Despite the efforts of the federal government to nip in the bud rice smuggling into the country by banning its imports through the land border as well as grow local production through various incentives to farmers, smugglers keep testing the might of the government. CHIKA IZUORA looks at the intricacies and strategies deployed to put out the nefarious trade and what the nation stands to gain by being self-sufficient in rice production and as well as the plan to be a net exporter of rice.

Rice smuggling is an unfortunate trademark in Nigeria’s business environment and perpetrators appear so elusive that successive administrations have found rather too hard to eliminate. It is not that its implications on the economy is not fully understood by the authorities but experts in the economy and policy makers are yet to come to terms as to why it is still a thriving venture whose sponsors or promoters are yet to be located. Going by findings, Nigerian government has not issued any licences in the last three years for rice importation, but yet Iddo market in Lagos, reputed to be the biggest rice market even in West Africa, displays 99 per cent of foreign rice as at today, all which are products of smuggled rice from neighbouring countries.

Rice is one of the most consumed staples in Nigeria, with a consumption per capita of 32 kilograms. In the past decade, consumption has increased 4.7 per cent almost four times the global consumption growth, and reached 6.4 million tonnes in 2017 accounting for 20 per cent of Africa’s consumption, a PricewaterhouseCoopers (PwC) data indicated. As at 2011, rice accounted for 10 per cent of household food spending, and 6.6 per cent of total household spending, and given the importance of rice as a staple food in Nigeria, boosting its production has been accorded high priority by the government in the past 7 years. Significant progress has been recorded, rice production in Nigeria reached a peak of 3.7 million tonnes in 2017. Nigeria continues to rely on rice importation to meet growing rice demand, because of production and demand disparity on one hand and being that urban consumers generally have preference for imported rice as a result of its perceived higher quality.

World’s 3rd Largest Importer of Rice

However, in the past five years however, rice imports have declined 33.3 per cent reaching 2.7 million tonnes in 2017, a situation attributed to reduced demand as a result of government’s policies on import substitution – import tariffs and inclusion of rice in the list of 41 items ineligible for forex in the official market. But despite these, Nigeria remains the single largest rice importer in Africa and the world’s third largest with Thailand, India and Pakistan as its largest import sources. It would be recalled that on June 23, 2015, the Central Bank of Nigeria (CBN) announced that it would no longer provide foreign exchange for 41 items including rice.

The bank, argued that the move would encourage patronage of locally made goods, which also led to immediate increases in the prices of some of the items. In 2017, Audu Ogbeh, minister of agriculture, said the country’s rice imports from Thailand had dropped to 20,000 metric tonnes. Apart from killing local rice industry, the illicit trade is boosting the economy of Nigeria’s neighbors who are reaping revenue from import duties they charge, as well as creating job opportunities for their citizens.

A stakeholder who analysed this scenario said that because government has significantly reduced rice importation, the country on one hand has denied itself revenue it ought to generate from levies, taxes and on the other hand caused job loss as terminal operators with handling facilities do not have businesses anymore. Our source also informed that a whole chain is affected because transporters have been affected as those involved in haulage do not have jobs while mechanics engaged in repairs are also affected. While, he said, this would have indirectly afforded local rice producers opportunities to grow their businesses and re-engage these people thrown out of job, smuggling has negatively stalled these, causing the country to lose revenue while local industries are at the mercy of smugglers.

Enormous Capacity for Local Production

Experts, however still have confidence that Nigeria’s rice statistics suggest there is an enormous potential to raise productivity and increase production. Yields have remained at two tonne per hectare, which is about half of the average achieved in Asia. In addition, as population increases, along with rural to urban migration, ensuring food security in key staples becomes critical. There is also this growing concern that apart from government inability to pause this illegal trade, the intervention in the rice production sector is not encouraging local rice production and processing. For instance, smallholder farmers, who account for 80 per cent of the agricultural production in Nigeria, have low income and limited access to credit facilities. Hence, high acquisition and maintenance cost of agricultural machinery has limited their capacity for investment in agricultural machinery.

