Agriculture and economic experts have warned that low tobacco prices and the country’s continued dependence on the top foreign exchange earner pose economic challenges.
Mwapata Institute research fellow Christone Nyondo said in an interview yesterday that if prices offered at the tobacco market season’s start at Lilongwe Floors on Wednesday persists, it could harm the country’s foreign exchange reserves and trade balance.
The opening day of the 2025 Tobacco Marketing Season exposed deep market distortions, with prices ranging from $1.20 (about K2 275) to $3.20 (about K5 600) per kilogramme (kg), triggering a temporary suspension of sales amid protests.
Nyondo said this means that the Reserve Bank of Malawi may find it challenging to stabilise the kwacha, leading to increased import prices for essentials such as fuel, fertiliser and medicines.
He said: “The market structure is dominated by an oligopoly. Buyers can collude to maintain low prices while farmers, especially smallholders, have little bargaining power.”
To address this imbalance, Nyondo said there is need for reforms to improve price transparency and increasing competition by, among others, empowering the Tobacco Commission, enforcing fair trade rules and incentivising the entry of new buyers.
Agriculture policy developmrnt expert Tamani Nkhono-Mvula, in an interview yesterday, warned that if such pricing patterns persist, the country’s fragile macroeconomic position could worsen.
He, however, expressed confidence that when the higher quality middle-leaf hits the market later in the season, the prices will improve.
“The government should strengthen farmer cooperatives and create transparent price-setting mechanisms. Otherwise, farmers remain at the mercy of market forces beyond their control,” he said.
Lilongwe University of Agriculture and Natural Resources agriculture economist Horace Phiri said yesterday that tobacco prices are inherently volatile and increasingly affected by global regulations and shifting demand.
“We must diversify our export base into less volatile, higher-value crops such as macadamia and avocado while also investing in agro-processing and non-agricultural sectors such as tourism and information and communications technology,” he said.
A closer look at historical data reveals a volatile trend. Tobacco earnings fell from $408.2 million in 2021 to $372.9 million in 2022, before recovering to $404 million in 2023 and soaring to $545 million in 2024.
While tobacco’s share of exports rose sharply from 40.75 percent in 2021 to 57.39 percent in 2024, its contribution to import financing remained modest, increasing only slightly from 13.3 percent to 16.97 percent over the same period, according to Reserve Bank of Malawi data.
