A recent news from the new Comptroller General of Nigerian Customs, Col Hameed Ali (rtd), that the Nigerian boarders will soon be opened for the importation of rice has set the Nigerian farmers to panic on the gains they have made in rice production in recent years. Those involved in the Agricultural Sector, and particularly in the Rice value chain fear for their investment. The big question everyone is asking is: Can the Buhari administration win the Rice war?
As the hues and cries about opening or not opening Nigeria’s land borders to rice importation gather momentum, clear signals that functional arms of this new government are either working at cross-purposes or that they are yet to find points of policy convergence are emerging. The Comptroller-General of Customs, Hameed Ali, a retired colonel, in his wisdom, had taken a decision to open land borders to importers, with explanations that stood economic logic on its head.
While the Nigerian public was just trying to come to terms with the rude shock occasioned by Hameed Ali’s decision, a governor from one of the rice-producing states dropped another reinforcing bombshell. This time, his disclosures sounded like a decision that was taken in agreement with other top government functionaries. Acting as a mouthpiece for the Vice President Yemi Osinbajo, the Central Bank (CBN) Governor Godwin Emefiele and permanent secretaries of federal ministries at the end of a meeting held in the presidential villa, Abuja, the Zamfara State Governor and Chairman of Nigerian Governors Forum, Alhaji Abdulaziz Yari told State House Correspondents about government’s political will to stop rice importation.
Yari had this to say: “Nigeria is currently a major importer of rice. Now, the political will is in place to stop it. We in about nine states are going to be seriously engaged in massive rice production. “We are hoping that in the next two years, rice importation into Nigeria will be banned. We are committed and the political will is in place.” He added that “The policy is going to be in place and we gave our commitment that we are ready to support the government policy in ensuring that Nigeria becomes self-sufficient in food production in the next two years.”
Yari’s comments, however, gave him away as either oblivious of the dust that Col. Ali’s decision is currently raising, or perhaps buttressing Ali’s position, using a plausible explanation. He did not clarify anything about how and where the government currently stands on rice importation. A lot would have been clarified if he has spoken about the land border issue. He did say, however, that Nigeria has to wait until another two years “until it has developed local industries to produce maximally for local consumption.”
Yari’s statements look good on the surface. But, in reality, what this could mean is that, within this period, the hazy and unclear government policy will create incentives to import (without particular limit imposed) and flood Nigeria with so much rice that will make local production uncompetitive and unattractive. Taming the importers might not be as easy as allowing them to start. After two years, serious-minded people will not like to venture. Banning importation at that time will amount to nothing and the “maximal production” from local sources will prove elusive. We could be reminded of the import concessions that brought our refined petroleum industry to the present impasse.
On Tuesday, Adamu Aliero, an investor in the rice value chain, who is a serving member of the Nigerian Senate, expressed worries about the Customs’ pronouncement. Following Aliero’s motion on the dangers posed by the removal of rice from the import restriction list and re-introduction of import duty payment on land borders, the senate summoned the Comptroller-General of Customs, Hameed Ali, to explain why he lifted the ban on rice importation through land borders. The Customs boss is to appear before the Senate’s ad-hoc committee on import duty waivers to explain reasons behind his action, viewed by the Senate to be above his level, since the order restricting rice importation through land borders was a presidential one issued in 2011.
Senator Aliero said that the Senate was concerned that the decision by the Comptroller-General of Customs to liberalise the importation of rice to the extent of lifting the ban on land importation of rice would worsen rice smuggling into the country. “The Senate is worried that the unilateral and unexpected decision of the CG Customs to re-open the country’s land borders to rice importation will reverse the tremendous gains recorded in rice production in the country. The Senate also wants to ensure that the agriculture sector (which) is the dependable lifeline of this country is not harmed beyond immediate repair by the policy inconsistency,” he said.
Senator Aliero seemed to have hit the nail on the head by his reference to “policy inconsistency,” a decision that was indicative of a clear case of insensitivity to the realities in the rice industry in Nigeria presently. The downsides are far-reaching. And, if Ali’s decision is not reversed, only time will tell the extent of damage this will do to the economy that is presently in dire straits. While there is an urgent need to keep the rice import under check, an official approval of land border importation of rice will complicate the presently delicate situation. The new government’s promised “change” could turn out to be a mirage after all and could take Nigeria further away from the status it attained in 2014, which was the verge of meeting its consumption needs through local production.
