Salvaging Nigeria’s rice backward integration policy from smugglers

Since the implementation of the rice backward integration policy, the tensions felt by the nation in addressing the smuggling of the product remains a symptom of what underlies the economic policies on the food production sector. Beneath the problem lurks the policy of protectionism that the government has put in place to aid entrenched production in the agricultural sector as well as a weakness in the regulatory system. The setback the country has encountered in food production in the last few years has further proven the need for government to address its policies for the nation to move forward economically. FEMI ADEKOYA writes.

In Nigeria today, news of rampant seizures of smuggled rice by the Nigeria Customs Service (NCS) is no longer new to many, but for stakeholders and consumers whose purchasing power has been whittled by rising inflation, it is a key concern considering the rising food prices, the problem of checking activities of smugglers by Customs, and the country’s deficiency in food production.

With a yearly sum of N360 billion (about $2 billion) at stake in the Nigerian rice business, it is believed that smuggling might be a difficult battle to fight in the country.

Former Minister of Agriculture and Rural Development, Dr. Akinwumi Adesina had said the country spends over N356 billion on yearly importation of rice, out of which about N1 billion is used per day.

Indeed, considering the political nature of the product, the problem is even more intractable as it appears to subtly enjoy the support of national government in countries sharing borders with Nigeria, including Benin, Cameroon and Niger.

Nigeria’s move from being the world’s second-largest importer of rice, to a self-sufficient nation has been described to most likely affect India, Thailand and Brazil, as well as neighbouring countries from which the product is being smuggled.

According to a United States Department of Agriculture (USDA) review of the agricultural situation in Benin, “Benin serves as a delivery corridor for West Africa, reaching more than 100 million people in the landlocked countries of Niger, Mali, Burkina Faso, Chad and the Northern states of Nigeria.”

Already, a conservative figure estimates that there are over 3,000 entry points into the country from the neighbouring countries such as Benin, Niger, Cameroun, Chad and Gabon, among others.

The USDA observed, “Benin’s relatively efficient port services and liberal trade policies mean it is an important cog in the regional trade flows to nearby countries.”

The report noted that improvements in the country’s port operations as well as some small improvements in the ease of doing business over the past three years aided the flow of imports in the country.

“Benin applies the WAEMU (often known by its francophone name UEMOA) common external tariff (CET) with its four tariff bands (zero, 5%, 10% and 20%) with no quantitative restrictions applied.

“Informal trade between Nigeria and Benin is substantial.” The main products involved in this informal trade include rice, poultry products, refined sugar and a range of other food and agricultural products”, the report added.

In the rice sector, according to the USDA review, traders from Benin can sell a 50-kg bag of rice in Nigeria at prices 75 per cent higher than they can obtain on the Benin side of the border.

According to USDA, in order to avoid the high Nigerian levies, Nigerian traders have been directing their rice consignments to ports in neighbouring countries where they are cleared and moved into the Nigerian market through informal trading activities.

Already the Nigeria Customs Service has “identified the low tariff on rice in neighbouring countries as one of the major factors contributing to smuggling of rice into the country”.

With long grain or imported rice listed as part of items that have been barred by the Central Bank of Nigeria from accessing foreign exchange, stakeholders predicated the increase in prices of the products on the huge gap between the local production and the demand of the items, which had been regularly filled by imports as well as heavy smuggling of the commodity.

President of the African Development Bank (AfDB) and Former Minister of Agriculture, Dr Akinwumi Adesina, had announced that the country would soon build the biggest rice farm in Africa, in partnership with a United States-based company.

The project, which is expected to gulp about $40 million, will produce around 300,000 tonnes of rice and reduce rice imports by 15 per cent and result in import savings of around N54 billion (about $342 million) every year.

The federal government had said the country has all it takes to become an exporter of rice, given its huge human and natural resources but arguments are that there is need to ensure availability of the product first, given that it is a major staple for millions of Nigerians.

However, an underlying provision to achieve such feat is that the market must be sane; and must be rid of all rice from illegal sources.

If smuggling is not checked, if the government does not seek a way to prevent these well-known companies from diverting rice meant for the Nigerian market to neighbouring countries for onward smuggling into Nigeria, then the national dream to become self-sufficient in rice production and consumption is at best wishful thinking.

A 2015 Investment Climate statement explained that bribery of customs agents and port officials remains common, and smuggled goods routinely enter Nigeria’s seaports and cross its land borders.

“The Government of Nigeria (GoN) has promoted an import substitution policy on the rationale that trade restrictions and local content requirements will attract investment that would develop domestic capacity to produce and manufacture products and services which the government believes can be produced domestically rather than imported.

“The import bans and high tariffs used to advance Nigeria’s import substitution goals have been undermined by smuggling of targeted products (most notably rice and poultry) through the country’s porous borders, and by corruption in the import quota systems developed by the GoN to incentivize domestic investment”, the statement read.

National Chairman, Rice Millers Association of Nigeria, Tunji Owoeye, urged the government to put structures in place to check smuggling of the product, which had become inevitable as a result of an increase in the retail price.

He said that there were thousands of illegal routes where smugglers could bring rice into Nigeria and advised government to beef up the security in those areas, noting that more NCS personnel would be needed to check the influx of smuggled rice into Nigeria.

Chairman of local growers and importers of rice, Habibu Maishinkafa said a bleak future lies ahead of local rice growers and investors given the free rein of smugglers.

“Smugglers push large volumes of rice into Nigeria with zero duty thereby unsettling the efforts to make Nigeria, self-sufficient in rice production. In 2013, the federal government imposed new tariff on imported rice ostensibly to cut down imports, (estimated to be N1 billion a day), and encourage local production of rice as well as offer investors some incentives and palliatives.

“Now, rice stakeholders are quite unhappy that despite all said and done, the rate of smuggling of the commodity remains quite high, with concomitant effects of loss of investment, market share, job losses, revenue and increase in youth unemployment.

“The rice policy is gradually being eroded in view of the unrestrained activities of economic saboteurs, illegal importers and smugglers”, he added.

He appealed to the federal government to tighten the nation’s porous land borders, while regretting that the local rice farms and milling plants have been unable to impact on host communities as they are supposed to, following the ugly development.

However, despite the high rate of smuggling into the country, the Nigeria Customs Service (NCS) said it is winning the war against smuggling in the country.

Controller, Federal Operations Unit, Zone ‘A’, Lagos Comptroller Amade Abdul said: “Having taken cognizance of the herculean nature of this mandate, and appreciative of the need to maintain and sustain the rating of the Unit as a hub and flagship of anti-smuggling, it became pertinent for me to put measures in place to actualize it. Part of my strategy is intelligence/information gathering, collaboration/synergy with you the critical stakeholders, the maritime operators, security agencies of government and even the various communities where we operate”.