Foreign Rice Importers: Game To Return Nigeria As Dumping Ground

In the rash of misinformation being peddled in the media, it has become necessary to separate the wheat from the chaff, as some entrenched interests seem bent on truncating the genuine strides made so far by the President Jonathan Administration to make the nation self-sufficient in rice production.

The rice industry was characterised by opacity and confusion, and importers, particularly a few foreigners, dominated transactions. It was this Administration of Goodluck Ebele Jonathan that initiated a rice revolution that ushered in massive production of rice within the country, with the ambitious plan of gradually phasing out importation by 2017 when Nigeria is expected to have become self-sufficient in rice production.

It needs to be emphasised that, under President Jonathan’s watch, and with his active support, the Minister of Agriculture, Dr. Akinwumi Adesina, designed the policy framework that gave local producers an opportunity to be competitive in the first instance. The idea of differential duty and levy, which was introduced, was meant to encourage investment in the Nigerian rice industry, to expand production, increasing milling capacity and creating employment along the rice value chain.

In a release by the Federal Ministry of Agriculture, the new rice policy driven by the Minister succeeded and galvanised $2.6 billion in investment commitments into commercial rice cultivation and establishment of integrated rice mills.

It is surprising that the same Minister, who has worked so hard in ensuring that sanity is brought into the rice industry, would be maligned by some for sticking to his gun that those, who owe government should pay their duties and levies. The Minister never gave waivers.

These Asian rice importers, who believe they are above the law in Nigeria, for decades, have frustrated every effort and policy to reverse the trend of massive food imports by Nigeria, did not envisage that one day an astute and incorruptible technocrat with a passion for change like Dr. Adesina, would emerge.

Before the Agricultural Transformation Agenda (ATA), Nigeria was enormously short-changed and there was no level playing field to encourage local production, to the extent the nation spent N356 billion annually on rice importation, thus bleeding the nation’s economy.

Under the ATA, the Federal Ministry Of Agriculture And Rural Development embarked on innovative interventions through the rice policy and set up its implementation plan.

On May 26th, 2014, a new rice policy was approved by President Jonathan to encourage investments in local rice milling and production through the introduction of an import duty differential on rice (brown or polished) imported by investors in the rice sector compared to rice traders. The policy thrust was meant to turn importers into investors to commence local production and become part of the drivers of the local content in the rice industry. This is to contribute in part to the expectation of increased rice paddy production, leading to the achievement of rice self-sufficiency.

The policy has been very successful under the passionate drive of Dr. Adesina, who said that Nigeria must become self sufficient in rice production within four years.

Dr. Adesina drove a massive innovation, which delivered free high-yielding rice varieties and subsidised fertilisers to six million rice farmers within three years.

In the period 2012 to 2014 paddy rice production in the country grew from 4.5 million MT in 2012 to 7.89 million (metric tons) MT in 2013, and 10.7 million MT in 2014.  Never has Nigeria seen such rapid growth of in paddy rice production. The capacity for integrated rice milling for the production of import-grade rice has also risen from 70,000MT in 2011 to over 800,000MT in 2014. The number of integrated rice mills increased from only one in 2011 to over 24 by 2014. Nigeria’s self-sufficiency in producing paddy rice rose from about 45 per cent in 2011 to 85 per cent by 2014. Adesina’s drive for rice self sufficiency is well on course. Nigeria’s food import bill declined from N 3.1 trillion in 2011 to N635 billion by 2014 according to data from the Nigerian Bureau of Statistics.

To encourage greater domestic investments in rice, the rice policy was designed to encourage expanded cultivation of commercial rice farms and establishment of new integrated rice mills. To ensure this, existing rice millers and new investors in rice milling and paddy production with verified Domestic Rice Production Plans (DRPP) will enjoy an import duty of 10 per cent and levy 20 per cent, while pure traders will pay a higher import duty of 10 per cent and levy 60 per cent.

The new rice policy also stated that importation of brown or polished rice should be limited to the national supply gap for import-grade rice. Rice import quotas at the preferential rate of 10 per cent duty and 20 per cent levy will be will be issued to existing and new rice millers/producers based on the national supply gap. Working with rice experts from the Africa Rice Centre, USAID, and from FMARD’s rice value chain, a methodology to determine the national supply gap and allocation of quotas to qualifying rice investors was developed.

Criteria for quota allocation was based on weighted parameters of: existing milling capacity, a Domestic Rice Production Plan (DRPP) that assessed size of new investments in rice production and milling, purchase of paddy locally from farmers and from the Paddy Aggregation Centers (PACs), and size of new proposed mills.  A report on the methodology was presented to the Inter-Ministerial Committee through a memo sent out from the office of the Minister on October 4th, 2014.

