Another policy somersault?

The Federal Government’s gamble to revive Nigeria’s rice fortunes faces its biggest test so far since its introduction in early January 2013 as it plans tariff cut to check smuggling. Analysts believe such a measure could be another government’s policy somersault

Ahead of the forth-coming yuletide, fresh indications have emerged that the skyrocketing price of foreign rice may drastically fall as the federal government might have concluded plans to review downward the 110 percent import duty and levy it slammed on the commodity January this year to boost local production. Currently, the market price for full bag of rice goes for N10, 500 and N5, 800 half bag depending on the brand.

Last week, Chairman, Presidential Committee on Trade Malpractices, Alhaji Dahiru Ado-Kurawa, gave the hint while fi elding questions from journalists in Lagos as he revealed that the Federal Government would soon review the tariff on rice, because the policy has escalated smuggling of the commodity and loss of revenue to the government to the tune of N2 billion.

Ado-Kurawa said the planned downward review was aimed at reducing the level of smuggling of the commodity from Benin Republic as he observed that the Federal Government introduced the rice policy of 110 per cent duty and levy in January, to boost local rice production.

“The Federal Government will likely adjust the policy because it has escalated the infl ux of smuggled rice from neighbouring countries. Benin Republic is one of the highest importers of parboiled rice, the country that ordinarily imports about 230,000 tonnes per annum.

Ado-Kurawa, lamenting that Nigeria lost over N2 billion to smugglers through land borders in Nigeria in the past eleven months said, ““The two-milliontonne parboiled rice imported by Benin is all smuggled into Nigeria. We cannot continue to fold our arms and allow neighbouring countries destroy our economy.”

According to him, the stakeholders met recently in Abuja and part of the resolution was to advice the federal government to review the rice policy and sift out the grey areas where improvements could be made with a view to ensuring that the government’s quest to halt rice import was achieved.

However, Ado-Kurawa was quick to add that the review should not be seen as a policy somersault but an approach to create a healthy mechanism for Nigeria to be self suffi cient in rice production and earn income from imported rice as he disclosed that the government would also give incentive to rice millers into backward integration

According to him, government’s policy on rice has greatly deepened local production, which was geared towards attaining self-suffi ciency in the product. He noted that local milling capacity has increased to 200 per cent and there has been an increment in production of about four million tons of local rice, thereby driving the production of paddy rice to an all-time high.

The chairman noted that government’s policy on rice has greatly deepened local production of the commodity. “The policy is geared towards attaining self-suffi ciency in rice production,” he said.

President, Millers, Importers and Distributors Association of Nigeria, Tunji Owoeye, commending the federal government for looking into the challenges facing the rice sub-sector, listed the challenges as smuggling of foreign rice brands through the Benin Republic border as well as incentives to rice farmers and processors.

Seeing the review policy as a welcome development, according to analysts, almost a year after unveiling a ten percent import duty, as well as 100 percent levy on both brown and polished rice, and engineering a programme to support local rice production, the effort appears to be succumbing to the onslaught of smugglers who are thriving on cheap imports from neighbouring countries.

Some analysts say they were tempted to dismiss the new tariff regime as another futile exercise.

“The policy will not work for now, because the ministry of agriculture does not have control over the Nigeria customs,” says Afi oluwa Mogaji of X-Ray Consulting, an agricultural consultancy, who also believes demand for and availability of local rice could eventually make imported rice take backstage.

Investigations show that Benin Republic, which shares a border with Nigeria, has become the biggest benefi ciary of the rice smugglers, with regard to revenues generated through their sea port and from the smugglers.

Sources say the heady profits from the huge smuggling activity have given rise to the current throng of rice warehouses around the Lagos metropolis, operated by the smugglers who bribe their way through the mass of security agencies that line the routes into Nigeria.

Anga Sotonye, of Universal Quest Nigeria Limited, an agric consultant, suggests that the trend will continue, unless the Federal Government mounts adequate security and surveillance at the borders.

Their activities have a huge impact on both local production and the Nigerian government’s revenues, and have become the gain of Benin Republic. Investigations also show that importers who also ally with the smugglers fi nd Benin Republic most suitable for their activities because of its very low import tariff.

The average international price of Thai rice which is mostly eaten in Nigeria is $600 or N96,000 per ton, with exchange rate at N160 per dollar (20 bags in a tonne). So, for every legally imported ton of rice, the importers pay effective duty of 110 percent, taking the landing cost to N201,600 per ton. Given this calculation, it costs between N10,000 and N12,000 per bag in the market.

But in Benin Republic, with total tariffs of about 35 percent only a 50kg bag of Thai rice in Benin Republic sells for as low as N6,480 in the market.

Even with bribes paid to ensure passage of the rice from Benin Republic to Nigeria, a bag of smuggled rice still enters the Nigerian market at N7, 000 and gets sold for less than N10, 000, usually N9,000.

