How a depreciating currency is subduing Liberia’s vegetable trade With the fourth highest rate of inflation in Africa, consumer prices in Liberia are projected to increase by 24.5% this year.1 We explore how a rapidly depreciating Liberian dollar is driving up costs and compounding some of the problems already facing the people who make a living from the vegetable trade. Depreciation of the Liberian dollar (LRD) against the USD Beyan Zizivily’s cabbages are the only “Issues of liquidity, and a persistent decline in the value of our currency, constant between the compounded by reducing inflows of foreign exchange and secluded garden nestled investments…[have] placed upward pressure on inflation” – President into the hills of Lofa County and the hubbub George Weah, September 2019 of Monrovia’s (Source: xe.com) Gorbachop vegetable market. The birdsong and gentle thud of ripened bitter balls landing in buckets are a far cry from the loudspeaker blaring Hipco beats and the shouts of market traders attracting customers to their stalls. But Zizivily and the market traders share the same concern: the increasing cost of The LRD has depreciated sharply against the USD since mid-2017. The growing his cabbages, Central Bank of Liberia (CBL)’s depleted foreign exchange reserves and the depressed mean it has been unable to respond to economic shocks caused by low market conditions in export earnings (due to depressed iron ore and rubber prices), which they are sold. combined with a low level of foreign investment and capital inflows. Unaffordable inputs The CBL has also reported a growing demand for foreign currency for for farmers the import of basic commodities, such as rice, as domestic production remains low, further compounding the depreciation of the LRD. Liberia’s economy, including the agricultural sector, is characterised by a dual currency system. Imported agricultural inputs such as seeds, fertiliser and pesticides are purchased from distributors and suppliers from Monrovia and neighbouring countries in United States dollars (USD) by agro-dealers and traders. These agro- dealers and traders then sell them onto farmers in Liberian dollars (LRD). In turn, farmers sell 1 https://www.imf.org/en/News/Articles/2019/06/11/pr-19208-imf-executive-board-concludes-2019-article- iv-consultation-with-liberia their produce to market traders and consumers in LRD. A depreciating LRD reduces farmers’ purchasing power; inputs are becoming more expensive for farmers who are now unable to purchase as much product with each Liberian dollar. “Whether the rate goes up or not, you are Increase in costs for forced to buy fertiliser, insecticide, fungicide if you want to grow vegetables,” says Zizivily, farmers and traders whose already modest profit margins earned from growing cabbage, hot pepper and bitter 67% ball have tightened significantly in the past year. “So once the chemical price increases I try to increase my production to cover it.” But that’s easier said than done, and many 58% farmers lack the capital to buy their own inputs, relying instead on their buyers to supply them with seeds and fertiliser – as well as food – and Transport Agro-Inputs deduct the cost from their post-harvest Qualitative data collected by GROW during payment. These buyers are also struggling, conversations with farmers and market traders in May meaning inputs are often delivered to the and June 2019 on price increases since January 2018 farmers late and in insufficient quantities. Many farmers find their yields decreasing as a result. “Often we’re planting and find the market traders are not ready to give us fertiliser,” complains Emmanuel Wokpeh, a farmer from Yanniquelleh in Bong County. “Sometimes we’re almost at the harvesting time before they bring it, and we don’t have the financial strength to buy on our own.” One such market trader is 53-year-old Oretha Doe, who buys cabbage and salad items from farmers in Nimba County for onward sale in markets across Monrovia. “I give the seed, I give the fertiliser, I give the chemicals,” she says. “But right now there’s no money to buy fertiliser and chemicals. It’s getting more expensive. I can’t afford to buy the 500g [of fertiliser] that I used to give out. So I give 200g.” Agro-dealers’ weakened customer base Agro-dealers also suffer as their products become less affordable for their customers. They grow reluctant to place large orders for replacement stock which they struggle to shift, while smaller orders cost more per unit. “I used to sell fertiliser for LRD5,000,” says Pewee Y. Beyan, owner of Beyan Business Center in Zorzor, Lofa County. “It’s presently LRD4,500 in Monrovia. It cost LRD3,500 Pewee Y. Beyan is reluctant to replenish his stock