Nigeria hopes high tariffs will make it grow more rice

16.03.2018

STANDING ankle-deep in water between neatly spaced rice plants, an instructor shows a group of about 100 farmers in Kebbi, a state in north-west Nigeria, how to apply herbicide. The training session, arranged by TGI Group, a Nigerian conglomerate that runs a large rice mill nearby, has an enthusiastic audience. Hussein Ahmed, a farmer, says the yield from his small field has increased by about 50% since he started using chemicals and carefully spacing the seedlings. Another farmer boasts of marrying a second wife thanks to the extra money he is earning from growing rice.

Across the region the grain is cooked with tomatoes and mounds of chili to make jollof, a dish that is almost always eye-wateringly spicy, no matter how mild the cook insists it is. Jollof is not just the cause of many arguments in the region—Ghanians and Nigerians each insist theirs tastes better. Its main ingredients have also become symbols of how Nigeria is trying to diversify an economy that exports crude oil and imports almost everything else.

Muhammadu Buhari, who was inaugurated as president in May 2015 in the midst of an economic shock caused by low oil prices, turned to autarky. His central bank stopped providing foreign exchange to importers bringing in 41 categories of goods, including rice, toothpicks and incense. The government increased customs duties on rice from 10% to 60% in October 2016 to encourage farmers to plant more.

Such tariffs have certainly spurred investment in farms and in milling plants such as the one run by TGI in Kebbi. The mill can already produce 120,000 tonnes of rice a year, yet the company is planning to add another 100,000-tonne production line and open two more mills in other states in the next five years. Aliko Dangote, Africa’s richest man, says he will invest in six new factories that will produce 1m tonnes of rice a year.

To feed these mills, Nigeria will have to increase its rice yield, which is among the lowest in the world. Farmers in Thailand harvest three crops a year, compared with one or sometimes two in Nigeria. Outgrower schemes, in which firms such as TGI provide training, fertiliser and other chemicals on credit that is repaid after harvest, can help. But extending them to all 1.4m rice farmers in the country would be a huge task.

The central bank has done its bit by doling out some 55bn naira ($153m) in loans to 250,000 farmers (most of whom grow rice). Architecture graduates and civil servants have cashed in on the boom and taken up farming. Central-bank officials are happy to talk about how much money it has lent, but they do not mention how much money is being paid back. Nigeria’s anti-corruption body recently said that it had recovered 300m naira stolen from the farm-loan scheme in two states.

The bigger problem, however, is that local rice is still not competitive with Asian imports. Farouk Gumel of TGI says that in January he was selling 50kg bags at his factory gate for 14,000 naira each (traders then add on the cost of the long journey to cities in the south). Smuggled rice, on the other hand, was being sold in urban markets for 12,500 naira a bag. Thanks to increased production and perhaps smuggling, rice prices are lower now than they were a year ago, though they are still 68% higher than they were two years ago.

The government says its policies are working and that Nigeria will no longer need to import rice by the end of the year. But its numbers do not add up. It says that rice production has doubled since 2015 (and will increase by 50% again this year), but there are scant data to support such ambitious claims. Nigerians eat 5.3m-7m tonnes of rice a year. Imports account for 2m-3m tonnes, a figure that has barely budged in recent years (see chart). Nigeria’s information minister, Lai Mohammed, points to statistics from Thailand showing that its exports to Nigeria have slumped by 97% in two years. But Thailand’s exports to Benin, have doubled to 1.8m tons a year, the equivalent of 160kg per Beninese. The country’s tariff of 12%, and its poorly policed border with Nigeria are probably the main reason for its booming demand.

Nigeria’s import restrictions benefit farmers and millers and seem to be encouraging more planting. But until yields improve and the costs of producing Nigerian rice fall, the country’s consumers will have more reason to thank smugglers for keeping their plates filled with jollof.


economist

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