Here are some of the many implications:
Opening the land borders will create great opportunities for neighbouring countries, particularly Benin Republic to reap handsomely from the import business at the expense of Nigeria. The level of import through Nigerian sea port might drop while the import through land borders will rise sharply as Benin port reaps from the losses to Nigerian port. Accounting for the import through land border will be much more difficult and less precise than through sea port. In fat, there will be an under-reporting of imports. One of the windows open for such is the Common External Tariff structure that could mean virtually allowing the commodities entry into Nigeria with little or nothing to pay. Those who masterminded this decision have done their homework. They are aware of what they stand to gain by importing through Benin port and transporting by road into Nigeria.
Authorising the opening of the land border is tantamount to neutralising the efficacy of the earlier plan to keep such an arrangement in check. In essence, it means that, this time, importers have no limit to what they can import. The impact, however, (short-term or long-term) is that the importers (especially the big ones) will flood the local market with so much that would discourage local producers and processors, which could be driven out of business when price war begins. Through the massive importation, the importers will try to sell dummy to Nigerians that the price of rice has gone down (but would not explain the true costs and structure to Nigerians). They will dominate the market and will drive the small importers too to the market periphery (through the sheer drop in price per unit, occasioned by the margin’s difference per bag) that will be difficult to match or challenge by small operators. Jobs will be lost and Nigeria will be at the mercy of foreign importers.
With the opening of land border, what happens to issuance of rice import quotas to protect investors? If that is sustained, how will it be enforced under a multiplicity of land borders? Is this new decision not going to benefit more of those who have no investments in the industry, either in form of paddy production or rice milling? How are we sure that this new policy is not remotely pushed by foreign importers of rice (and a few local ones) who wish to run their own rice policy, legitimising it with government’s fiat? The new decision seems more of a leeway for implementation of a perverted rice importation plan of a handful of Asian companies (lately joined by Latin America) determined to undermine Nigeria’s self-sufficiency in rice production, as they have repeatedly done under a number of previous governments. These companies are experiencing serious competition from patriotic Nigerian rice importers who have embraced President Jonathan’s new rice policy and have become major investors in the local rice sector.
Opening up rice import channels through the land borders will put patriotic local producers at a disadvantage in a fierce competition with rice importers who have no interest in putting down their investment here. Investors’ confidence in rice production in Nigeria will be severely shaken by this decision to open land border to rice imports. It will quickly reverse the gains made since May 26th, 2014, when a new rice policy was approved by President Goodluck Jonathan to encourage investment in local rice production and milling through the introduction of an import duty differential on rice (brown or polished) imported by rice investors compared to rice traders.
A major decision that side-stepped the role of an inter-ministerial committee chaired by the Federal Ministry of Agriculture and Rural Development (FMARD), with membership drawn from the Federal Ministry of Finance (FMoF), Federal Ministry of Industry, Trade and Investment (FMITI) and the National Planning Commission (NPC) is clearly an aberration that needs to be urgently rescinded. A broad-based stakeholder consultation had much earlier identified the national supply gap, which should serve as a benchmark for decisions. Does it make an economic sense to sweep aside the facts assembled in the last regime by FMARD, FMITI, rice experts from Africa Rice Centre, Rice Value Chain Consultants, USAID, and verified, during stakeholder meetings and consultations, with members of the Rice Processors Association of Nigeria (RIPAN) and Rice Importers and Distributors Associations of Nigeria (RIMIDAN)?
With the Customs’ recent intervention, we expect to see a derailment of plans which have been in place to annually reduce the national supply gap from the 1.5million MT determined in 2014 to 1.0 million MT in 2015, 0.3 million MT in 2016 and to zero in 2017, when the country is expected to become self-reliant in rice production, when new rice mills being purchased by investors, such as Dangote Group, Honeywell, Wacot are to be in active production. The new government is expected to carefully revise the plan to ensure that it is still on course. What happens to these investors who have acquired and are developing over 270,000 hectares of rice fields to supply their rice mills with paddy?