Also, low technical skills have constrained the adoption of mechanisation and without training, smallholder farmers do not have the technical capabilities to operate machinery and equipment. According to experts, empirical evidence suggests that mechanisation promotes rice production, and according to a study conducted by Sultana et al (2015), which analysed the drivers of increased rice production in five Sub-Saharan African countries, including Nigeria, farmers who ploughed with a tractor increased their production by 51 per cent relative to those who utilised manual methods. In addition, mechanisation reduces production costs and post-harvest losses, as AfricaRice policy shows that the use of appropriate technologies could reduce a country’s rice imports by 17 per cent. Based on recent PcW analysis, an increase in mechanisation rate from 0.3 horsepower per hectare, hp/ha to 0.8hp/ha in the next five years, can double rice production to 7.2 million tonnes.

Nigeria’s mechanisation has remained low at 0.3 horsepower per hectare hp/ha, relative to 2.6hp/ha in India and 8 hp/ha in China. The number of agricultural tractors is estimated around 22,000, relative to one million and 2.5 million in China and India respectively. Low income, limited access to affordable financing and the lack of technical skills have limited the adoption of mechanisation across the rice value chain. Analysing, the economic implications of rice smuggling in Nigeria, the general manager, rice of Elephant Group Plc, Aliyu Tajudeen Olarenwaju, expressed some reservations with current rice policy because it has not adequately addressed the large scale smuggling along border lines. “In the last three years government has not issued any “FORM M”, to anyone to import rice into the country, so we shouldn’t be seeing imported rice in the market, but with smuggling significantly thriving government is simply losing revenue from duties and levies and terminal operators are also losing business opportunities. From every indication, 99 per cent of rice circulating in our markets are imported rice, and this is because the landing cost is cheaper”, he said.

Challenges Before Local Rice Producers

But why is local price not competitive and why is smuggling the preferred option? LEADERSHIP Sunday inquired. Olarenwaju now gave the following explanations. According to him, local producers are highly challenged by dearth of infrastructure and other factors. For the paddy rice which government is promoting through its intervention mechanism costs between N130,000 to N140,000 to process a ton and from a 1,000 kilogram of paddy rice you realize 550 kilograms which translates to 11 bags and when this number is divided by 50 kilograms, then you come to a production cost of N12,700 for a bag of paddy rice.

This is the cost of purchase outside milling cost which is N2,500 per bag bringing a complete 50 kilograms production to N15,200 actual price, and when added transportation and other sundry elements it goes a little higher. Olarenwaju, said that it is more profitable to smugglers, who lands a 50 kilogram of Thai rice at N6,000 and pay additional N2,000 to cross it and sell either below or at same cost with local spec. He said, at the present competition rate, no local miller can sell at credit level, therefore local processors cannot match smugglers prices because cost of production is very high. A rice Miller who would not want to be named said at present he has 15,000 metric tonnes of paddy rice valued at N2 billion waiting to be milled since December.

He said, milling at present market regime will be a waste of fund because the selling price cannot compete with foreign rice that has flooded the market. Sunday LEADERSHIP also learned that paddy rice production in the country is in the region of 10 million tonnes per annum. While this appear to be encouraging, associated processing cost makes the local market redundant. Operators are strongly not coming to terms with the CBN intervention initiatives even as the bank claims it has also stepped up the Anchors Borrowers Programme (ABP) to create a linkage between companies involved in the processing and small holder farmers (SHFs) of key agricultural commodities.

The programme provides inputs to farmers to improve production and the farmers supplies produce to the processing company at harvest in exchange for the cash equivalent. Olarenwaju on his part, said, the Anchor Borrowers initiative is commendable but with the high production cost and the fund not easily accessible at single digit it makes no economic value because millers cannot produce at margin. The CBN, said it has spent N55 billion on boosting rice production through the Anchor Borrowers programme in the last two years. Through that intervention, at least 2.5 million metric tonnes has been added to the already 2.5 million metric tonnes Nigeria was already producing.

The CBN has also promised to expand the scope of intervention in 2018 to achieve 3.5 million metric tonnes of rice production through the Anchor Borrowers’ Programme by the end of 2018. Despite these claims, Olarenwaju disclosed that there are companies that have been approached but they declined taking the fund because they cannot recoup investment given present market environment. Despite that the Nigerian Customs had declared zero-tolerance to rice imports through the land borders irrespective of volume with immediate effect and importers who have already initiated import processes were given grace period ending March 25, 2016 to clear their consignments, rice smuggling has increased at the border areas.

