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Rice: Are we chasing our tail?

By Charles Ugwuh
26 May 2015   |   5:28 am
RICE has assumed a very important position in the food basket of many Nigerians, to the extent we consume six million tonnes per year, of which we produce (grow and process) at best only three million tonnes per year.

Obasanjo-02RICE has assumed a very important position in the food basket of many Nigerians, to the extent we consume six million tonnes per year, of which we produce (grow and process) at best only three million tonnes per year.

Tremendous efforts and investments have been made by various Nigerian Governments over the years, from President Shehu Shagari through President Olusegun Obasanjo, President Umaru Musa Yar’Adua and now President Goodluck Jonathan.

Enormous resources have been poured into stimulating private sector investments with considerable assistance from the Federal Government and State Governments under various agricultural promotion initiatives.

Nigeria has suitable ecology to grow rice paddy virtually all over the country. With dedication, perseverance and national commitment, Nigeria can grow and process enough rice to meet its domestic need.

Indeed, the country can also export to other African countries at the least; where a ready market exists for over 15 million tonnes from West through Central and Southern Africa.

Current Situation Nigeria has been striving hard to grow its capacity in paddy production and processing through massive investments in infrastructure: power, water, irrigation facilities, dams and processing industries and technology.

At this moment, Nigeria has made a serious start, but she is yet uncompetitive and needs even greater investments to compete with other countries in South East Asia, who have been producing rice for decades (with more developed/advanced infrastructure and techniques) and have evolved a culture of rice at a low cost and high yields that are difficult to match.

Unfortunately, each time we make earnest efforts to grow our rice capacity to displace imports, our traditional rice suppliers from South East Asia (India, Thailand, Bangladesh, Vietnam, Cambodia, etc.) double up their efforts (through the Diaspora merchants) to beat us down.

With their production efficiencies, low cost of production, better quality milled rice and other trade malpractices and gimmicks, they are able to weaken our resolve and erode our competitiveness, forcing us to buy from them and to abandon all our well-laid plans, investments and import-substitution strategies.

In the meantime, we commit up to US$2.6 billion to buy 3.0 million tonnes of rice per year. We export out of Nigeria various desperately needed jobs to South East Asia. We further pauperise our people by collecting additional toll as import tariff of over US$1 billion. In the process, we also enrich smugglers and sundry merchants/traders with another US$1.2 billion.

Overall, we bleed US $4 billion to US$5 billion  from our economy  each year on a product we can well produce with little effort and determination. From 2008/2009 we embarked on another cycle of investments in integrated new rice mills, farms, seeds production, infrastructure, and technology and rice agronomy christened import substitution strategy, a component of the ATA.

Suddenly in May 2014, we reversed our policies and allowed rice merchants (parading as investors) to dump on Nigeria over two million tonnes of rice between June 2014 and January 2015. The consequence is a total collapse of the rice market.

This was through legitimate import quota, smuggling and discretional waivers granted by “higher authorities”. Once again we have wiped out local small holder rice farmers, small rice millers and the new industrial level rice processing factories established between 2008 and 2014.

No one in the Rice Value Chain is able to cope with the level of prices at which these imports have landed Nigerian markets. We are enjoying incredible low prices for rice as commodity prices fall in the world market.

Consequently, we have allowed the little progress we have made recently to be completely destroyed, trapping unwary local investors and their bankers in huge debts, while subjecting indigenous farmers to outrageous poverty and agony.

What a disaster!! How will salvation come? Ideally, it would have been better to ban the import of rice, close our doors, windows and all borders to rice import; reform our Customs, bring in excellent, dedicated Customs officers from Mars, who would be deployed to man our borders.

Incorruptible! Rock Solid! We can then continue our massive investment drive in local production for five years. Borrowing money from the World Bank to develop our Rice production – (farms and processing factories).

In less than five years, we would have developed our infrastructure and strengthened our capacity (through vertical integration strategies) to a point we can compete with India, Thailand and others in all areas and factors of rice production.

We can amortise our World Bank loan through the export of 10 million tonnes of locally produced rice to our neighbours in Africa, who may be unable to make the level of investments they require to produce their own needs.

We can also mortgage a small part of our oil revenue to achieve self-sufficiency in rice production and save up to US$4 billion per year going forward. Yes, success is possible! Let’s consider some realistic strategies and smart ways to achieve our national goal.

Yes, let’s restrict imports and deploy a viable quota system to import/supply the national shortfall in our demand for a few years; impose a reasonable tariff on the regulated imports – perhaps 30% across the border; encourage the Governments of Benin and Cameroon to respect our tariff laws and tariff rates; and maintain the same customs tariff as Nigeria; and  let’s pay to these countries, the differential tariff between their own low import tariff rates and the high tariff levels we need them to impose on rice to protect our border.

Given the centrality/importance of their collaboration (in order to prevent smuggling through their borders), it pays Nigeria to subsidize the Benin and Cameroon Governments the needed tariff to protect their income or earnings from rice import.

This may sound radical, but it is indeed the only way we can achieve price parity in Lagos, Port Harcourt, Cotonou and Yaoundé to prevent the subversive impact of smuggling.

Yes, there may still be trickles of smuggling coming from dare devil smugglers but the volume would be insignificant to do any damage to us.

This policy would need to be sustained for three years at least within which Nigeria can drive hard to grow local capacity and competitiveness. With the massive investments being made in rice production, we can uplift our capacity and strengthen our competitiveness against the sporadic destruction of our activities in the Rice Sector, every election year.

Vertical integration of our activities will ensure efficiencies, and cost effectiveness at every stage such that Nigeria achieves world viability in rice and then openly compete with other world producers.

Indeed, when the irrigation schemes for rice are linked to fish production (aqua culture), the overall benefit to our nation would be very great.

It is worth it to think globally to uplift our nation beyond smuggling and its catastrophic effects on us. Delivering local rice as near as possible to world commodity price levels, we can ensure market access for our local production without India, Thailand and elsewhere delivering rice far cheaper than we can produce the commodity.

This is the progress we need! Yes, it is possible to achieve! Finally, for the policy to succeed, Nigeria must make strong and determined efforts to give market access and patronage to locally milled rice that are properly and effectively graded. Wider Economic Impact Ask CBN. Nigeria is spending a whopping US$9 billion annually on four commodities (wheat, rice, sugar and fish).

•Can we muster political will and national determination to reduce this by 50% in three years?  • What other vital national need or infrastructure can we afford to establish with US$4 billion savings we can make – just by changing our habits and adjusting our trade policies with our neighbours within ECOWAS?  • Is anybody awake in Nigeria? • Ugwuh, an engineer and a former Minister of Commerce and Industry , wrote from Abuja