In October, President Muhammadu Buhari presented an Appropriation Bill of N20.51trn ($43.7bn) for the fiscal year 2023 to the joint session of ... the lower and upper Chambers of the National Assembly. He described the 2023 proposed budget as one “of fiscal sustainability and transition" - his very last budget as Nigeria's president. However, what financial legacy is he leaving behind?
In 2010-2011, soaring commodity prices, particularly for wheat, were among the main causes of the uprising in the Arab world. Today, the conflict between Russia and Ukraine is putting a strain on many economies dependent on wheat imports from these two countries, especially in North Africa. Will we see a new “Arab Spring?” Here’s a look at the situation in North Africa’s four most populous countries.
One month after the outbreak of the Russian-Ukrainian conflict, Alexander Zolotov, the Russian Federation’s ambassador to Tunisia, has confirmed that Moscow is willing to “continue to contribute to Tunisia’s food and energy security.”
Energy expert Mustapha Haddad underlines “a great dependence on foreign countries with about 57% of the country’s energy needs imported, as well as an electricity mix almost exclusively dependent on natural gas at 97%.”
Given that it is not able to deploy an operational emergency plan and implement a crisis strategy, Tunisia can only rely on Algerian gas. Of the five billion cubic metres it consumes per year, two billion are produced in Tunisia and three billion come from Algeria, half of which is delivered in exchange for allowing the gas pipeline to pass through Tunisian territory. The remaining 1.5 billion cubic metres are subject to a contract.
But demand in Tunisia is growing and will have to deal with the availability of gas and the saturation of the gas pipeline, as well as with unforeseen costs in its budget.
“The winter is over in Europe, unless there is a surprise, we have passed the course for 2022, but it will be necessary to carry out negotiations and programming for 2023,” says an engineer from the Tunisian Company of Electricity and Gas (Steg).
What applies to energy is also relevant to cereals and oilseeds. With annual needs of 1.5m tonnes of soft wheat, 1m tonnes of barley and 0.5m tonnes of durum wheat, Tunisia relies on the international market to cover 50% of its consumption needs and depends on Ukraine for 40% of its soft wheat.
The current flour, semolina and derivatives shortages are mainly due to the appetite of the Libyan market, which is drying up the availability of these products, which are subsidised by the state and can be found on the two countries’ black markets.
This tension in the agri-food sector, and cereals, in particular, reflects the upward trend of world markets in post-Covid-19 recovery and threatens the country’s food security.
Tunisia had succeeded, despite its exsanguinated public finances, in securing its supplies by the end of 2021. However, this was before the effects of the war in Ukraine were being felt. Furthermore, it is now difficult to predict how much the cost of transport will increase as well as the availability of nitrogenous fertilisers, of which Ukraine and Russia are producers.
According to the FAO, a lack of cash combined with a war taking place thousands of kilometres away places Tunisia among the countries susceptible to famine.
“It seems that we have not learned the lessons of the 2008 crisis, which weakened our countries and social balance and fuelled the revolts that occurred a few years later. Agriculture’s place within the scope of public policies must be redefined. But the European Union (EU) would also do well to look a little more toward the southern Mediterranean. Otherwise, migration problems will get worse,” says Leith Ben Becher, farmer and founder of the Tunisian Farmers’ Union (Synagri).
In the kingdom, anger was already brewing. However, the Russian-Ukrainian war will likely make the situation worse. At the beginning of February, 23 days before Russia’s invasion of Ukraine, protests against the high cost of living broke out all over the country, with calls demanding the resignation of Aziz Akhannouch, the head of government who had been appointed in September 2021. For months, inflation (+4.7%) has been eroding Moroccans’ purchasing power.
All prices have increased: +14% for mineral water, +5% for oil and +6% for flour, while the minimum wage is about €240. This is not only due to a 2-year health crisis, sluggish economic growth (0.7%) and a very serious drought, but also the combined effects of global inflation and the war in Ukraine.
On 16 March, fuel prices reached an all-time high: 11.93 MAD (€1.11) per litre for diesel and 14.18 MAD (€1.32) per litre for petrol. Moroccans were so surprised that many decided to capture the event with their smartphones.
As the month of Ramadan approaches – a time when Moroccans significantly increase their food consumption, particularly wheat – national agricultural production has fallen by 75%, from 103.2m quintals in 2021 to 25m quintals in 2022. In recent years, the kingdom has experienced a series of increasingly long and intense droughts due to lack of rainfall. Since 2018, cereal production has even been divided by three, while the dams do not exceed a filling rate of 30%. Yet the country is dependent on its agricultural sector, which represents 14% of GDP.
Every year, Morocco imports between 60 and 75m quintals of grain from the US, France, Canada and Ukraine. Although Ukrainian wheat imports do not exceed 26%, the price per tonne of wheat has risen by 21.3% since last year.
