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The Parable of Rice

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One of the biggest problems with the Nigerian government’s policy on rice is that its entire policy is constructed on a foundation of falsehood. The idea is that by importing rice from countries like Thailand, Nigeria is supporting the economy and jobs in those countries to the detriment of Nigeria’s own economy. With this is the starting point for policy making, everything that comes after it is completely wrong.

Nigeria does not pay the full price of the rice it imports from Thailand because the Thai government spends billions of dollars subsidising rice production. Thailand’s former Prime Minister, Yingluck Shinawatra, once paid farmers 50% more than market price for their rice and then tried to hoard it to drive up prices. The scheme failed spectacularly and cost the government up to $12bn. Countries like Nigeria benefitted from this because this move caused prices to fall dramatically – the government bought rice at $450/metric tonne and exported it for $380/metric tonne. In effect, they did Nigeria a favour. Is it because they love Nigerians? Of course not.

Consider a very simplified economy with just one woman in it. She earns $100 per month and spends $20 on food, $20 on housing, $20 on transportation, $20 on phone and internet and the remaining $20 on entertainment. That is, her income supports 5 industries in the economy. If she only earned $80, the economy would have only 4 industries or 5 industries at smaller sizes. But there’s more to it – those 5 industries she is supporting are not equal. She cannot do without food which means that if the cost of food were to double to $40, one industry will collapse or the other 4 will shrink. Either way, the effect will be the same – entertainment industry that had $20 revenues would either sack all its workers and shut down if she moves her entire entertainment budget to food or sack half of its workers if she cuts her entertainment budget to $10.

If you visit Thailand, you will quickly see that it is a diversified economy. Tourism is huge, entertainment is big and agriculture is gigantic. The billionaires there are also real (the CP family employs half a million people), unlike Nigeria where someone can become a multi-billionaire by selling inputs (e.g. cement) for which there is no visible output (e.g. housing, infrastructure). Another thing you quickly notice is that the food is very cheap, whether in a restaurant or on the side of the road. The 2016 Thailand Consumer Survey by Deloitte showed that the average Thai household spent 17% of their income on food. Compare that to Phillips Consulting 2016 Survey of the Nigerian Household which showed the average Nigerian household spent 59% of their income on food. Similarly, a report in The Economist last year showed Nigerians paying 30% more for food than Indians.

The effects of these are painfully clear to see. While Thais can spend 24% of their income on ‘leisure, holidays, welfare and savings’ – according to Deloitte – in Nigeria, Dettol now comes in a sachet so people can afford to stay disinfected. If you spend N60m to produce a movie in Nigeria today, you run a real risk of never making a profit as the economy can only support a small number of such movies at a time even with a population of 200 million people. The more of your income you spend on food, the less of any other type of economy you can have. Your entertainment industry will remain small; many people will not be able to buy newspapers leaving your media industry at the mercy of moneybags and brown envelopes. And so on. Spending a large portion of your income on food is one of the clearest signs of poverty you can find anywhere. Once this is understood, you begin to see the damage it causes in the economic possibilities that are sacrificed on the altar of high food prices.

The APC have doubled down on the false doctrine of making food more expensive for Nigerians. The Thai government subsidises rice which Nigerians can buy. Rather than quietly accept this as a gift (the effect is the same in both countries – lower food prices), Nigeria rejects this gift by putting punitive tariffs on rice to raise the price back up. To make matters worse, the government has taken farmers as its clients and will thus get Nigerians to pay as high as possible to keep farmers happy. It bans options that can bring down the cost of food in the name of ‘only eating what we grow’. Imagine a future where this depressing vision – of everyone farming and eating local food – comes to pass. It will be a country with agriculture and not much else and it will be deeply poor.

This kind of thinking is everywhere in the APC’s economic policies and from all indications, Nigerians are in for another 4 years of it, with Trader Moni as the only Balm in Gilead. God save us all. And don’t forget that President Buhari’s 2nd term has not even started yet.


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