This is not the first time that foreign importers have tried to derail government’s rice self-sufficiency policy. They have always sabotaged every rice policy of the federal government. It is like the Buhari’s government is playing into their hands again, this time. The Presidential Initiative on Rice put in place between 2001 and 2003 under Obasanjo suffered a setback. The foreign importers have even falsely argued that rice production in Nigeria was not economically feasible and uncontrolled imports should be allowed in. The Brazilians have read Hameed Ali’s message or, by extension, President Buhari’s “body language” very well that they have quickly come begging Nigerian government to allow them export rice to Nigeria.
Brazilian Ambassador to Nigeria, Mr. Elvado Silva Junior, who led a delegation of 20 companies to the Nigerian Investment Promotion Commission, NIPC, in Abuja on Monday, said Brazil was keen on exporting its quality rice to Nigeria. According to him, “the main target of Brazilian investors is on rice importation. We wish to bring our high quality rice to Nigeria and we will appreciate if the Nigerian government can relax its barriers on rice importation.” This is a bad omen, speaking economically, and is just the beginning. We might soon receive delegations from Thailand, Vietnam, India, China and others who know how much rice our country annually imports and would want to have their own share of the pie.
The overtures of these bold exporters are in spite of the fact that Nigerian farmers have shown an impressive performance in response to government’s new rice policy that favours local rice production and milling. Since the onset of Agricultural Transformation Agenda of the immediate past regime, Nigeria has seen a rapid growth in paddy production from 4.5 million metric tons (MT) in 2012 to 7.89 million MT in 2013, and 10.7million MT in 2014; with the addition of a completely new rice growing season – the rice dry season farming programme. The socio-economic impact of the rice transformation agenda has been tremendous; the total estimated additional paddy produced of 7 million MT is worth N407 billion. This is money that has been re-directed into our rural rice producing communities in the country between the period of 2011 and 2014 rather than go to Asian rice growers.
While some subtly nurse a hidden agenda of killing our emergent rice industry, false claims are making rounds that some billions of naira are lost to smugglers. Instead of monitoring the ports and borders properly, the Customs had been misleading Nigerians into believing that the reformist policy in rice was reducing revenues perennially collected from rice import and that the restriction on importation through land border encouraged smuggling. This is like a clever attempt to re-establish the land border importation of rice with the excuse that this helps the federal government to generate revenues.
So, which one is better: to allow unfettered importation or to grow local industry and enjoy the multiplier effects of doing so? A total of US$2.6 billion or N494 billion in new investment is the current value of Domestic Rice Production Plans (DRPPs) of the companies who are supposed to still be beneficiaries of quotas for preferential imports. The US$1billion by the Dangote Group, US$300 million by the Elephant Group, US$218 milllion by Flour Mills of Nigeria, US$213 million by Honeywell Group, US$75 million by Wacot, to mention a few. These are all reputable companies whose investments in the rice sector can be verified.
The faceless and unpatriotic rice importers prefer means of importation mostly not supported by verifiable data, not providing for a commensurate investment in local production, giving no consideration at all to our local rice production, and could destroy all the efforts made in the past four years to raise domestic rice production. Under this perverse rice import policy proposal, most likely dictated by foreign rice importers, the country will continue to lose tens of billions of naira, exportiing jobs to Asian countries or Latin America. This is exactly what those making known their intents and their Nigerian collaborators have been doing. Nigeria is back at it again.
The goal of this government should be to turn importers into local producers. That is already being achieved before Buhari’s government came on board, and should be sustained. For example, Dangote Group a major importer of food in the country, is developing 150,000Ha of rice fields in Edo, Kebbi, Jigawa, Niger, and Kogi States that will produce one million MT of rice paddy per annum within four years. Elephant group, another major rice importer is investing US$300 million in a 76,000MT/annum mill, and a 10,000Ha farm in Oyo State. These are all investments that have been publicly announced. It was widely reported that Dangote signed an MOU with Federal Ministry of Agriculture and Rural Development before President Jonathan on August 1, 2014. No one hoodwinked him into the project. It was actually a mark of success of the new rice policy.