FAO reveals US$105B hidden costs in Nigeria’s Agri-food system underscoring global need for true cost accounting

NIGERIA – A recent report by the Food and Agriculture Organisation (FAO) has shed light on the environmental, health, and social hidden costs of Nigeria’s agrifood system, which amounted to at least $105.13 billion in 2020.

The comprehensive 154-country study found that the global hidden costs of agrifood systems reached an astonishing US$12.7 trillion, underscoring the need for true cost accounting to inform policy decisions.

While current food systems play a crucial role in providing nourishment and sustaining the economy, the FAO report highlighted the substantial hidden costs imposed on health and the environment.

The study indicated that lower-middle-income countries exhibit the highest variation in the distribution of quantified hidden costs.

“In Nigeria and the United Republic of Tanzania, social hidden costs associated with poverty and undernourishment dominate, while in Pakistan, Vietnam, and particularly Egypt, it is those resulting from unhealthy dietary patterns causing obesity and non-communicable diseases (NCDs), as more commonly seen in high-income countries.”

Nigeria’s share of global hidden costs in the world’s food system stands at 0.8%, with the country contributing to 51.1% of total hidden costs in West Africa, amounting to $205.89 billion.

Hidden costs represent expenses to individuals or society that are not reflected in market prices. These costs are measured in terms of losses linked to declines in productivity or environmental damage, comparable to GDP purchasing power parity based on market transactions.

The report emphasized that the sustainability of agrifood systems is undermined by these hidden costs, which remain concealed behind price tags and go unaccounted for by the stakeholders in agrifood systems.

The hidden costs, including water pollution, biodiversity loss, and non-communicable diseases, are driven by negative externalities, market failures, spillovers, policy shortcomings, and institutional failures.

To transition agrifood systems toward sustainability, the report recommends the measurement and valuation of these hidden costs across environmental, social, and health dimensions.

FAO’s report, representing initial estimates, is the first to disaggregate these costs down to the national level, making them comparable between countries and cost categories.

The organization plans to dedicate two editions of The State of Food and Agriculture to this theme, with the next report focusing on in-depth targeted assessments to identify the best ways to mitigate these hidden costs.

The report urged governments to use levers such as taxes, subsidies, legislation, and regulation to transform agrifood systems and address the challenges related to the climate crisis, poverty, inequality, and food security.

QU Dongyu, FAO Director-General, emphasized the importance of appreciating all food producers, regardless of their size, and acknowledging these true costs in the face of global challenges.