AKADEMIYA2063-Ecowas Regional Learning event: Trade in Times of COVID-19 Pandemic
1. TRADE IN TIMES OF COVID-19 PANDEMIC:
EFFECTS OF GLOBAL PRIMARY COMMODITY MARKET DISRUPTION
ON GROWTH AND POVERTY IN WESTERN AFRICA
Ismael FOFANA
AKADEMIYA2063 - Director for Capacity and Deployment
West Africa Regional Learning Event – February 11, 2021
2. 1. Introduction
Impact of the COVID-19 pandemic on primary commodity prices: A mix picture
Changes in primary commodities prices between 2019 and 2020, percentage point difference between estimated and predicted prices for 2020
-40
-30
-20
-10
0
10
20
30
40
Coal,
Australia
Crude
oil,
avg
Natural
gas,
Europe
Natural
gas,
US
Natural
gas
LNG,
Japan
Cocoa
Coffee,
Arabica
Coffee,
Robusta
Tea,
auctions
(3),
average
Coconut
oil
Groundnut
oil
Palm
oil
Soybean
meal
Soybean
oil
Soybeans
Barley
Maize
Rice,
Thailand,
5%
Wheat,
US,
HRW
Bananas,
US
Meat,
beef
Meat,
chicken
Oranges
Shrimp,
Mexico
Sugar,
World
Logs,
Cameroon
Logs,
Malaysia
Sawnwood,
Malaysia
Cotton
A
Index
Rubber,
Malaysian
Tobacco
DAP
Phosphate
rock
Potassium
chloride
TSP
Urea,
E.
Europe,
bulk
Aluminum
Copper
Iron
ore
Lead
Nickel
Tin
Zinc
Gold
Silver
Platinum
3. 1. Introduction (Cont’d)
High contribution of primary commodities in exports of West African countries
Share of primary commodities in total IMPORTS
Share of primary commodities in total EXPORTS
0 10 20 30 40 50 60 70 80 90 100
Guinea-Bissau
Nigeria
Ghana
Sierra Leone
Mauritania
Burkina Faso
Niger
Côte d’Ivoire
Benin
Guinea
Cabo Verde
Mali
Senegal
Gambia
Liberia
Togo
0 10 20 30 40 50 60 70 80 90 100
Gambia
Benin
Senegal
Côte d’Ivoire
Burkina Faso
Mali
Guinea-Bissau
Nigeria
Guinea
Togo
Cabo Verde
Sierra Leone
Mauritania
Ghana
Niger
Liberia
4. 1. Introduction (Cont’d)
Mix of agricultural and mineral commodities in the export basket of West African countries
Percentage Share of Selected Primary Commodities in the Export Basket of West African Countries
Petroleum
Petroleum
Petroleum
Petroleum
Petroleum
Petroleum
Petroleum
Cocoa
Cocoa
Cocoa Cocoa
Cocoa
Cotton
Cotton
Cotton
Cotton
Cotton
Cotton
Nuts
Nuts Nuts
Nuts
Nuts
Nuts
Nuts
Nuts
Wood
Wood
Fish
Fish
Fish
Fish
Fish
Fish
Aluminium
Aluminium
Aluminium
Copper
Iron
Iron
Iron
Iron
Titanium
Titanium
Diamonds
Gold
Gold
Gold
Gold
Gold
Gold
Gold
Gold
Gold
Gold
0
10
20
30
40
50
60
70
80
90
100
BEN BFA CBV CIV GMB GHA GIN GNB LIB MLI MRT NER NGA SEN SRL TGO
5. 1. Introduction (Cont’d)
Objective: Assess the effects of changing international
commodity prices and global market disruptions on economic
growth and poverty in Western Africa, with focus on:
• Agricultural Commodities
• All Primary Commodities
Geographical coverage: 16 West African countries
Benin, Burkina Faso, Cabo Verde, Côte d’Ivoire, Gambia,
Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Mauritania,
Niger, Nigeria, Senegal, Sierra Leone, Togo.
