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ANALYSIS: Why Nigeria’s border closure may spike price of local rice

SINCE the Federal Government launched a border closure policy in late August, the decision has triggered mixed reactions from Nigerians, neighbouring countries and regional bodies.

Farm produce from neighbouring nations such as Benin Republic, Togo, Ghana meant for the Nigerian market rots away daily due to the government’s policy. And the cost of food items in Nigeria, particularly rice, is on a steady rise.

For instance, prior to the land border closure, a 50kg bag of rice that was sold at N13, 000, now goes for N25, 000.

 

As at 2011, Nigeria annually spent N24.5 trillion importing food items into the country. Five years after, a different report put the figure of four major imported commodities – Wheat, Rice, Sugar and Fish at $11 billion (4 trilliion). Experts have argued that Nigeria’s fertile soil places it at advantage to grow rice in over 18 states across the country, thus feeding itself with the commodity which has an annual estimated import figure of N356 billion.

For reasons partial border closure appears to be the right decision, the above figure is invariably assumed good enough to create local jobs. Rather, what we have are continued job exports through persistent food imports. Former Ministers of Agriculture and Rural Development, Dr. Akinwumi Adesina and Chief Audu Ogbeh, as well as former Agriculture Minister of State, Heineken Lokpobiri, have repeatedly claimed rice and frozen foods illegally imported through the land borders lack good nutritional value compared with local varieties. They argued further that such imports keep crippling local capacity and government efforts to promote farming, especially among the youth. Ironically, more than 18 states from the 36 across the country have the potential to grow rice.

Some of the states include Kebbi, Ogun, Kaduna, Adamawa, Sokoto, Kano, Katsina, Cross Rivers, Ebonyi, Benue including the Federal Capital Territory (FCT) to mention but few.

Most importantly, the sector has significantly enjoyed the attention of repeated administrations either in terms of funding or policy. Aside from Levy and Excise Duty-free tariff for agricultural commodities, the sector has enjoyed World Bank loans through the FADAMA projects and recent FADAMA Additional Funding I and II.  The CBN, as at April 2019 says it has so far disbursed N174.48 billion to farmers via the Anchor Borrowers Programme (ABP). And since the border closure, the federal government boasted to have raked in N1.4 billion and arrested 319 suspected smugglers.

But, despite these interventions and the recent land border closure, believed good enough to ensure self-sufficiency in rice production, the nation might continue to witness higher costs of rice except deliberate and sustained actions are taken in selected areas. The ICIR identifies these to include farm mechanisation, extension services, subsidy for farmers such as the Growth Enhancement Support Scheme (GES), establishment of more rice milling centres, improved finance – single-digit interest rate; banks until lately have been recalcitrant to lending to farmers and even those who do do so at high-interest rate; addressing infrastructure deficit and awareness creation on insurance or early warning system against flooding or natural resources that could affect farm harvests.

Farm Mechanisation

 

Machinery and Equipment Requirement Across the Rice Value Chain.
Source: PWC 2017 Report on Boosting Rice Production through Increased Mechanisation

Statistics have shown that Nigeria’s large population is fed by subsistence farmers largely in rural communities. Majorly, 80 percent of rice grown in the country which is about 3.7 million tonnes is produced by smallholder farmers while the remaining 20 percent is cultivated by commercial farmers. Yet, local consumption of staple food stands at 6.4 million tonnes as of 2017.

Invariably, this implies an almost 50 percent deficit in local consumption. Cultivation has also been manual, usually through the use of cutlasses, hoes and other crude equipment; hence the level of production output. As such, Nigeria clearly has a high deficit in farm mechanisation, a factor threatening local rice sufficiency target.

A 2017 report from the PriceWaterCoopers (PWC) titled Boosting Rice Production through Increased Mechanisation revealed that agricultural mechanisation in the country has remained so low at 0.3hp/ha unlike 2.6hp/ha in China and 8hp/ha in India.

The report further put the estimated figure of tractors in the country at 22,000 farm machines, relative to 1 million in China and 2.5 million in India – all top rice-growing nations.

“We estimate that increasing the mechanisation rate in Nigeria from 0.3hp/ha to 0.8hp/ha in the next 5 years, can double rice production to 7.2 million tonnes. To achieve this, we estimate that Nigeria will need to at least triple its current stock of machinery over the same period,” the report says.

Extension Services

The role of extension services to farmers cannot be overemphasised. Their responsibility is mainly to enlighten farmers either as groups or through other means on better agricultural practices. Oftentimes, the extension workers are domiciled in the State and Federal Ministries of Agriculture and Rural. They go round to sensitise the farmers of the right choice of seeds, rain onset and offset to guide farmers towards better harvests.

