Socio-economic and political impact on food and nutrition security by SWAC/OECD

FOOD AND NUTRITION SECURITY ANALYSIS NOTE

THE SOCIO-ECONOMIC AND POLITICAL ENVIRONMENT AND ITS IMPACT ON FOOD AND NUTRITION SECURITY IN THE SAHEL AND WEST AFRICA NOVEMBER 2023

SAHEL AND WEST AFRICA

Club Secretariat

FOOD AND NUTRITION SECURITY – ANALYSIS NOTE

BACKGROUND This paper is a contribution to the analysis of food and nutrition security in the Sahel and West Africa region. It aims to provide information and analysis to feed into the Cadre harmonisé (Harmonised Framework – HF). It also sets out the implications that global and regional environmental, socio political and economic determinants have on the food and nutrition security situation in the Sahel and West Africa, including the capacity of countries to respond effectively. Also, it lays out details that can help better understand and interpret anything that could influence household dietary and living conditions. In short, it provides information for producing a more detailed analysis of the HF results and figures, and for formulating messages and recommendations. Moreover, it highlights the factors that can directly or indirectly impact access to good food and nutrition, which forms the basis for alerting or drawing the attention of public authorities.

Contact: swac.contact@oecd.org This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

FOOD AND NUTRITION SECURITY – ANALYSIS NOTE

WORLD ECONOMY The latest forecasts released by the Organisation for Economic Co-operation and Development (OECD) point to a slowdown in the growth of the world economy and indicate that it will drop to 2.8% in 2023, compared with 3.5% in 2022 and 6.1% in 2021.1 High inflation, tighter monetary policies and more stringent credit conditions are thought to be the cause of the downturn, which will lead to financial disruptions in vulnerable emerging and developing economies.2 Rising interest rates in the United States automatically increase the cost of servicing dollar-denominated debt and the exchange rate with other currencies. This partly explains the strength of the US dollar, which in turn increases the value of products imported in local currency and fuels inflation. However, this situation offers the advantage of exporting products in dollars and obtaining a better price in local currency. But developing economies, which are often net importers, are disadvantaged because of the rising value of the dollar against local currencies. This is particularly true of countries in the Sahel and West Africa region, which have a trade deficit. Currency depreciation amplifies inflation, resulting in additional monetary tightening on the part of central banks in developing countries. Figure 1. Changes in world economy growth 2018-2024 6.3

3.6

3.5 2.8

2.8

3.0

2020 2018

2019

2021

2022

2023

2024

-2.9

FOOD AND NUTRITION SECURITY – ANALYSIS NOTE

Message This global economic context is likely to exacerbate inflationary trends and increase budget deficits due to higher debt servicing costs and the value of products imported in local currency. Oil and gas exporting countries (Nigeria and Ghana) should fare better.

WORLD CEREAL TRADE AND THE IMPACT ON SUPPLY IN THE SAHEL AND WEST AFRICA Against this gloomy economic backdrop, the World Trade Organization (WTO) has downgraded its trade volume growth forecast to just 0.8% in 2023, compared with 1.7% as predicted in its April forecasts. According to the same source,3 several countries are affected by the downturn in world trade, as are many goods. It also points out that the factors behind the slowdown are not clearly identified, but inflation, high interest rates, the appreciation of the US dollar and geopolitical tensions are all contributing factors. Also, the main exporting countries have imposed trade restrictions on the main cereals, such as rice, maize and wheat.

World rice trade With a world market share of 36%, India is the world’s leading exporter and is pursuing a policy of trade restrictions to combat rising domestic prices. Between the end of July and the middle of August 2023, it introduced a ban on non-basmati rice exports and a 20% surcharge on parboiled rice exports.4 According to the same source, these measures have had a domino effect on the market, resulting in a 14% increase in the benchmark price of rice in Thailand and a 22% increase in Vietnam. Other countries, such as Myanmar and the Philippines, have also introduced restrictive measures, including compulsory export licences and price controls. As a result, importers are turning to alternative sources, including the United States. The USA is the world’s fifth-largest rice exporter and it sold 2.2 million tonnes in 2022 at USD 687 per tonne, i.e., 40% higher than the price of Indian rice.5 Trade forecasts for 2023/2024 point to a drop in India’s exports of 3.6 million tonnes, a shortfall that Thailand, Vietnam, the United States and China6 will make up for. If the markets are adequately supplied, rice prices should continue to rise, given the trade restrictions and the uncertainty surrounding production in the main Asian exporting countries that will be affected by El Niño in the coming weeks. In the medium and long term, the concentration of exporters in five key countries namely, India, Thailand, Vietnam, Pakistan and the USA, will increase from 77% to 81% by the end of the decade, according to the Food and Agriculture Organization (FAO) and the OECD.7