Following feedback on the methodology from members of the Committee, a meeting was held on November 10th, 2014 with representatives of the Federal Ministry of Investment, Trade, and Industry, rice sector stakeholders, and rice experts to deliberate on the report.  The supply gap of import-grade rice was determined to be 1.5 million MT for 2014.  The meeting also agreed that 1.3 million MT should be allocated to existing rice millers and importers with approved Domestic Rice Production Plans (DRPP), at a preferential levy of 20 per cent and duty of 10 per cent, while 0.2million MT is allocated to other rice importers at the normal levy of 60 per cent and duty of 10 per cent.

Subsequently, a letter was sent to existing rice millers and new investors, to submit a DRPP, and based on their submissions a total of 1.3 million MT of rice import quotas was issued to 25 qualifying millers at the preferential levy of 20 per cent and duty of 10 per cent.  The remainder 0.2 million MT of rice imports will be at the higher levy of 60 per cent and duty of 10 per cent for other rice importers.

Based on methodology for allocating quotas and DRPPs submitted by existing rice millers and new investors, the Minister allocated quotas to an approved list of 25 qualifying rice investors (with DRPPs) on November 29th, 2014.  A performance bond to be paid by importers with DRPPs was introduced to ensure compliance with milestones of their investment plans.

It was clearly stated that any beneficiary, who has already imported rice above these approved quantities would have to pay to treasury the higher levy of 60 per cent and duty of 10 per cent for the excess amount.

Without waiting for determination of supply gap by the inter-ministerial committees or issuance of quotas, two Asian companies, Popular Farms and Mills – owned by Stallion Group, and Olam, had each imported 390,145.53MT and 244,126.63MT respectively of polished rice as at December 3rd, 2014. These two companies together imported a total of 634,270.16MT of finished rice or 56 per cent of the total imported finished rice under the new policy as at December 3rd, 2014.  Their approved quotas for 2014, however were 89,939MT for Popular Farms and Mills and 133,963MT for Olam.  By December 4, 2014, both companies had imported a total of 410,368.16 MT in excess of their approved quotas.

The Minister of Agriculture blew the whistle that this was totally unacceptable. He wrote to the President that the Nigerian Customs must enforce the quota ceiling and ensure that any company, which imported above their allocated ceiling must pay the Treasury at the applicable higher tariff of 10 per cent duty and 60 per cent levy. Accordingly, Popular Farms and Mills owe the Treasury N19.379billion in unpaid levies, while Olam owes the Treasury N9.02billion.

The companies cannot claim ignorance. According to Nigerian Customs, the importers agreed with the Customs to pay any duty and levy differential if their eventual quota allocation turned out to be lower than what they have imported. Rather than pay the levies owed, the two companies wrote letters to the Minister asking for a revision of their rice import quotas. Olam asked for 400,000MT rice import quota, to cover the quantities of rice that they had gone ahead to import (or still desire to import) without any approved quotas or DRPP as required, but a mere agreement with Nigerian Customs that they would pay the duties due once the quota allocations are out.

Both companies pleaded with the Minister to no avail. He insisted everyone must follow the transparent and rigorous methodology on issuance of quotas. He noted that the Nigerian Customs Service has permitted the importation of 852,400.89MT of polished by traders at the lower tariff of 10 per cent duty and 20 per cent levy over and beyond approved rice import quotas in total disregard to directives on the rice policy.

The Minister raised the alarm that two companies had imported 410,368.16 MT above approved quotas and will crowd out local millers from the milled rice market, who will be unable to buy from local rice farmers.  The indiscriminate importation of rice by these foreign companies will undo the rapid progress made in the last three years on Nigeria’s drive to self-sufficiency in rice production

In response to spurious allegations by a faceless group known as ‘Stakeholders in the Rice Industry’ on the alleged indiscriminate granting of waivers and issuance of rice import quotas to investors who have no investments in the industry, either in form of paddy production or rice milling, and the loss of N40 billion in Government revenue, the Minister held a press conference on January 12th to address issues raised by the group.

At the press conference, the Minister described the transparent methodology with which the rice import quota allocation was done and revealed that foreign companies who had imported 410,368.16MT beyond their quotas were the ones owing government N36billion.

The Minister made a strong statement on implementation of the rice policy that “Every Company must follow the rules and there are no sacred cows. The days are gone when they can bribe to get what they want. I will not allow them to scuttle our self-sufficiency drive in rice production. I cannot be bought or bribed. These two companies, Olam and Popular Farms and Mills, owe government and they must pay for the excess rice they imported above their allowed quota at preferential rate.”

Several leading legitimate investors in the rice sector and farmers rose up in support of the Minister. A former Attorney General of the Federation, Mr. Aondoakaa, a rice processor, said “in all my several years in government, I have never seen a process so transparent and a Minister who fights always for public interest with such integrity and passion.”

The claims of preferential waivers are simply not true. The Minister of Agriculture gave no waivers. Only the President can give waivers. The Nigerian Customs Tariffs Act makes it mandatory for Customs to collect all duties and levies due to government before imported goods can be released to importers. It is the duty of the Nigerian Customs and Excise to enforce the Act. Anyone who owes government duties and levies and rice should go and pay; there will be no sacred cows.