been a source of concern to players in the logistics chain of the agricultural business, upsetting distribution of farm products and causing an uptick in food price inflation, a Financial Derivatives Company report has said.
The situation has stimulated price inflation in some relatively inelastic commodities such as rice, beans and tomatoes. Against last month’s figure, 50 kilogrammes of rice edged up from N15, 500 to N16, 000. 50 kilogrammes of beans (the Oloyin variety), saw about 6 percent increase to N27, 000 from N25, 500, while tomato prices for a 50 kilogrammes rose from N10,000 to N12, 000, representing a 20 percent increase.
Except for palm oil, yam, sugar, garri and cement, most domestic commodities have increased comparatively to the previous month.
The planned 2.3 percent increase in the price of flour will also push up the level of food inflation in October and could be complicated by the minimum wage settlement in the coming days, the report said.
Sanni Yadakwari, the secretary, Tomato Growers Association of Nigeria (TOGAN) confirming the situation to business a.m. said transportation of produce from farm gates to township has been incredibly difficult in the affected areas, with farmer’s resorting to canoe or ship movement due to very poor road access.
The impact is also being felt in the country’s largest agricultural market, Lagos, where supply from the region has become scarce.
Femi Ogunsanya, a consultant for the Arewa Perishable Food Stuff Association at Mile 12, Lagos told business a.m. that the decline in supply from the region, coupled with crop damage by flooding has jerked up prices. He said 40 kilogrammes of tomatoes now sold for N13,000 from N12,000 in the preceding month.
His forecast is that demand would remain steady while price might further rise up if the situation persists. “The market has definitely felt the consequences of the situation but it is not really as adverse as one could imagine. It has really affected the produce coming in from the Middle Belt. There are some areas the flood has damaged and for the fact that the rain has not really subsided, it has not allowed for bumper harvest from the other states. Prices have gone up about 10 percent,” he said.
“And because tomato is a basic commodity, there is nothing that can be done about it. People must eat. When you have bumper harvest, the same basket of tomatoes that we are talking about may be sold for N40, 000 and at another time when we are out of the season, it will be sold for N30, 000 because the demand will be chasing the supply,” Ogunsanya further explained.
Fitch Solutions, a market analyst firm in a report last month said the prevalence of major natural disasters around the globe highlights the growing levels of disaster risk that both contractors and operators of infrastructure assets face. Its projection is that disaster risk could become more critical in the coming years, as climate change intensifies.
Citing the torrential rains in Nigeria, it acknowledged that each of the disasters have already made significant adverse impact on local infrastructure bases, creating the burden of rebuilding costs for individual owners of damaged assets, obligations on the part of insurance companies, and outlays on behalf of local and national governments.
Estimations of the total monetary damage wrought by Hurricane Florence in the United States, for instance, range between $17 billion and $22 billion, according to the Fitch report which rated low the impact of the twin natural disasters in Japan, due to the country’s robust emergency response protocols and resilient building codes.
“The world has been hit by a series of prominent natural disasters in the first part of September, inflicting tens of billions of dollars of infrastructure damage and highlighting the degree to which investors, contractors, and operators of infrastructure assets need to factor Disaster Risk into their risk management calculus.”
Considering the growing frequency of extreme weather events over the past decade from the continuous warning of the climate, Fitch posits that stakeholders in the infrastructure development process need to intentionally address disaster risk.
This means that key stakeholders like the national and local governments should be encouraged to sponsor and invest in infrastructure assets that mitigate the effects of natural disasters, from flooding and drain systems to breakwaters and access roads.
In addition to re-prioritising disaster-related infrastructure assets, the analyst firm forecasts that governments are also likely to scale up infrastructure expenditure in both the short and long-term to address the immediate effects of disasters and broader issues.
In terms of insurance, it sees insurers becoming either more selective in extending insurance to projects in markets highly vulnerable to disaster risk, charge higher premiums, or a combination of both.
“This tendency will affect both governments and private sector infrastructure players’ contractors and operators alike. For governments, a lack of access to insurance for major projects of national interest may impede the full development of their ambitious project pipelines, as major projects stall and their feasibility is questioned. A comparison of our Disaster Risk data and Infrastructure Risk Reward Index underscores the risks that decreased access to insurance may have, with a number of high Reward markets (in part the result of strong development pipelines) like the Philippines simultaneously exposed to high levels of disaster risk,” Fitch said.
For contractors and operators, higher insurance costs may erode the returns of developing infrastructure projects in certain markets, undermining the financial viability of projects that may otherwise have moved forward.