FOOD AND NUTRITION SECURITY – ANALYSIS NOTE

Figure 2. Percentage of rice imported into the Sahel and West Africa by the top three Asian countries Togo

Average dependance (73%)

Sierra Leone Senegal Nigeria Niger Mauritania Mali Liberia

Guinea-Bissau Guinea

Ghana

Gambia Côte d'Ivoire Cabo Verde

Burkina Faso Benin

India

Vietnam

Thailand

The value of the Sahel and West Africa region’s rice exports increased slightly from USD 3.95 billion in 2021 to USD 4.05 billion in 2022. Rice accounts for 49.2% of the value of cereal imports in the region. The rice is imported mainly from India (55%), Thailand (8%) and Vietnam (10%); together they account for 73% of the region’s rice supply.8 This situation makes the region particularly vulnerable to trade restrictions in those countries. Such a high level of dependence, coupled with the trade restrictions imposed by India, could have a negative impact on the availability and price of rice.

World maize trade There are no restrictions on the maize trade, as Argentina and Russia lifted the latest measures, namely export taxes, at the end of the first half of this year. Despite the absence of regulatory policies, global maize exports will decrease, with a sharp drop in the volumes exported by Argentina (-10.6 million tonnes) and Ukraine (-9.5 million tonnes). The growth in exports from the USA (+9.8 million tonnes), Brazil (+3.6 million tonnes) and the European Union (+0.6 million tonnes) will not make up for the shortfalls in exports mentioned above. Argentina and Ukraine, the world’s third and fourth-largest exporters of maize, recorded unit values below the world average for exports. In contrast, the United States is offering its product at a price that exceeds the world average. After record inflation in 2022, the price of maize should continue to fall in 2024. OECD analyses forecast growth in maize consumption of 1.2% a year over the next decade, driven by rising incomes, which will translate into greater demand for livestock feed.9 Asian countries will account for 52% of this growth, half of which will come from China alone. The value of maize imports into the region reached 219 million dollars in 2022, an annual growth rate of 30%. Senegal is the region’s leading importer of maize, with a market share of 68% of the value and over 400,000 tonnes of the volume. Between 2021 and 2022, the value of Senegal’s imports increased by 129%. Senegal is followed by Côte d’Ivoire (12%), Cabo Verde (6%), Mauritania (5%) and Ghana (5%).10 The supply comes mainly from the United States, Russia, Argentina and France.

FOOD AND NUTRITION SECURITY – ANALYSIS NOTE

World wheat trade

Message

There are no restrictions on the wheat trade, except for the Ukrainian market constraints linked to the conflict with Russia. The world wheat trade is set to decline, despite a forecasted increase in exports from Russia (+8.5 million tonnes) and thecontext European Unionto(+0.5 million tonnes). Significant are forecasted in Australia This global economic is likely exacerbate inflationary trendsdeclines and increase budget deficits due 11 (-12.7 million tonnes, or -40%), Canada (-4.2 million tonnes) and the United States (-1.5 million tonnes). to higher debt servicing costs and the value of products imported in local currency. Oil and gas exporting

countries (Nigeria and Ghana) should fare better. In 2022, wheat imports into the region totalled USD 3.96 billion, down 4% in comparison with the previous year. Nigeria accounts for 57% of imports, followed by Senegal (10%), Côte d’Ivoire (8%), Ghana (5%), Mali (3%) and Guinea (3%).

Cereal imports from Russia and Ukraine Between 2018 and 2021, Russia and Ukraine held approximately the same market share of the world cereal trade, i.e., 7 to 8% per country, per year. Despite the conflict, the agreement allowing Ukraine to export its cereals via the North Sea made it possible for it to export 33 million tonnes and to find alternatives before the agreement expires. These could include solidarity corridors, with the support of the European Union, which is the largest importer of Ukrainian wheat. Also, Ukraine has harvested as much wheat as it did before the conflict began, amounting to about 21 million tonnes in 2022. The Sahel and West Africa region absorbed 9% of the value of Russian cereals in 2021, while in 2022 that figure dropped to 3%. Ukrainian exports follow the same downward trend, with 1.85% in 2021 and 0.03% in 2022. Only 3% of Ukrainian wheat exports are destined for the Sahel and West Africa. Also, Russian wheat imports into the Sahel and West Africa are declining, reaching 11%, 9% and 3% in 2020, 2021 and 2022. The region’s imports include a substantial share of Ukrainian cereals, estimated at 0.3%, 6.9% and 0.5% in the same years. And because the bulk of Ukrainian wheat exports are destined for Europe, wheat from Ukraine accounted for just 1% of the region’s wheat imports in 2022 and 2020, compared with 14% in 2021. While the amount imported has not dropped, the region has diversified its suppliers. The market tensions caused by the Russian-Ukrainian conflict are also having an indirect impact on the region, including increased wheat prices on the world market.