Reassuringly, the Moroccan government has announced that the country’s wheat stock will last for more than 5 months, until September 2022. The kingdom will therefore not suffer from a shortage, but it will pay a high price for its wheat, which will further increase the budget deficit, already estimated at 6.5% of GDP.
The Moroccan economy is thus walking a tightrope. The government has mobilised itself and put in place a series of emergency measures. These include a “drought insurance” for farmers and smallholders for a total amount of €1bn, flour subsidies and suspending customs duties for wheat.
Many observers feel that these measures will not be enough to stem the multidimensional crisis. Some advocate structural rather than cyclical reforms: fighting the cash economy, reforming the tax base and even changing the economic and agricultural model.
The national economy’s other pillar is tourism, which has been slowly recovering ever since borders reopened on 7 February. Although several experts in the sector affirm that Morocco could reach the number of pre-pandemic tourists (13 million) it had before 2023, the surge in oil prices could limit how far many travellers can go.
If in the coming months the Akhannouch government – whose main mission is to lead the generalisation of social protection – does not manage to stay the course, the spectre of social protest could become a reality.
Since the beginning of the war, the price of many foodstuffs has risen unprecedentedly. The price of bread, a staple of the Egyptian diet, rose by 50%, while the price of a tonne of flour rose from £8,500 to £11,000. While this increase is partly due to the Russian-Ukrainian war, some accuse traders of trying to take advantage of the conflict to speculate.
“Egypt is one of the countries most affected by the war-related crisis. It depends on Russia and Ukraine for the import of essential commodities, including wheat and corn,” Elhami al-Merghani, a member of the political bureau of the opposition Socialist People’s Alliance Party, told us.
The world’s largest wheat importer, Egypt purchased 12.4m tonnes of wheat in 2021, 80% of which comes from Russia and Ukraine.
Fearing a popular revolt, the government is trying to reassure a population of 103 million. Campaigns have also been launched to track down traders who are monopolising commodities such as flour. The armed forces, police and government have announced that they are providing the market with a large quantity of low-cost foodstuffs through sales exhibitions. The government has also given some flour to the private market to help stabilise prices and announced a freeze on bread prices.
The state has also banned the export of five commodities, including pasta, lentils, beans and wheat. Although the government hopes that local wheat production will be able to cover this year’s needs, it has forced farmers to sell 60% of their harvest to the state.
“There is anger at the price hike, especially for bread. There is a palpable impatience with the economic policy adopted by the regime, which has harmed the poor and middle classes. The population’s poverty rate has now reached 60% in Egypt,” says researcher Abdel Khalek Farouk, president of the independent Nile Centre for Economic and Strategic Studies.
“From the beginning of the crisis, the government reacted quickly to anticipate any aggravation. The government has also changed its usual discourse and no longer talks about the possibility of no longer subsidising bread. Sissi’s regime is obviously afraid of the repercussions of this crisis, including a popular revolt,” he adds.
“I don’t have any semolina today, but you can find it in other shops,” the manager of a grocery shop in Kouba tells a young woman who is worried about not finding the product on the shelves.
In Algeria, even though there is no shortage of flour and semolina yet, the population is anxiously stocking up and emptying its shelves on the eve of Ramadan. The country has not yet started panicking because it has enough security stock to cover domestic needs until the end of the year, according to the Ministry of Agriculture.
After a poor harvest in 2021 (-38%), Algerian cereal imports, mainly soft wheat, have risen by 25%. As Africa’s second largest wheat consumer and the world’s fifth largest cereals importer – behind Egypt, China, Indonesia and Turkey – Algeria will inevitably be affected by the war in Ukraine, according to Mokrane Nouad, an agri-food consultant.
“It is true that Algeria is benefiting from the explosion in oil prices, but as a net importer of consumer food products, whose prices have also soared, shortages are possible,” the expert told us.
He added: “Ukraine accounts for 50% of world production. Its customers will fall back on Canada. The European countries will favour the option of trading among themselves. Prices will rise and we will reach a point where demand can no longer be met, even though we are only at the beginning of this crisis.”
Algeria imports soft wheat from France, Canada, Germany, the US, Spain, Mexico and, since 2021, Russia. However, Nouad feels that it is time “to develop strategic products at home to guarantee our food security and preserve our sovereignty.”
Russia and Ukraine also account for 20% of world maize exports and 30% of barley, the main cereals used in the livestock sector. “In the long term, we must fear a shortage of meat, milk and eggs in Algeria. The entire food system will be disrupted,” concludes the expert. On 15 March, Algeria decided to ban the export of sugar, pasta, oil, semolina and all wheat derivatives.
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