Domestic Rice Production is a Necessity


Tuesday, August 30, 2016 8:58am /FBNQuest Research

Rice remains an integral part of the average Nigerian’s diet. As such, there is no surprise that the country is import heavy on this food crop. The FGN’s estimates show demand at 6.3 million metric tons per year (mmt/y) while domestic supply is estimated at 2.3 mmt.

According to the FGN’s Agriculture Promotion Policy, rice imports still exceed US$1bn per annum. We gather that the CBN’s policy which focused on limiting the importation of 41 items (rice inclusive) led to a 300,000 metric ton decline in rice imports in Q1 2016.

The inclusion of rice on the list of 41 items excluded from accessing forex from the official window as well as the general issues with sourcing fx has led to a drop in rice supply to the domestic market and a spike in prices.

Considering that the FGN’s set minimum wage currently stands at N18,000 per month, a bag of rice currently priced at N23,000 per bag is almost not affordable for the average household.

Despite the ban on rice imports through land borders, there has been increased smuggling. The Nigeria Customs Service has recorded a pick-up in seizures since January 2016.

The Federal Ministry of Agriculture and Rural Development (FMARD) has expressed its commitment to improving rice productivity. Local rice production has been projected to hit 2.7 mmt in 2017.

On the public- private partnership sphere, recently Dangote Industries Limited (DIL) signed a Memorandum of Understanding (MoU) with the FMARD to invest US$1bn towards boosting fully integrated rice production and processing across the country over the next two years.

Apart from large entities like Olam and Dangote, there has been increased participation by small holder rice farmers. However, access to credit still remains a challenge.

There are other areas within the rice value chain which are largely untapped; they include processing, storage, packaging and distribution. Insufficient supply chain integration was highlighted as a core issue within the rice segment by the FGN.

While the supply deficit is huge, closing the gap could be accelerated through increased private sector participation. However the onus is on the government to create an enabling environment. Excluding the job creation potential, this would also ease pressure on the country’s import bill.

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