Impact of Trade on Domestic Rice Production and the challenge of Self- sufficiency in Nigeria Chuma Ezedinma Integrated Cassava Project International.

Impact of Trade on Domestic Rice Production and the challenge of Self-

sufficiency in Nigeria

Chuma Ezedinma

Integrated Cassava Project

International Institute of Tropical International Institute of Tropical AgricultureAgriculture

Rice Paddy Production (Mt)' by Proportion

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Nigeria 51.5 52.2 50.8 44.7 48.0 44.5 44.1 43.9 43.3 44.0 38.0 43.6Benin 0.2 0.2 0.2 0.3 0.3 0.3 0.4 0.5 0.4 0.7 0.8 0.9Burkina Faso 0.6 0.7 0.9 1.1 1.4 1.6 1.2 1.2 1.2 1.4 1.5 1.2Cameroon 0.6 0.8 0.5 0.7 0.6 0.5 0.5 0.7 0.9 0.8 0.9 0.8Chad 1.9 1.7 0.4 1.7 1.3 1.4 1.5 1.6 1.8 1.2 1.5 1.6Cote d' Ivoire 10.5 10.6 11.2 12.9 12.6 16.2 17.4 16.0 16.0 16.4 16.7 11.2The Gambia 0.3 0.3 0.2 0.4 0.3 0.3 0.2 0.3 0.4 0.5 0.4 0.3Ghana 2.4 2.1 2.6 3.0 3.3 3.1 2.7 2.6 2.8 3.3 3.8 3.8Guinea 8.0 8.2 8.8 10.0 10.4 9.6 9.7 10.2 10.8 9.9 10.9 11.5Guinea-Bissua 2.0 2.0 2.1 2.4 2.2 1.7 1.4 1.2 1.1 1.4 1.2 1.1Liberia 1.6 1.8 1.1 0.9 0.9 1.3 2.3 2.8 2.6 2.4 2.0 2.6Mali 7.3 6.6 7.1 8.6 7.8 8.9 7.8 9.6 9.6 9.9 12.9 12.7Mauritania 0.7 0.8 1.1 0.8 0.9 1.0 1.1 1.4 0.7 1.0 0.9 0.9Niger 1.2 1.1 1.2 1.1 0.8 0.7 0.8 0.8 0.8 0.8 1.1 1.0Senegal 2.7 2.8 3.2 3.0 2.6 2.1 2.3 1.7 3.2 2.7 3.4 2.4Sierra Leone 8.0 7.7 8.1 7.5 5.8 5.6 5.6 4.4 3.3 2.7 3.2 3.4Togo 0.6 0.4 0.6 0.9 0.8 1.1 1.2 1.2 1.1 0.8 0.9 0.9

Total 100 100 100 100 100 100 100 100 100 100 100 100

• Nigeria is the largest rice producing country in the West African region.

• By 2002, the country accounted for 57 % of the total rice producing area in West Africa.

• Potential land area for rice production in Nigeria is between 4.6 million and 4.9 million ha.

• Out of this, only about 35 percent of available land area is cropped to rice.

• Rice yields are however low even by West African Standards

Introduction

The Paradox Nigeria is the largest importer of rice in the world

The annual demand for rice in the country is estimated at 5 million tons

Domestic production accounts for 3 million tons

Imports account for about 2 million tons

Between 1990 and 2002, Nigeria imported 5,132,616 tons of rice

In 2002 alone, the country imported 1.882 million tons of rice.

Value of rice imports ('000US$)

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

Year

US

$

Objectives

Describe the effect of rice trade (imports) on domestic rice

production and marketing

Assess the competitiveness of domestic rice relative to

imported rice in Nigeria

Assess the effect of policy inconsistency on rice production

Determine the optimal efficiency of local rice mills

Primary sources:

Field level survey involving small scale mills, rural and urban markets in north and south of Nigeria

Secondary sources:

IITA and other Libraries, internet

Methodology

Rice Production Systems In Nigeria, cultivable land to rice is spread over five ecologies, namely:

rain fed upland

rain fed lowland or shallow swamp

irrigated rice

deepwater or floating rice and

tidal mangrove swamp

Rice production features and systems in Nigeria

17%

52%

27%

3% 1%

Rained Upland

Rained Lowland

Irrigated

Deep Water Floating

Mangrove Swamp

Major Rice producing States:

Kaduna - 22 %,

Niger - 16%

Benue - 10%

Taraba - 7%

In geopolitical terms rice is produced mainly in the central region of Nigeria

Rice Output in Nigeria by Zones (2000)

23%

15%

47%

10%5%

Northwest

Northeast

Northcentral

Southeast

Southwest

Effect of rice trade (imports) on domestic rice production and marketing

The proportion of local rice available in Nigerian markets is far less than that of imported rice

