Nigeria wheat import to decline as weakening naira constrains consumer purchasing power

NIGERIA – The Foreign Agricultural Service (FAS) of the US Department of Agriculture (USDA) has slashed Nigeria’s wheat consumption and imports by 10% and 9% respectively owing to a weakening naira.

Post estimates marketing year (MY) 2023/24 wheat consumption to decrease to 4.5 million metric tons (MMT) recording a 10 percent decline while Imports to decrease by 9 percent to 4.8 MMT.

Post attributes the decline to a weakening naira raising the cost of imported wheat, the ending of the national fuel subsidy that has eroded consumer purchasing power, and soft consumer demand for wheat-based products in favor of lower-cost alternatives.

According to USDA, food processing contacts reported that soft consumer demand for wheat-based foods, such as bread, pasta, and noodles has declined significantly due to wheat flour price increases.

Contacts further note that high food prices across all categories have made it difficult for consumers to switch from wheat-based products to alternatives.

Millers across Nigeria are operating at 50 percent or below capacity due to deteriorating macroeconomic 3 conditions, high costs of production and distribution (i.e., transportation), reduced consumer sales, and the Nigeria-Niger border closure.

In June 2023, the Central Bank of Nigeria (CBN) abolished the country’s multiple exchange rate system and effectively floated the naira currency to trade freely against foreign currencies.

As a result, despite the decline in global wheat prices in MY 2022/23, Nigerian wheat importers are spending relatively more on wheat imports since they must source foreign currency using 4 naira which has weakened nearly 100 percent.

On production, FAS-Lagos estimates MY 2023/24 production at 110,000 metric tons (MT), in line with Post’s production estimate for MY 2022/23, and lower than USDA’s official estimate of 120,000 MT for MY 2022/23.

The estimated production decrease is attributed to high input costs and continued insecurity in the north’s wheat-producing region.

MY 2023/24 area harvested is forecasted at 5.7 million hectares, a slight decrease from the 5.8 million hectares in MY 2022/23.

Corn and rice follow suit

On the other hand, corn consumption in Nigeria is projected at 12.3 MMT in MY2023/24, a 4.6 percent decrease compared to Post’s prior MY’s 12.9 MMT estimate.

Corn is an essential part of many families’ diets in the northern half of the country. It can be consumed as corn flour, roasted or boiled whole, or prepared as porridge. About 20 percent of production goes into animal feed, particularly poultry feed.

According to the USDA, consumption is expected to decrease due to food and beverage manufacturing slowdowns, decreasing sales due to the Nigeria-Niger border closure, and soft consumer demand.

However, Post forecasts corn imports for MY2023/24 at 150,000 MT, a 50 percent increase compared to Post’s MY2022/23 estimate.

On rice, production in MY 2023/24 is forecast to decrease to 8.095 MMT from 8.5 MMT in the prior MY.

This lower production estimate is based on higher fertilizer prices, reduced access to farmlands in conflict-prone areas, and an increase in unrecorded rice imports of cheaper paddy that is making local paddy less competitive.

Post forecasts MY 2023/24 rice consumption at 7.8 MMT, about a 4 percent increase from MY 2022/23 estimate of 7.5 MMT.

Market sources attribute this increase in demand driven in part by local governments providing low or no-cost rice to the public following the central government’s decision to remove the petrol subsidy policy.

The government approved $235 million for its 36 states to procure food and other staples to cushion the effects of food shortages across the country.

Post estimates MY 2023/24 imports at 2.3 MMT, a 10 percent increase from the 2.1 MMT estimate for MY 2022/23.