• Friday, March 01, 2024
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Why Nigeria rice is not competitive

Rice prices rise 98.5% amid paddy scarcity – NBS

For Nigeria to sustain the progress made in its rice revolution, local parboiled varieties must compete favourably with imported brands, experts say.

Rice millers in Africa’s biggest economy need a metric tonne of paddy to produce 600kg of parboiled rice (12 bags of 50kg), according to current industry data.

A metric tonne of paddy is sold for N280,000, meaning that millers in Nigeria spend an average of N280,000 ($607.5) on paddy to produce 12 bags of 50kg of local parboiled rice, excluding other production costs.

Data from the International Grain Council show that a metric tonne of parboiled rice sells for $470 in Thailand and other Asian countries that are top growers of the grain as of February 15 – an indication that it is cheaper to produce rice in Thailand and other top Asian countries than it is in Nigeria.

The low prices of foreign varieties have continued to drive the influx of parboiled rice through the country’s land borders, making it more difficult for local millers to compete with them.

“Nigeria’s local parboiled rice is not competitive owing to the high cost of paddy, which constitutes 70 percent of milling cost,” said Jonathan Joshua, national president of the Association of Small-Scale Agro Producers in Nigeria.

“We can only address the issue of smuggling fully when our local rice can favourably compete with imported parboiled varieties as smugglers will be discouraged when prices of local brands are cheaper,” said Joshua.

In 2015, the Central Bank of Nigeria (CBN) listed rice among the 41 items classified as not valid for foreign exchange in the Nigerian forex market, to support local rice millers. In 2018, the government imposed a 70 percent tariff (10 percent duty and 60 percent levy) on the importation of parboiled rice into the country.

In 2019, the country shut its land borders for 16 months to tackle the high rate of smuggling – a development that led to a spike in the prices of local parboiled rice owing to production shortfall.

Joseph Kudu, manager at Africa Rice Mills, said the price of paddy is very high for millers to produce at a competitive price, adding that fuel and naira shortages have worsened the situation for rice processors.

“The price of paddy is very high for millers in Nigeria to be competitive and the scarcity of fuel and naira we are experiencing is making things worse off,” said Kudu in response to questions.

Given the importance of rice – a key staple in the Nigerian diet, the government has since 2014 accorded high priority to boosting its production.

The government, through the CBN, set up the Anchor Borrowers’ Programme (ABP) to offer smallholder farmers credit facilities at a single-digit interest rate in the form of inputs.

Since the inception of ABP in 2016, the apex bank said it has committed N554.6 billion to support 3.8 million farmers under the initiative as of March 2021, with rice growers accounting for the highest percentage of recipients of the money.

Read also: Why farmers must insure their farms in 2023

The efforts are showing results, and Nigeria is now producing 5.5 million tonnes of rice annually, according to the United States Department for Agriculture’s 2022 grain report.

However, despite farmers increasing productivity per unit area over the last few years, Nigerian rice has remained uncompetitive owing to numerous factors apart from the high cost of paddy.

Insufficient supply chain integration, weak infrastructure, and lack of capacity for farmers’ low use of farm mechanisation, among others, have led to a high cost of production, thus making it more expensive to produce a bag of local parboiled rice.

“Weak infrastructure is also a major challenge making us unable to produce at a competitive price. Most of the mills run constantly on diesel, and the prices have been surging,” Kudu said.

Energy remains a big infrastructural challenge in Nigeria, pushing up operational costs for rice processors and reducing their expansion rate.

“Most rice mills are running on generator plants and this constitutes the bulk of their production cost,” said Abiodun Olorundenro, operations manager at Aquashoots Nigeria.

“We need to address infrastructural problems as it has continued to limit the sector and make our products not competitive,” he said.

Rotimi Fashola, a rice expert said in an interview with BusinessDay that the country’s average yield per hectare of rice must be in line with the global average of 6 metric tonnes per hectare to boost productivity.

He called on farmers to adopt mechanised farming to transit from subsistence to commercial agriculture.

Fashola said the cost of production cannot be drastically reduced if farmers are not using modern farming technologies to boost productivity.

“With lower production cost per hectare and constant yield per hectare, farmers will reduce their price of paddy and in turn millers will reduce their cost of milled rice,” he said.