6. 2. Analytical Framework and Data
• Simulation models (Akademiya2063 / ReSAKSS)
Single-Country CGE Models
Micro-Simulation Models
• World Development Indicators database (World Bank)
Macroeconomic data (2019/2018)
• Statistics on international trade (United Nations)
Import and export data (2019/2018)
• Primary commodity price database (World Bank)
Monthly price estimates for 46 primary commodities
Annual price predictions (Commodity market outlook released
in April and October)
Update the
Simulation
Models
Build the
Price
Scenario
7. 3. Scenarios
Changes in the international price of primary commodities
(Price Shock)
• Commodities Prices Estimate for 2019 and 2020 (COVID
Scenario)
• Commodity Prices Outlook for 2020 released on October 2019
(Baseline or BaU Scenario)
Disruption of global trade conditions and market access
(Trade Shock)
• Sensitivity tests on trade elasticities; i.e., from “minor disruptions”
to “severe disruptions”
8. 3. Scenarios (Cont’d)
Export price scenario is based on the composition of the basket of primary
commodities exported by each country
Changes in Prices of Top Primary Commodities Exported by
Ghana (%)
Share of Top Primary Commodities in Ghana’s Total Exports
in 2019
Gold 37.0 %
Petroleum 31.7 %
Cocoa 16.0 %
Fish 1.2 %
Palm oil 0.6 %
Wood 0.5 %
Aluminium 0.5 %
Rubber 0.4 %
Other primary commodities 2.0 %
Other commodities 10.2 %
21.6
-27.3
0.6 1.1
28.9
1.1
-3.1
1.3
Gold
Petroleum
Cocoa
Fish
Palm
oil
Wood
Aluminium
Rubber
9. Share of Top Primary Commodities in Ghana’s Total
Imports in 2019
Changes in Prices of Top Primary Commodities
Imported by Ghana (%)
3. Scenarios (Cont’d)
Import price scenario is based on the composition of the basket of primary
commodities imported by each country
Rice 3.6 %
Petroleum 2.7 %
Wood Product 2.8 %
Fish 2.0 %
Wheat 1.5 %
Sugar 1.5 %
Palm Oil 1.3 %
Iron Products 7.2 %
Other primary commodities 4.6 %
Other commodities 72.7 %
18.4
-27.3
1.1 1.1
4.3
-1.7
28.9 29.4
Rice
Petroleum
Wood
Product
Fish
Wheat
Sugar
Palm
Oil
Iron
Products
10. 3. Scenarios (Cont’d)
Deterioration in the TOT for agricultural commodities in most WA countries
Changes in the Terms of Trade for ALL PRIMARY COMMODITIES,
Percentage Point Difference between COVID vs. BaU Scenarios
-20 -10 0 10 20
Benin
Guinea Bissau
Nigeria
Mali
Burkina Faso
Sierra Leone
Gambia, The
Niger
Ghana
Guinea
Cote d'Ivoire
Togo
Liberia
Cabo Verde
Mauritania
Senegal
Changes in the Terms of Trade for AGRICULTURAL COMMODITIES,
Percentage Point Difference between COVID and BaU Scenarios
-20 -10 0 10 20
Benin
Guinea Bissau
Nigeria
Mali
Burkina Faso
Sierra Leone
Gambia, The
Niger
Ghana
Guinea
Cote d'Ivoire
Togo
Liberia
Cabo Verde
Mauritania
Senegal
11. 4. Results
Negative growth effects of commodity price and trade shocks in most WA countries
Percentage point change in GDP growth, COVID vs. BaU Scenarios, Price and Trade Shocks
-6
-4
-2
0
2
4
6
Benin
Burkina
Faso
Cabo
Verde
Cote
d'Ivoire
Gambia,
The
Ghana
Guinea
Guinea
Bissau
Liberia
Mali
Mauritania
Niger
Nigeria
Senegal
Agriculture Primary
12. 4. Results (Cont’d)
Increase in poverty driven by agricultural commodity price and trade shocks
Changes in Poverty Headcount Ratio, COVID vs. BaU Scenario, Price and Trade Shocks (pp)
-2
0
2
4
6
8
10
12
14
16
Benin
Guinea
Bissau
Nigeria
Mali
Burkina
Faso
Sierra
Leone
Gambia,
The
Niger
Ghana
Guinea
Cote
d'Ivoire
Togo
Liberia
Senegal
Primary Agriculture
13. 4. Results (Cont’d)
Increase in urban and rural poverty in WA countries
Changes in urban
and rural poverty,
COVID vs. BaU
Scenarios, Agri.
Com. Price and
Trade Shocks (pp)
Changes in urban and
rural headcount
poverty rates,
COVID vs. BaU
Scenario, All Primary
Commodity Price and
Trade Shocks (pp)
-2
0
2
4
6
8
10
12
14
16
Benin
Guinea
Bissau
Nigeria
Mali
Burkina
Faso
Sierra
Leone
Gambia,
The
Niger
Ghana
Guinea
Cote
d'Ivoire
Togo
Liberia
Senegal
Urban Rural
-2
0
2
4
6
8
10
12
14
16
Benin
Guinea
Bissau
Nigeria
Mali
Burkina
Faso
Sierra
Leone
Gambia,
The
Niger
Ghana
Guinea
Cote
d'Ivoire
Togo
Liberia
Senegal
Urban Rural
14. Protect rural and urban populations
Scale social protection schemes
5. Conclusion
Export diversification
Increase the contribution of agricultural and food commodities in the export basket (e.g.,
Nigeria)
Increase the number of agricultural and food commodities in the export basket, i.e., raw
material, agri-food products, and processed food (e.g., Benin)
Support the rural economy
Increase public agricultural investments
Accelerate the implementation of agricultural policies