Messages

•

Trade restrictions imposed by rice-exporting countries are leading to fears that rice prices will continue to rise, reducing the ability of vulnerable households to access this staple food. Added to this is the potential reconfiguration of the world rice market, which could threaten the region’s supply. More specifically, there is a trend towards greater regionalisation, with the emergence of the Association of Southeast Asian Nations (ASEAN) as a regulatory body for the rice trade in Asia.

•

Trade in wheat and maize should see fewer disruptions due to the Russian-Ukrainian conflict and the vagaries of the weather, thanks to sufficient production and a forecasted drop in prices.

FOOD AND NUTRITION SECURITY – ANALYSIS NOTE

THE ECONOMY AND REGIONAL TRADE The financing capacity of any government is crucial to ensuring that the social contract with its population is respected. Wealth creation, as measured by gross domestic product (GDP), is one of the factors that influence that capacity. The average GDP in West Africa has dropped from 4.4% in 2021 to 3.8% in 2022, an indication that the recovery from the 2020 downturn has slowed.12 The level of wealth in each region in 2022 is shown in the map below. It also provides the GDP growth rate per capita, and its evolution between 2021 and 2022. Figure 3. GDP and GDP per capita

Note: Map prepared and data calculated by the author using World Bank data.

According to World Bank data, Cabo Verde, Côte d’Ivoire, Ghana and Nigeria are the richest countries in the region, with GDP per capita of between USD 2 176 and USD 3 903. Countries with fewer resources per capita include Niger, Chad, Liberia, Sierra Leone and Guinea Bissau. Of the 17 countries, 9 recorded a drop in GDP per capita. Another important consideration is the distribution of the income generated by the economy and the level of poverty. According to the World Bank, the income of the poorest 40% of the population decreased in close to one third of the region’s countries in 2015.13 The post-Covid period has been marked by record inflation rates, which have bolstered this trend. Inequalities are widening due to the lack of shared prosperity. This is exacerbating the food access crisis which is a contributing factor to the situation in which 83 million people were under food pressure in April 2023, as compared with just 23 million in April 2018, an increase of over 60 million.14 The depreciation of national currencies against the US dollar is also having an impact on the regional economy. Except for the Guinean franc, which has appreciated against the dollar in the past five years, all currencies in the region have depreciated, ranging from 5.5% in Chad to 54.8% in Nigeria.15 This is one of the factors behind the persistence of inflation. However, the situation seems to have improved over the past twelve months.

FOOD AND NUTRITION SECURITY – ANALYSIS NOTE

The value of the Nigerian Naira against the US dollar rose to 45.14% in one year. Sierra Leone’s national currency showed the second-best performance: it reduced its depreciation by 27 points in one year. The Gambian Dalasis registered the third-best increase in value with a rise of 17.07 points in that same period. Conversely, the Ghanaian Cedi gained 19.13% in value against the US dollar in one year. During the same period, the CFA zone currencies in West and Central Africa appreciated by 5.88%. In some countries, central bank policies aimed at reducing the money supply in circulation have undoubtedly had an effect on the appreciation of their currencies against the US dollar. Figure 4. USD exchange rate variance

Country

USD exchange rate variance Nov. 2018 to Nov. 2023 (5 years)

Nov. 2022 to Nov. 2023 (1year)

Benin

-5.61

5.88

Burkina Faso

-5.61

5.88

Côte d’Ivoire

-5.61

5.88

Cabo Verde

-5.55

5.9

Ghana

-59.03

19.3

Guinea

6.27

-0.4

Gambia

-26.22

-9.15

Guinea-Bissau

-5.61

5.88

Liberia

-16.66

-18.46

Mali

-5.61

5.88

Mauritania

-9.44

-3.48

Niger

-5.61

5.88

Nigeria

-54.82

-45.4

Senegal

-5.61

5.88

Sierra Leone

-47.2

-20.6

Chad

-5.52

5.9

Togo

-5.61

5.88

FOOD AND NUTRITION SECURITY – ANALYSIS NOTE

Countries are facing budgetary constraints and receiving support from their development partners. Food sector aid is invaluable, especially for Chad and the central Sahel countries. Between 2012 and 2021, food aid grew from USD 1.274 billion to USD 1.838 billion, an increase of 44%.16 Details are presented in the graph below. Figure 5. Variation in food aid between 2012 and 2021 58%

44%

-2% Humanitary

Development

Total food aid

Figure 6.

