Nigerians are paying more for local rice, not necessarily, because it is scarce as some would like to suggest, and even though cost of production remains high, current prices especially in places like Lagos, are not exactly market reflective.
Agribusiness Insight exclusively gathered that during a meeting called by the Central Bank of Nigeria (CBN), rice millers in the country reached an understanding with the apex bank to sell a 50kg bag of rice at the rate of N14,000 to their distributors. This was the CBN’s way of ensuring prices did not become excessively inflated on the back of the border closure. According to a credible source, the CBN is also currently monitoring rice distribution across the country, having requested to be furnished with a list of rice distributors and suppliers in every geopolitical zone where each rice miller supplies.
However, since the closure of Nigeria’s borders to all goods, rice topping the list, the widely consumed staple has retailed for as high as N25,000 per bag, an N11,000 mark-up from the price it should come from the milling companies. Somewhere between the rice mills and the consumers, a 78 percent increase in price occurs.
“We have done some analysis and came to the conclusion that local rice should not be selling beyond N16,000 or N17,00 per 50kg bag, but it is currently selling over N20,000,” said Emmanuel Ijewere, vice president, Nigeria Agribusiness Group in a phone interview.
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This, he attributes to “some greedy people who have put nothing in but want a lot in return”. While this has translated to consumers paying more for rice, the farmers are also not necessarily recording higher prices for their paddy, commensurate with the increase in price for the milled product.
“Some individuals sit, bribe somebody and buy a quantity of rice, jerk up the price because there is a perceived shortage,” said Ijewere.
This view is however not peculiar to him alone. A major rice distributor whose corporate and individual identity is withheld to avoid retribution, identified a group of four people from Lagos (names of which were also provided), who go to different rice mills, placing orders of about N100 million and tell them, “once you finish supplying me this 100 million, tell me, I will give you another one”.
When other dealers now go to those companies, they are directed to meet any of those people. They in turn sell at not less than N18,000 per bag to the other dealers and distributors who ordinarily should have purchased directly from the mills. However, with N18,000 now the price many purchase from this group of persons, it then becomes inevitable that when every dealer adds their own margin, depending on where they are in the supply chain, pushed prices to as high as N24,000 a month ago. At present, a BusinessDay report stated it has come down to about N19,500 on the average.
“The same companies we used to patronise and buy directly, for instance Labana in Kebbi state, will say they already have some people they want to supply, so don’t pay,” said the unnamed source.
With Labana mills specifically mentioned, Agribusiness Insight reached out to Abdullahi Zuru, the company’s general manager, to clarify the allegation that his company has been favouring what appears to be becoming a cabal of rice distributors.
In his response, Zuru explained that before the border closure, many rice dealers in the South West preferred to deal in Imported (or smuggled) rice, with more patronage for local rice coming from the South East. According to him, rice millers like his company were invariably more familiar with a certain group of distributors, mostly from the South East, and have only continued to deal more with those they are familiar with following the border closure.
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While there appears to be an impasse in determining whether there is collusion between millers and a group of people cashing in on the luxury good rice is fast becoming, the unnamed rice distributor hinted that this practise has encouraged some distributors with no other option, to patronise local farmers and millers. Even though it is ‘stony rice’ since they cannot get from the big milling companies, they purchase and start trying to sieve the stones as much as possible until it is a bit clean.
Some of these rice distributors, to avoid getting pushed out of the market completely, now use bags belonging to big brands, which the source said is “for them to be able to make more money,” a practise he did not personally identify with.
“The millers are our problem because their profit margin is too high,” claimed Siddik Abdullahi, chairman, Rice Farmers Association of Nigeria (RIFAN), Kwara state chapter in an interview last year. According to him, “in 2016 a 70-75kg bag of paddy rice was sold at about N12,000 but the price has fallen and now sells for N7,500. Yet the price of local rice has not come down. Our millers are the problem,” said Abdullahi, frustrated that farmers were not getting higher prices for their paddy rice, which becomes the milled rice Nigerians consume.
BusinessDay recently reported the average cost for a bag of paddy is now N8,500, whereas the cost of milled rice has increased by a higher percentage.
“NABG is concerned, consumers are suffering, and farmers are not getting commensurate value,” said Ijewere, who disclosed NABG will be writing all integrated milling companies in the country for a meeting to address the artificial scarcities being caused from some quarters.
Importantly, however, while local production has ramped up significantly in recent years, there is no data to establish how sufficient Nigeria has become in rice production.
CALEB OJEWALE
