Domestic rice production, a bare necessity - See Import Quota Beneficiaries

Proshare

Friday, February 20, 2015 8:35 AM / FBN Capital Research with addendum by Proshare

The intense pressure on Nigeria’s foreign reserves should draw more attention to the FGN’s import substitution strategy going forward.

 

The country remains the second largest importer of rice globally, with an annual average spend of about US$2bn. Industry reports place Nigeria’s annual consumption requirement at 5 million metric tonnes, substantially higher than domestic supply estimated at 3 million metric tonnes.

 

The import quota allocation procedure under the rice policy introduced by the ministry of agriculture last year is imposed on both existing rice millers and investors with a Domestic Rice Production Plan (DRRP).

 

Based on the recent submission of DRRPs, a total of 1.3 million metric tonnes of rice import quotas were issued to 26 qualifying millers at a preferential levy of 20% and duty of 10%.

 

According to industry statistics, Nigeria spends about US$500m on rice imports from Vietnam annually. Data from the Nigerian-Vietnam Chamber of Commerce and Industry suggest that Vietnam spends US$100m annually importing agricultural products such as cashew, cassava and oil palm from Nigeria.

 

Initially, the bulk of Nigerian rice imports came from Thailand, followed by India. However, India’s removal of an export ban on non-basmati rice has led to the country becoming Nigeria’s leading supplier.

 

Approximately 8 million metric tonnes (mmt) of paddy rice was reeled last year. This translates into 3.5mmt of milled rice which still falls below the annual domestic demand of 5mmt.

 

Nigeria stands to benefit from a N610bn (US$3.3m) rice grant geared towards improving sourcing capacity under the Competitive African Rice Initiative (CARI) project. The project is scheduled to end in 2017 but aims to support 120,000 small scale rice producers as well as rural service providers and rice millers. Other countries participating in the project are Ghana and Tanzania.

 

Nigeria’s infrastructural and security challenges pose major obstacles to local rice in terms of its competitiveness once it reaches urban markets. The situation is worsened by a glut in the market; distributors purchase cheaper foreign rice at N6,500 (US$33) per bag as opposed to local rice estimated at N8, 700 (US$44) per bag.

 

The prizes on offer if Nigeria attains near self sufficiency in rice production are numerous; these include job creation as well as a reduction in the pressure on the current account, the naira exchange rate and official reserves.



ADDENDUM

 

26 Beneficiaries of the Preferential Import Quota and Quantities Approved

 

Having determined a supply gap of import-grade rice to be 1.5 million MT for 2014, the allocations below were therefore made by the Inter-Ministerial Committee which issued approvals for 1.3 million MT of rice import quotas at the preferential levy of 20% and duty of 10%.

 

The remainder 0.2 million MT of rice imports will be at the higher levy of 60% and duty of 10% for other rice importers.

 

According to the Government, “...given these allocations, any beneficiary who has already imported rice above these approved quantities will have to pay to treasury the higher levy of 60% and duty of 10% for the excess amount.”



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