due to his customers’ declining purchasing power just two months ago, and I’m also paying LRD200 for transportation to bring it up. So how will we sell?” Other agro-dealers source their stock from neighbouring Ivory Coast and Guinea. This piecemeal overland supply chain already means that costs are higher than they should be. And dealers’ business costs are increasing further as they exchange their LRD earnings first into USD and then the foreign currency. The depreciating rate is eating into their profit margins and making their newly purchased stock ever less affordable for the farmers. “Every time we go to Ivory Coast the prices change,” says Gertrude Gboko, an agro-dealer from Ganta in Nimba County. Rising fuel prices for transporters Transporters, who are a vital link in the farm-to-market chain, also operate in LRD. Their biggest concern surrounding the LRD:USD depreciation is its effect on fuel prices. “The price of fuel has become exorbitant!” exclaims Abraham Zuo, 37, who transports goods between Monrovia and Ganta. “A few years back we used to buy fuel for LRD350 per gallon. But now it has gone up to LRD700, and after the subtraction of the fuel cost we find ourselves with nothing.” Transporter Kokou Mai Yahgbo, who plies the poorly maintained route from Monrovia to Voinjama in Lofa County, is also feeling the hit of the rising cost of repairs and replacement parts for his vehicle. “Because we are straining ourselves to go in we must increase the price of the transport,” he says. “That’s how we do things.” The transporters have no option but to pass on the higher cost to the farmers and market traders, who are already suffering from inflated input prices. “Before, we were taking one flour bag of cabbage from Ganta to Monrovia for LRD200,” says Zuo. “Now we are carrying it for LRD300. But we don’t always receive the full amount because people say things are not easy and they too face difficulties in selling.” “The market is not moving” And indeed, the challenges are not over once the vegetables reach the market. Prices are set according to demand rather than the cost of production, and the value of the vegetables drops during the main harvesting periods when there is a glut of produce.“We need to sell it for more but right now the price is not high,” says trader Oretha Doe. “One sack of cabbage presently fetches LRD1,500. But when it’s scarce in the market we can sell it for LRD3,000.” The current price combined with the new Garmo Paye has plenty of cabbages to sell, but finds her customers at currency-related pressures Monrovia’s Gorbachop Market are buying in smaller quantities means farmers and traders are barely able to cover their costs, let alone think of profits. Sixty-seven-year-old Garmo Paye has been buying cabbage from farmers in Nimba County and bringing it to sell at Monrovia’s Red Light market for the past 45 years. Recently, she’s noticed a decline in the number of customers coming to buy. “I carry down plenty but people are buying small-small,” she says, as she peels the wilting outer leaves from a large pile of cabbages between two market stalls. “The leaves are growing brown as the market is not moving.” Anita Mato, 34, travels every week by road to Ivory Coast to buy tomatoes. She sells her tomatoes in Monrovia in LRD, but is required to exchange her earnings into USD and then CFA francs in order to purchase more. The multiple conversions combined with the depreciating rate are making her operations much more expensive. This, combined with a recent scarcity of tomatoes in Ivory Coast and the increased transportation cost, has led her to almost double the price of a carton of tomatoes in the past year. But consumers are not keeping up. “We have to increase the prices here and the business is not going,” says Mato. Farmers are the hardest hit While imported vegetables such as tomatoes are becoming dearer in the local markets, the same does not apply for domestic produce, whose prices remain more firmly dictated by market demand. Farmers, being forced to commit to individual buyers on whom they depend for the provision of inputs and food before the harvest, are unable to control the market value of their produce.Nimba farmer Darius Gbonblee sums up the predicament of farmers across the country: “The price of our produce is coming down but the Farmers are not receiving a better rate for their produce to compensate for price of the materials required for the the depreciating currency work is going up.” About GROW Liberia GROW is an agri-business and investment advisory program that partners with businesses, investors, associations, and government agencies to accelerate inclusive economic returns within high growth industries in Liberia.