However, the ratio of extension workers to farmers is low.

The National Agricultural Extension Research Service (NAERLS) in a report criticised the population of extension service to the farmers. As a result, a digital platform to share information across to farmers was established. But again, how many farmers are digitally literate?

Farm Subsidy

Several experts have argued that for the nation to realise its food sufficiency target, there should be a constant and strategic subsidy for farmers. Such incentive was provided to farmers during the administration of Adesina, the former Minister of Agriculture and Rural Development. The local farmers across the nation were provided with subsidised seeds and fertilisers.

The model was such that the Federal Government pays 50 per cent for the farm inputs, the State was responsible for 25 per cent while the interested but captured farmers only paid 25 per cent. Ogbeh, the immediate past agriculture minister also maintained the same argument attributing lack of subsidy to farmers as a reason for the increasing price of local rice.

“Agriculture should be subsided, but strategic subsidization at the point of providing general incentives that give enabling environment for farmers to achieve optimum production,” Prof. Oluwole Fatumbi, Lead Specialist at the Forum for Agricultural Research in Africa (FARA) added at recent training in Abuja.

“….only 2 per cent of Americans are farmers on the farm while 13 per cent are in value chain development, processing and financing which brings growth and reduction in the price of the commodity. So, I am not against government efforts, they are trying, but they need to channel the efforts and energy in the right direction to ensure that agriculture delivers for the larger population.”

Rice Milling Centres

Rice generates more income for farmers than any other cash crop in the country. This singular reason led to a steady increase in local production despite the poor mechanisation. For instance, in 2017, the United Nations’ Food and Agriculture Organisation put the value of harvested rice paddy at 4,912,650 but mainly affected by milling capacity.

Rural farmers are mostly faced with the challenge of logistics to transport rice paddy to millers. Some would often travel kilometres to mill but local access roads are usually in bad states while corruption trails distribution of milling machines.

Though new mills are springing up via private sector involvement such as the 250 tonnes daily milling capacity Amarava Rice Mill, Kano state, local access to farm mechanisation remains abysmally low.

In July 2018, the former Agric. minister signed N10.7 billion deal on behalf of the government with MV Agro Engineers, to make available integrated rice mills for the use of local farmers. It is to be delivered in December this year. Hopefully, this promise will be fulfilled by the set date.

Single Digit Interest Rate

Except for CBN interventions with special interest on rice, farmers’ access to credit from commercial banks has been a huge challenge. This situation also extends to rice farmers which, in most cases, the commercial banks prefer to give loan more than other businesses.

Until August 2018, commercial banks gave loaned to farmers with an interest rate of about 30 per cent, an initiative  Ogbeh repeatedly described as non-sustainable.

“That the Central Bank considered working with the Bankers’ Committee to finance agriculture from the commercial banks’ huge reserves, running into billions of naira, is a cause for optimism in the agricultural sector.

“This is more so as the single-digit interest rate of nine per cent on long-term credit of a minimum tenor of seven years will support stable agricultural investment and predictable increase in food production. The multiplier effect of this initiative at a time of a restructured and recapitalised Bank of Agriculture will be a reduction in uncertainties and avoidable risks in agricultural investments where farmers will enjoy wider latitude of access to loans from either commercial banks or BOA with less hassles,” Ogbeh had stated. Yet, farmers wanted a 5 per cent rate instead of the existing 9 per cent.

Infrastructure Deficit

One of the major challenges of rural farmers is basic infrastructure such as access roads to transport agricultural products from farms to markets. This is evident in Benue State where farm produces rots away, especially during the rainy season due to lack of motorable roads. Also for rice, transporting paddy from farm to milling machine has reportedly been a huge problem – far worse during the wet season.

Awareness Creation

The Nigerian Agricultural Insurance Commission (NAIC) is an agency of government responsible for insuring farm produce against flooding and other forms of disasters, but, most farmers are unaware of its existence yet annual budgetary allocation goes to the agency. Aside, most farmers are still ignorant of how to access financial supports from the government despite huge sum disbursed since the commencement of the Anchor Borrowers Programme (ABP).

More so, information on the free import duty for agricultural machinery is not so popular among rural farmers. These, among others, are to be addressed if the nation must achieve its rice sufficiency target.

Meanwhile, Aminu Goronyo, President of the Rice Farmers Association of Nigeria (RIFAN), conclusively maintained that border closure was to promote patriotism and not to enrich rice farmers.

“Before 2015 Nigeria, spent nothing less than N368 billion for rice importation but today that same money is in circulation within the country’s business community….However, the closure is not to enrich rice farmers but a devotion to the welfare of the country and commitment to compete with other nations,” he said.

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