The World Bank has said that the war in Ukraine has dealt a major shock to commodity markets, altering global patterns of trade, production, and consumption in ways that will keep prices at historically high levels through the end of 2024.
The World Bank said this in its latest Commodity Markets Outlook report.
According to a new report by the Washington-based bank titled, “Food and energy price shocks from Ukraine war could last for years,” the increase in energy prices over the past two years had been the largest since the 1973 oil crisis. Price increases for food commodities—of which Russia and Ukraine are large producers—and fertilizers, which relied on natural gas as a production input, had been the largest since 2008.
“Overall, this amounts to the largest commodity shock we’ve experienced since the 1970s. As was the case then, the shock is being aggravated by a surge in restrictions in the trade of food, fuel and fertilizers,” said the World Bank’s Vice President for Equitable Growth, Finance, and Institutions, Indemit Gill
“These developments have started to raise the spectre of stagflation. Policymakers should take every opportunity to increase economic growth at home and avoid actions that will bring harm to the global economy.”
According to the report, energy prices were expected to rise more than 50 per cent in 2022 before easing in 2023 and 2024. Non-energy prices, including agriculture and metals, are projected to increase almost 20 per cent in 2022 and will also moderate in the following years.
Nevertheless, commodity prices are expected to remain well above the most recent five-year average. In the event of a prolonged war or additional sanctions on Russia, prices could be even higher and more volatile than currently projected.
Because of war-related trade and production disruptions, the World Bank predicts the price of Brent crude oil at an average of $100 a barrel in 2022, its highest level since 2013 and an increase of more than 40 per cent compared to 2021. Prices are expected to moderate to $92 in 2023—well above the five-year average of $60 a barrel. Natural gas prices (European) are expected to be twice as high in 2022 as they were in 2021, while coal prices are expected to be 80 per cent higher, with both prices at all-time highs.
“Commodity markets are experiencing one of the largest supply shocks in decades because of the war in Ukraine,” said Director of the World Bank’s Prospects Group, Ayhan Jose, which produces the Outlook report.
“The resulting increase in food and energy prices is taking a significant human and economic toll—and it will likely stall progress in reducing poverty. Higher commodity prices exacerbate already elevated inflationary pressures around the world.”
The report said wheat prices were forecast to increase more than 40 per cent, reaching an all-time high in nominal terms this year. That will put pressure on developing economies that rely on wheat imports, especially from Russia and Ukraine. Metal prices are projected to increase by 16 per cent in 2022 before easing in 2023 but will remain at elevated levels.
“Commodity markets are under tremendous pressure, with some commodity prices reaching all-time highs in nominal terms,” said Senior Economist in the World Bank’s Prospects Group, John Baffes.
“This will have lasting knock-on effects. The sharp rise in input prices, such as energy and fertilizers, could lead to a reduction in food production particularly in developing economies. Lower input use will weigh on food production and quality, affecting food availability, rural incomes, and the livelihoods of the poor.”
Register With Us, Grow Your Business, Edo Govt Tells Business Owners
Micro, Small and Medium Enterprises (MSMEs) have been urged to register with the appropriate Edo State agencies in order to get the requisite government assistance to grow.
The Acting Governor of Edo, Comrade Philip Shaibu, made the call on Thursday in Benin during a stakeholders meeting between the MSMEs and the state Ministry of Physical Planning, Urban and Regional Development.
The meeting was convened in partnership with the German Agency for the Cooperation (GIZ), which is working to ensure an enabling environment for the MSMEs.
The business owners, the acting Edo chief said would need to register with the state Ministry of Trade and Investment, so as to receive necessary attention.
“As Government, we will use the banks; we will also use our facilities to grow your businesses because we have discovered we need you to function.
“We need you to stand; until you stand, our economy will be shaking and we don’t want our economy in Edo to be shaking.
“We want to grow our GDP. Our target is not 28 per cent contribution to the GDP (Gross Domestic Product), our target is to have MSMEs accounting for at least 65 per cent,” he said.
Shaibu described MSMEs as a critical stakeholder that was responsible for 79 employment in the state.
Earlier in her address, Ms Blessing Ajimoti, Edo Coordinator for the GIZ-SEDIN programme, urged the MSME owners to leverage of the opportunity to ask questions about the Benin Masterplan.
She said her agency’s partnership with Edo ministry was in fulfilment of its objectives.
One of these, she said was to improve the employment and income situation of MSMEs through access to finance and business service.
She also said that GIZ SEDIN programme also aimed to strengthening entrepreneurial and managerial skills, and addressing key barriers in the business environment and investment climate.