Food aid in the Sahel and West Africa (USD million)

1 662 977

1 172

1 103

1 350

1 625

1 324

1 518

1 549

268

289

2020

2021

776

296

2012

205

2013

215

257

2014

2015

279

262

207

2017

2018

2019

228

2016

Humanitary Development

FOOD AND NUTRITION SECURITY – ANALYSIS NOTE

Humanitarian aid allocations account for 84% of the volume of aid, dominating the food sector. They increased by 58% between 2012 and 2021, while allocations intended for development decreased by 2% over the same period.17 Although no consensual methodology for estimating the cost of an adequate response yet exists, the various evaluations of the Charter for Food Crisis Prevention and Management (PREGEC Charter), and other analyses, are unanimous on the low level of food aid effectiveness, due tied in part to the inadequate coverage of people and needs. Food aid amounts are unlikely to increase significantly given the budgetary constraints in several donor countries, some of which have frozen their official development assistance for 2024 or extended the deadline for achieving their target (0.7% of their GDP) to 2030. It is also important to consider the significant increase in humanitarian needs in other parts of the world, including the Middle East, Ukraine, East Africa, Yemen, Afghanistan, and others. Trade and regional markets have developed considerably over the past few decades. Trade in food markets alone was estimated at a minimum of 160 billion dollars in 2015. However, the growth of West African trade continues to be hampered by the lack of quality transportation infrastructure and barriers along corridors and at borders. Obstacles to regional trade (restrictions on cereal exports or the movement of transhumant livestock, illegal taxation, as well as road and border harassment) explain the very high transaction costs. The number of checkpoints has doubled on the Lomé Ouagadougou corridor as compared with 2013, a jump from 14 to 29 according to the latest Borderless Alliance verification mission (2015). Despite efforts made to curb the problem (warning systems at the borders and on the roads, etc.), the phenomenon persists. Moreover, it is exacerbated by the security crisis, with huge additional transportation costs in areas that are difficult to access. Moreover, the recent political crises have led to restrictions within the regional trade area because of the sanctions imposed by the Economic Community of West African States (ECOWAS) on Niger, particularly on the Niger Nigeria and Niger Benin borders. As a result, there is a risk that food and nutrition insecurity will deteriorate due to disruptions to local food systems, including a supply surplus and lower prices in supply areas coupled with a risk of shortages and higher prices in destination areas.

Messages

•

Analyses show that there is a risk of sustained inflation in the region, which would aggravate the food and nutrition security situation of poor and vulnerable populations. Cross-border areas affected by insecurity will be further impacted by the volatility and inflation resulting from distortions and restrictions on regional trade. This situation may intensify food and nutrition insecurity by aggravating the access crisis for vulnerable populations.

•

Governments in the region will need to solve the equation of the growing basic social needs of their populations in the face of reduced financing capacity due to a combination of factors. These include a decline in GDP per capita in most countries, the likelihood of a decrease in development aid, depreciation of national currencies against the US dollar, and the burden of debt on national budgets.