“That is why they will kill to smuggle it” says a source who suggests that top level Customs offi cers are behind the business because of the huge ‘kick-backs’ they receive. This is considered by some industry watchers as one of the greatest rip-offs.

Recent published reports from the Lagos Ports Complex (LPC), Apapa, which controls over three quarters of the country’s import traffi c, confi rmed that legal rice importation has been going down. The records show that between November 2011 and now, rice importation has declined by about 58,000 metric tons, that is, 2,900 bags per week.

However, there is no scarcity or short-fall in supply of imported rice in the Nigerian market, indicating that smuggling through the land borders has increased, replacing a considerable part of legal importation.

The last published report by the Federal Government shows fi ve million metric tons of rice, about 100 million bags is demanded annually in the country. The total value for these, is about N1 trillion annually.

Legal importers are upset that they are losing sales to smugglers, as smuggled rice is cheaper than legally imported rice, sometimes by as much as N1,000 or more, because the average Nigerian consumer would go for the cheaper imported rice.

It was gathered that the commodity was last imported into the country through the Lagos seaport on March 13th 2013 via MV Lucija which berthed at the ENL terminal at the Lagos Port Complex (LPC) with 12,000 metric tonnes. This is clear a departure from the past when ships laden with rice arrive at the ports almost daily. Frontline player in the business of rice importation and Chairman Oceanglory Commodities Limited; Reverend Chiori Cole noted that no businessman is ready to allow his money to be tied down because of the high tariff on the commodity.

Meanwhile, while Ado-Kurawa’s position seems to have been in sharp contrast to the Jonathan-led’s government’s position of putting a total ban on rice importation by 2014, in order to develop local production of the commodity, there have been mixed reactions by stakeholders.

For instance, while Kayode Olanipekun, the Acting General Manager, Osun State Agricultural Development Corporation (OSSADEC), backed government’s decision to ban rice importation by 2014 saying that the policy would encourage local production of the commodity rice, the Chairman, Rice Farmers Association of Nigeria (RIFAN), South-West zone, Olusegun Atho advised government to put in place proactive measures to meet the country’s rice demand before banning imported rice.

Olanipekun said that the country has the resources to produce enough rice for local consumption.

“The mission to stop importation of rice into the country is accomplishable, if the Federal Government will be serious with the policy and invest appreciably in the agriculture sector.

“Although, it can be diffi cult a bit at the beginning, but it will be to our advantage because it will ensure food security in the country and eventually boost our foreign exchange, because we have the resources — human and natural.

“It is now imperative for governments at all levels to increase budgetary allocation to the agriculture sector and not defence, since we are not fi ghting or waging wars,’’ Olanipekun said.

However, the general manager advised the government to get its priority right by giving the necessary attention to agriculture, noting that the country was blessed with the natural and human resources to prosper as an agrarian nation.

He also urged the government to boost the production of local rice along with other food crops such as cassava, maize, beans and cowpea.

According to Atho, government needed to provide incentives to farmers to become selfsuffi cient in rice production.

“I don’t see any reality in this 2014 deadline. Not until when necessary machinery is put in place should government ban imported rice.

“Government should equip farmers with the necessary tools, including tractors, organic fertilisers and give adequate training to farmers.’’

The RIFAN chairman also advised the government to provide adequate funding by way of grants or loans to farmers.

“These factors are very important and must be put into consideration, before the proposed ban.

“If these things are not in place, the ban cannot be realistic. Until when government begins to do something about it, that is when we can see the seriousness.’’

He identifi ed smuggling as the major factor that would hinder any ban on the imported commodity, just as it had adverse effect on local rice production.

“Government needs to come out and deal with the issue of smuggling, in order to encourage local growers.’’

Atho appealed to government to construct more dams and provide mini-pumping machines for farmers to prepare them for irrigation farming as well as introduce modern rice production technology.

“If government can provide all these to farmers, that is when government can boast of self-sustainability.’’

Meanwhile, Minister of Agriculture, and Rural Development, Dr Akinwumi Adesina has re-affi rmed FG determination to ensure that all rice consumed in Nigeria was produced by local farmers.

“Nigeria, as I said, is running a prodigal consumption pattern in the sense that we are spending billions of Naira everyday importing rice from Thailand and India when we can grow that rice here. If you go to Sokoto or to Kebbi , Kano, Katsina, Niger, Kogi, ofada rice in Ogun State, down to Abakiliki and down to the Niger Delta, we have upland rice, lowland rice, fadama rice, all types of rice that can be grown here, yet we are buying rice. We buy what we can produce, we keep on exporting jobs and creating poverty in our rural areas, destroying incentives for our own growth then we turn around and ask the question why is there poverty.”

That is why the President decided that we should have a self-suffi ciency food plan, such as the rice transformation strategy to make Nigeria self sufficient in rice by 2015.”The minister submitted.

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