Border Closure Hitting The Price of Rice


Friday, October 04, 2019 / 11:04 AM / CSL Research / Header Image Credit: Yahoo

Since Nigeria closed its land borders, the price of rice, a major staple in the country has been on the rise. According to a report by Business Day Newspaper, the price of a 50kg bag of imported rice, which was selling at N14,500 before the closure of the border, now sells for N27,000. Locally produced rice has not been left out of the party as the price of Lake rice (a product of an alliance between Lagos State and Kebbi State) has increased 22% to N16,500 from N13,500 before the closure of the border.

According to data from the U.S. Department of Agriculture (USDA) for August 2019, Nigeria, with average local demand of 7.3 million metric tonnes (MT) per annum - versus average local production of 4.9 million MT, is the world's third largest rice importer behind China and the Philippines. Since 2011, the government has made substantial efforts to encourage the domestic cultivation of rice and eliminate imports using incentives such as subsidised loans, cheap fertilizer, free farm lands, and tax rebates. The central bank has also initiated lending schemes such as the Anchors Borrowers Programme (ABP) and Commercial Agriculture Credit Scheme (CACS) to stimulate the planting and cultivation of local crops.

Though production has improved and locally-grown rice is now available in many markets, supply still dwarfs local demand. The decision to close the land borders has worsened the supply situation, resulting in a steep increase in price as seen in the past few weeks. Adding to the pressure of low supply, many dealers are said to be hoarding the commodity with the intention of selling at increased prices during the Christmas festivities.     

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Whilst hurting consumers, the closure of the borders has been positive for local rice producers such as Olam and indigenous companies such as Flour mills who produce spaghetti. Our chat with a few consumers and retailers suggests that spaghetti is gradually becoming an acceptable substitute for rice as a pack of sphaghetti that can feed four average consumers sells for N220 while a derica (the local measurement) of imported rice that feeds about 5 average consumers now sells for N400.

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1.      Border Closures May Only Offer Temporary Subsidy Reprieve - CardinalStone Research, October 11, 2019  

2.     Effects of Closing The SEME Border - Coronation Research, October 15, 2019

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