CBN, States Partnerships

Rice smuggling, may have greatly jeopardized the country’s efforts and anticipation not only to bridge production gap but to embark of export of locally produced rice. The Central Bank of Nigeria, had projected that Nigeria will begin to export rice to other countries by the end of 2017.

The CBN, during a sensitisation/awareness programme for farmers in Bayelsa state on the apex bank’s Anchor Borrowers’ Programme, last November said the programme had started yielding fruits, and that with the progress so far recorded by the CBN through its agricultural financing policies, Nigeria would begin to export rice. The bank started a pilot programme in Kebbi state with 78,000 farmers, cultivating an average of one hectare and that was when President Muhammadu Buhari launched the programme in 2016.

The programme was to enable farmers to plant three times in year – two dry seasons cropping and one rainy season cropping, and helping Kebbi State to exceed one million tonnes of rice. Apart from Kebbi, Ebonyi state has keyed into it promise to produce 1.2million tonnes of rice in one year. There are other states like Abia, Jigawa, Sokoto, Cross River, which appear to have shown significant interest in the initiative. Nevertheless, experts say huge rice production cannot be achieved by a system that depends almost entirely on human muscle power and other manual methods.

The growth recorded in rice production has been facilitated by government policies towards achieving self-sufficiency in rice production. Government intervention in rice production has leaned towards providing inputs such as improved seedlings and fertilizer to small holder farmers. Also, some state governments have granted land concessions as an investment incentive to large commercial farmers. Towards improving irrigation, government is investing in various irrigation projects as well.

Mechanisation Way To Go

They have observed that the adoption of mechanisation is still low as a result of the bureaucratic processes and inadequate agricultural machinery. From the 1980s till date, the federal government has sought to enhance mechanisation through several agriculture policy interventions. These range from the establishment of National Centre for Agricultural Mechanisation (NCAM) in 1990, to the recent Mechnisation Implementation Programme (MIP) 11. Similarly, many states have attempted to increase mechanisation through the provision of subsidies for tractor hire. In his view, however, the director general of the Lagos Chamber of Commerce and Industry, LCCI, Muda Yusuf, said there is nothing on ground to confirm Nigeria has really increased its rice production to such a level that importation is no longer necessary.

While, he supports ban on importation of commodities and products that can be sourced locally, as announced by agriculture minister recently, he disagreed with statistics flaunted by government. “We need to relate with the reality on ground, if there is sufficient domestic production it will be there for everyone to see, you cannot hide it. There is apparent gap between domestic demand and supply, and there is no sufficient paddy rice to mill because local capacity is low. If the rice is available the price should have come down and with 70 per cent of the people at poverty level, they hardly can afford the local rice claimed to be available”, he argued.

Yusuf suggested acceleration of mechanized and commercial agriculture to increase economic returns to small scale farmers and improve production. He decried low penetration rate of mechanization which he said remains a major factor militating against the sector’s productivity, adding that food is a basic necessity of Nigerians and ways must be sort to improve agricultural productivity in the country so as to meet the food demands of the populace. According to him, with mechanisation and more lands under cultivation, the scale of operation of the farmer is increased and if a farmer is using hand tools, he may be restricted to 2 hectares but with mechanization he can cultivate farm land up to 10 hectares in size. Following, the increase in rice smuggling in recent times, the federal government has threatened shut down the land border between Nigeria and a neigbouring country to avoid smuggling of foreign rice into the country.

Audu Ogbeh, minister of agriculture and rural development, while speaking with youths in a leadership clinic under the auspices of Guardians of the Nation International (GOTNI), explained that the action had become necessary to encourage local production and sustain the economy of the country. The minister said a neighbouring country was bent on destroying the economy of the country and discouraging local production of rice, hence the need to shut down the border. “Our other problem is smuggling. As we speak, a neighbor of ours is importing more rice than China is importing,” he said.

“They do not eat parboiled rice, they eat white rice, they use their ports to try and damage our economy. I am telling you now because in a few days, you will hear the border has been shut, we are going to shut it to protect you, us and protect our economy,” the minister said. He said the federal government in two years reduced rice importation by 95 percent and increased the number of rice farmers from five to 30 million. The minister said states like Anambra, Ebonyi, Kebbi, Kano, Jigawa were doing well in rice production. “We just have to handwork you to prosperity otherwise, this country will not grow. My wish for you is to have a better time that we had,” Ogbeh said.

Source: leadership.ng

Hits: 34