E-Naira, Others May Drop Remitting Cost To Nigeria, Others —IMF
The International Monetary Fund has disclosed that central bank digital currencies could drop the cost of sending and receiving the money to Nigeria and other Sub-Saharan African countries.
The Washington-based lender stated that Sub-Saharan Africa is the most expensive region to send and receive money, with the average cost pegged at a little under eight per cent of the transfer amount. It added that CBDCs could cheapen the process by shortening payment chains and creating competition among service providers.
In its ‘More African Central Banks Are Exploring Digital Currencies,’ report published on its blog, the IMF said, “They can also facilitate cross-border transfers and payments.
“Sub-Saharan Africa is the most expensive region to send and receive money, with an average cost of just under eight per cent of the transfer amount. CBDCs could make sending remittances easier, faster, and cheaper by shortening payment chains and creating more competition among service providers.
“Faster clearance of cross-border payments would help boost trade within the region and with the rest of the world.”
According to the fund body, several sub-Saharan African central banks are exploring/piloting digital currencies following Nigeria’s October’s launch of the eNaira. It said CBDCs are digital versions of cash that are more secure and less volatile than crypto assets because they are backed and regulated by central banks.
The South African Reserve Bank is experimenting with a wholesale CBDC, which can only be used by financial institutions for interbank transfers, as part of the second phase of its Project Khokha. The country is also participating in a cross-border pilot with the central banks of Australia, Malaysia and Singapore.
It stated that the Bank of Ghana was testing the e-Cedis while the South African Reserve Bank is experimenting with a wholesale CBDC as part of the second phase of its project Khokha and participating in a cross-border pilot with the central banks of Australia, Malaysia, and Singapore.
It said while countries have different motives for issuing CBDCs, it has some potential important benefits for the region.
The IMF further said, “The first is promoting financial inclusion. CBDCs could bring financial services to people who previously didn’t have bank accounts, especially if designed for offline use.
“In remote areas without internet access, digital transactions can be made at little or no cost using simple feature phones. CBDCs can be used to distribute targeted welfare payments, especially during sudden crises such as a pandemic or natural disaster.”
It added that while several risks and challenges needed to be considered before issuing a CBDC, governments must improve access to digital infrastructures such as a phone or internet connectivity.
The IMF stated that central banks will need to develop the expertise and technical capacity to manage the risks to data privacy and to financial integrity, which will require countries to strengthen their national identification systems so that know-your-customer requirements are more easily enforced.
It said, “There is also a risk that citizens pull too much money out of banks to purchase CBDCs, affecting banks’ ability to lend. This is especially a problem for countries with unstable financial systems.
“Central banks will also need to consider how CBDCs affect the private industry for digital payment services, which has made important strides in promoting financial inclusion through mobile money.”
Bread Producers Threaten Strike Over Bakery Materials’ Price Hike
Bread producers and caterers on Friday threatened to withdraw their services nationwide due to the unprecedented increase in bakery materials and the neglect of the Federal Government to this matter.
In a communiqué issued by their national body – Association of Master Bakers and Caterer of Nigeria, they stated that the cost of flour, sugar and other materials used in bakery business had skyrocketed beyond the reach of many bakers.
In the communiqué, which was issued after the National Executive Council meeting of the association in Abuja, and made available to our correspondent on Friday, the bakers stated that they would down tools from July 13, 2022.
They also revealed that efforts to get government’s intervention in the matter had been unsuccessful, as there had been no positive response from the concerned ministries, departments and agencies of government.
The communiqué, signed by the association’s executives, led by its National President, Mansur Umar, stated that the council reviewed the “neglect of the Federal Government in addressing the challenges facing our sector as captured in our letters acknowledged by the Federal Ministry of Industry, Trade and Investment, Federal Ministry of Finance, Central Bank of Nigeria and unproductive intervention of the Secretary to the Government of the Federation.
“Increase in prices of bakery materials especially flour and sugar having reached unprecedented levels, for example, flour is now between N25,000 and N27,500, so also other ingredients.
“The National Wheat Cultivation Committee already constituted is yet to be inaugurated after over one year. NAFDAC, SON, NESREA have turned the bakers into money making machine by charging our members outrageous levies even at this very challenging moment.
“Consequently, the NEC in session resolved that all zones, state, Local Governments and units of our association should commence full mobilisation of our members nationwide to embark on withdrawal of services starting from Wednesday July 13, 2022 for an initial period of two weeks.”
The, however, noted that its “members should await further directives.”
This came as it was gathered that the hike in bakery materials was what led to the recent increase in the cost of bread and other items produced from flour.
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