FOOD AND NUTRITION SECURITY – ANALYSIS NOTE

INSECURITY AND CONFLICT IN THE REGION Insecurity is on the rise in the central Sahel and the Lake Chad Basin. According to the Sahel and West Africa Club Secretariat,18 77% of violent events and 86% of deaths between January 2022 and September 2023 took place in Burkina Faso, Nigeria and Mali. The same source indicates that Burkina Faso is now the second most affected country, just behind Nigeria. Conflicts have a damaging impact on local economies, leading to forced population displacements. The number of internally displaced people in the region reached 6.7 million in October 2023; Nigeria accounts for 52% of the total, followed by Burkina Faso with 31%. Mali and Chad each have a 6% share, while the figure for Niger is 5%. Also, there are some 1.4 million refugees in the region. Moreover, insecurity now threatens the north of Togo, Benin and Côte d’Ivoire. At the national level, insecurity generates economic uncertainty, which slows foreign investment. It also changes the spending priorities of governments, which have to invest more in the security of their populations to the detriment of basic social services and productive investments. Between 2012 and 2022, military spending in the region reached USD 59 billion. In 2022 alone, it amounted to USD 7.25 billion, four times the value of aid granted to the food sector.19 This represents an additional USD 3 billion in 10 years, an increase of 71%.20 In 2002, the region invested USD 1.356 billion in the military sector, five times less than it currently does. The countries of the central Sahel and the Lake Chad Basin (Chad, Mali, Niger, Burkina Faso and Nigeria) accounted for 66% of those expenditures in 2022. Burkina Faso, Mali and Niger account for 8%, 7% and 3%, respectively, of military spending, while the figure for Nigeria is 43%. Côte d’Ivoire, Senegal and Togo devote substantial amounts to the sector, accounting for 8%, 6% and 5%, respectively, of the regional total. In those three countries, military spending increased by 106% between 2012 and 2022.21 This shows that even countries not yet affected by this scourge are stepping up their military and surveillance resources to deal with any eventuality.

FOOD AND NUTRITION SECURITY – ANALYSIS NOTE

Figure 7. Military expenditures in the Sahel and West Africa (USD)

2 464

1 484

312

4 787

2 762

1 044 2002

2012

2022

Central Sahel and Lake Chad Basin Other countries

Message •

Extensive military spending drastically reduces the already weak capacity of the countries concerned to cover social expenditures and respond to food and nutrition insecurity. Failure to deliver on the social contract could lead to frustration, a source of social discontent that could in turn provoke political instability. to cover social expenditures and respond to food and nutrition insecurity. Failure to deliver on the social contract could lead to frustration, a source of social discontent that could in turn provoke political instability.

FOOD AND NUTRITION SECURITY – ANALYSIS NOTE

NOTES http://dotstat.oecd.org/Index.aspx?DataSetCode=AFDDANN, consulted on 5 October 2023. http://dotstat.oecd.org/Index.aspx?DataSetCode=AFDDANN

[1]

World Bank (2023), Global Economic Perspectives June 2023, World Bank, Washington, DC.

[2]

World Trade Organization (2023), “World Trade Outlook and Statistics”, October.

[3]

AMIS (2023), A Look at Global Rice Markets—Export Restrictions, El Niño, and Price Controls, https:// www.amis-outlook.org/events/detail/en/c/1156626/

[4]

https://www.trademap.org/Country_SelProduct, consulted on 7 November 2023.

[5]

AMIS, op. cit.

[6]

OECD/FAO (2023), OECD-FAO Agricultural Outlook 2023–2032, OECD Publishing, Paris, p. 152, https://doi.org/10.1787/08801ab7-en. https://doi.org/10.1787/08801ab7-en

[7]

Author’s calculations based on International Trade Center data https://www.trademap.org/ https://www.trademap.org/, consulted on 12 October 2023.

[8]

OECD-FAO, op. cit., p. 147.

[9]

International Trade Center, op. cit.

[10]

AMIS, op. cit.

[11]

African Development Bank (2023), West Africa Economic Outlook 2023, African Development Bank, Lomé, Togo.

[12]

https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?view=chart consulted on 4 https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?view=chart, November 2023. Author’s calculation based on the results of the Harmonised Framework, April 2018 and April 2023.

[13] [14]

https://www.xe.com/fr/currencycharts/?from=XAF&to=USD&view=5Y consulted on 10 https://www.xe.com/fr/currencycharts/?from=XAF&to=USD&view=5Y, November 2023.

[15]

OECD, https://stats.oecd.org/OECDStat_Metadata/ShowMetadata. ashx?Dataset=TABLE2A&ShowOnWeb=true&Lang=en, consulted on 3 November 2023. ashx?Dataset=TABLE2A&ShowOnWeb=true&Lang=en

[16]

Ibid. SWAC/OECD (2023), Facts and Figures: Urbanisation and Conflict in North and West Africa, OECD Publishing, Paris. https://www.oecd.org/swac/topics/security/urbanisation-conflictsnorth-west-africa-brochure.pdf

[17] [18]

Author’s calculations based on data from the Stockholm International Peace Research Institute, https://www.sipri.org/databases/milex https://www.sipri.org/databases/milex, consulted on 3 November 2023.

[19]

Ibid.

[20]

Ibid.

[21]

FOOD AND NUTRITION SECURITY – ANALYSIS NOTE