[Column] Olumayowa Okediran: Banning Rice Importation in Nigeria is a wrong move. Here's Why
30-01-2017 16:45:00 | by: Andrea Ayemoba | hits: 5 | Tags: , ,

The Federal Government of Nigeria’s plan to ban rice importation in the country by 2017 is ill-advised and would eventually backfire on its increasingly dire economy. Nigeria is the second largest importer of rice in the world expending 356 billion naira annually. The country is also the largest consumer of rice and the largest producer of rice in Africa. However, at a growing consumption rate that has hit 7 million metric tonnes, Nigeria is unable to meet up with local demand rate. The country’s farmers are only able to produce 2.7 million metric tonnes. While the Federal government’s intent to ban rice importation to protect local farmers might appear a good initiative, it will eventually hurt the country more.

A ban on rice importation when the country is yet to even reach 50 percent self sufficiency would create lots of problems. Only 8 states (Benue, Kaduna, Kano, Niger, Kaduna, Ebonyi, Nasarawa and Anambra) out of 36 states currently cultivate rice at a commercial level.   Nigeria mostly imports rice from Thailand, India and Brazil. The country had  placed a ban of rice importation through land borders in 2015 as a step towards the complete ban on the importation of the commodity in 2017. This, in collaboration with the worsening exchanged rate, led to prices of the commodity to skyrocket. Several Nigerians decried the partial ban and called for it to be lifted.

When products are banned, it opens room for illegal trade. Only a few pockets would get to benefit from the ban through smuggling. This is not helped by the porosity of the land borders and the corruption that infests the custom service. This would further undermine the efforts of local farmers who are toiling hard to meet new demands. It would eventually end in a lose-lose situation where only a privileged few gain while majority of the rest are left biting their fingers. In addition to giving smugglers an incentive to import the commodity illegally, Nigeria would lose revenue it would have accrued from importation duties.

Such ban would lead to an untimely shift in demand that would pile up pressure on local production. Nigerian rice farmers at optimum level are yet to reach 4 metric tonnes in rice production. A ban in 2017 will lead to an unprecedented scarcity of rice in the face of rising demand. Costs of the staple food would hit the skies as Nigerians scramble for the available rice. The ban would also put pressure on production and in order to meet demands, farmers might begin to cut corners to take advantage of the situation. Distributors might also create more obstacles to trade so they can gain more. In the end, the biggest losers will be Nigerians especially those at the base of the income pyramid.

While Nigeria may be enjoying some improvement in the production of rice locally, it might be more beneficial to abandon its obsession with local production altogether. Nigeria has reportedly spent 40 billion naira out of its 100 billion naira allocated to self-sufficiency in rice on just pilot schemes. With quite a lot other things to fix along the rice value chain such as efficient storage systems, packaging and processing, and distribution among others, Nigeria is frantically looking for more finance to support its horse dreams about rice.

In a study titled Economic Analysis of Paddy Rice Production in Niger Delta Region of Nigeria by Kadiri, F. A., Eze, C. C., Orebiyi, J. S. and Henri Ukoha A, it was revealed that the production cost of a hectare of rice in the Niger Delta is about ₦334,916.60 ($1,098.08) which yields about 4713.25kg of paddy rice while in other climes, the cost per hectare is as low as $359 for the same 4 tons per hectare output. In its stead, Nigeria can focus its efforts and investment in products like cassava where it has achieved world dominance by producing over 20 percent of the total global production of the crop, thus providing Nigeria a comparative advantage over rice.

Despite its position as a leading cassava producer, Nigeria had earned just 1 million dollars in export of the product out of a potential 16 billion dollars. If the country can reach such incredible numbers in terms of production in the current state of agriculture in the country, it will only need some more support from the right stakeholders like the Government and private investors to increase its dominance and convert that dominance into staggering revenue. Such efforts could include increasing access to credit facilities for farmers especially by lowering interest rates which are as high as 23 percent. New processing facilities could be set up to help refine the produce and make it more marketable.

Nigeria must accommodate the fact that the country cannot produce everything it consumes. Instead, the government should examine the cash crops Nigeria currently enjoys comparative advantage over other countries and invest in such products. Such crops would require lesser investment when compared to rice, where the country currently struggles to match self-sufficiency. The country would eventually empower more people and can import rice at lower costs instead. Taking measured and more informed steps like this would not only ensure food sufficiency, but would grow the country's economy and offer food at more affordable prices.   

Article by Olumayowa Okediran, policy fellow at the South African Institute of Race Relations, and Korede Ologun, Head, Research & Advisory at Helix Securities Limited.

 

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