CBN Plans Increased Supply of Rice to Reduce Price

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Wednesday, June 23, 2021 / 04:25 PM /  By CSL Research  / Header Image Credit: GLICO

 

Rice, being a major staple in Nigeria, is an important part of the diet of almost every household. With average local consumption significantly above production, Nigeria, until recently, was the second highest importer of rice. Since 2011, the government has been making substantial efforts to encourage the domestic cultivation of rice and to eliminate imports using incentives such as subsidised loans, cheap fertilizers, free farmland, and tax rebates. Other strategies to discourage imports were also put in place such as stopping rice importers from buying foreign exchange from the official market and raising tariffs to as high as 60%. The Buhari administration had in 2016 set 2018 as a target period to end importation of rice and become self-sufficient.

 

These restrictions led to a gradual decline in imports and resulted in an increase in the price of imported rice. The most effective measure against rice imports however was the closure of the land borders in August 2019. Following the shut-down of land borders in Q3 2019, the price of rice has continued to rise, taking it out of the reach of many households in the country. A recent news report says the Central Bank of Nigeria (CBN) plans the injection of 27000 MT of Rice into the Nigerian market, with the expectation that it would result in a decline in the price of the commodity, and perhaps, taper food inflation.

 

Managing the influx of imported rice has been a concern for successive Governments, however, smuggling activities have continued. Based on rice importation data from Thailand, though rice importation to Nigeria has declined steeply, neighbouring countries like Benin Republic have seen a significant growth in imports from c0.80m MT in 2015 to 1.06m MT in 2019, suggesting a re-routing of Nigerian imports to Benin and subsequent smuggling back to Nigeria through the Seme Border. That said, one cannot deny the fact that these policies have improved rice production in the country. Nonetheless, the country's annual consumption of c. 7.0m MT, still significantly exceeds local production capacity of c.4.8m MT We struggle to see how the injection of 27,000 MT into the market will impact prices in any significant way, but we laud the efforts of the CBN.

 

Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


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