Acute on Chronic: Managing Shocks in the West African Food System

Over the past three years an unprecedented convergence of shocks, including the global pandemic, the war in Ukraine, and weather-induced production shortfalls has stressed an already vulnerable food system in West Africa. The combined impact of these acute shocks and chronic challenges, such as instability, low productivity, and limited access to technology, have drastically increased the number of food insecure West Africans. With more than 30 million people in a state of severe food insecurity, the region is currently experiencing its worst food crisis in more than a decade. 

Given these alarming food security trends, the World Bank Agriculture and Food Global Practice, together with the Disaster Risk Financing and Insurance Program, have assessed agriculture risks, management measures and financing mechanisms. The results are published in a new report, entitled Regional Risks to Agriculture in West Africa.

High exposure to production shocks

The work looks at agricultural production risks for six West African countries: Burkina Faso, Chad, Mali, Niger, Sierra Leone, and Togo. Via probabilistic analysis of historical production data, the report finds that the six countries combined can lose on average $700 million in any given year in important crops (yam, rice, maize, millet, sorghum, and fonio) with the potential for losses to climb to more than $1 billion every 5 years.
 

Production shortfalls mean undernourishment for millions 

The report also explores how production shocks affect levels of undernourishment by combining the results of the production risk analysis with data on the prevalence and depth of undernourishment in terms of kcal. Chronic undernourishment is already high in the six focus countries, amounting to some 17 million people. According to the simulation, a relatively frequent, medium severity production shock could push an additional 15 million people into undernourishment without disaster relief. A worse production shock could increase the number of undernourished by 18 million people (see Figure 1).

Figure 1: Total simulated increase in the number of undernourished people by severity of shock event, expressed in probability of occurrence, vis-à-vis chronic undernourishment (aggregated for Burkina Faso, Chad, Mali, Niger, Sierra Leone, and Togo)

^{Source: Authors’ calculations}

Unequipped to handle shocks

By taking stock of national and regional food reserves and dedicated financial resources, the report finds that the six countries can face enormous funding gaps following production shocks. For example, taking just one of the countries examined in this analysis, Niger, a medium-severity production shock is estimated to cause production shortfalls of $525 million and additional humanitarian intervention costs of more than $300 million. However, existing reserves and instruments can only provide the equivalent of around $61 million, leaving a combined funding gap of $768 million. For more severe shocks, the funding gaps become even larger (see Figure 2). In reality, funding gaps are likely even larger as countries’ entire shock response funding is currently employed to cover chronic food insecurity needs.
 
Figure 2: Estimated funding gaps* for medium and medium-severe production shocks of key food crops

^{Source: Authors’ calculations}

*Funding gap = difference between the combined production shortfalls and humanitarian response needs after a shock and the total available funding for a government from all sources (budget lines, contingency reserves/credit, sovereign insurance, lending).

Opportunities for strengthening agriculture risk management

Risk management measures (mitigation-transfer-coping) are required at national and regional levels and at all layers of risks. 

First, reducing chronic food insecurity and improving the resilience of food systems must be a key priority, e.g., by investing in agricultural productivity and integrating food markets. Otherwise, governments will always face funding shortages following shocks given limited resources. Second, countries should strengthen risk management instruments that use pre-arranged funding to respond to shocks instead of relying on costly ex-post funding. This implies, for instance, bolstering national disaster funds, food reserves and adaptive safety nets. Third, as many countries face similar risks, there are promising opportunities to risk management instruments across the region. Countries could pool resources to set up a regional support unit to build their technical capacity for disaster risk financing. For extreme shocks, West Africa could explore regional risk transfer solutions. For example, the regional Economic Community of West African States (ECOWAS) Food Security Reserve could benefit from reinsurance that protects it against the impacts of rare but large-scale production shortfalls. 

Over the next five years, the West Africa Food System Resilience Program (FSRP), aimed at reducing food insecurity and vulnerability to shocks, will support many of the above listed recommendations. Led by the ECOWAS and financed by the World Bank, the $700 million operation will promote agriculture risk management measures across at least seven West African countries covering a broad spectrum of production risks.