Table: Market share of foreign rice to local rice in selected urban markets. Urban market

Local rice volume (tons)

Foreign rice volume (tons)

Total volume (tons)

Percent of foreign rice

Enugu 2270.00 5935.80 8205.80 72.33 Umuahia 417.00 14202.90 14619.90 97.14 Owerri 1786.90 15493.40 17280.30 89.60 Uyo 290.70 887.00 1177.70 75.53 Port Harcourt 442.90 26306.50 26749.40 98.34 Onitsha 4284.90 157600.00 161884.90 97.35 Calabar 321.00 790.10 1111.10 71.11 Aba 847.97 23177.10 24025.07 96.47

Source: Field survey, 2001.

Effect of rice trade (imports) on domestic rice production and marketing

Capacity utilisation in selected rice processing mills

Location Capacity utilisation (%) Abakiliki 7.06 Afikpo 40.27 Adani 20.46 Omor 60.36 Ogoja 8.89 Bende 5.41

• The small rice processing mills are the most dominant in Nigeria

• Low effective capacity utilisation in small rice mills

Three types of rice processing mills

Traditional/hand

Small rice mills

Large rice mills

Effect of rice trade (imports) on domestic rice production and marketing

Nassarawa

Afikpo

Abakaliki

Adani

Benue

Gombe

Taraba20%30%

15%

30%

15%

30%

20%

15%

Figure External sources of paddy rice to Abakaliki, Adani and Afikpo rice mills.

Loss of rural farm labour to urban migration

Rise in intra regional trade

Effect of rice imports on domestic production

Growth rate of Rice Production in Nigeria

-500000

-400000

-300000

-200000

-100000

0

100000

200000

300000

400000

• The growth in domestic rice output declined with growth being negative in 1995

• The growth rate in domestic rice production is still negative to date

How competitive is local rice ?

Table: Comparing price competitiveness for domestic and imported rice from selected rice mills Mills Millers

price N/25kg

Additional processing cost (25%) N/25kg

Marketing margin N/25kg

Estimated Urban market price N/25kg

Price of imported rice N/25kg

Percentage Difference

Abakaliki 900.00 225.00 613.00 1738.00 1575.00 10.30

Adani 1018.75 254.68 431.00 1704.55 1575.00 8.23

Omor 1068.75 267.18 531.00 1866.93 1575.00 18.53

Bende 1137.5 284.37 461.00 1882.87 1575.00 19.50

Source: Field survey, 2001.

On the average an extra cost of 25 percent is needed to process domestic rice to the quality and standards of imported rice

Improving the standards of local rice is feasible and desirable, but it may not be competitive for local rice mills

Compounded by the issue of grading and uniform rice varieties from local farmers

Table International rice prices relative to domestic rice prices in Nigeria 1993 to 2001 Year Exchange

rate (N) International rice price ($/ton)*

Domestic rice (Paddy) $/ton

Domestic rice (Milled) $/ton

Prices (milled rice) at 2002 exchange rate (N120.96 = US$1.00)

1993 24.67 160.29** 429.27 739.76 150.88 1994 22.00 186.12 544.09 994.55 180.88 1995 75.92 268.50 188.09 393.44 246.94 1996 80.00 234.06 323.0 566.00 374.34 1997 81.25 214.02 311.14 596.43 400.63 1998 82.75 215.16 386.1 593.35 405.91 1999 92.08 191.46 293.55 479.47 365.00 2000 100.6 142.96 265.00 436.28 362.85 2001**** 112.03 135.38 334.55 532.36 493.05 *Based on international prices for White broken rice, Thai A1 super f.o.b Bangkok **Source http://apps2.fao.org/servlet/org.fao.waicent.ciwp.CIWPQueryServlet ***Source: PCU data Average annual market prices, 1993 t0 2000 ****Source RUSEP website: www.rusep.org

How competitive is local rice ?

The table compares the domestic prices of paddy and milled rice in Nigeria with the international prices of the worst grade rice (white broken rice, Thai A1 super, f.o.b Bangkok). If we assume that exchange rates in Nigeria reflect market forces (which is unlikely especially in 1993), then Nigerian domestic rice is expensive to produce (compare paddy prices) and expensive to process (milled rice) and so cannot compete in the international market.

Optimal distribution in domestic rice trade Domestic rice markets are

shrinking due to rice imports

The closer the demand market

to the supply zone, the less

optimal it becomes with

increase in transport cost

The marginal cost of non-

optimal supply of rice from

small processing mills

increases with increase in

transport cost

ABAKALIKI

UYO

OWERRI

UMUAHIA

ENUGU

ABA

OBOLLO

NSUKKA

BENIN

ONITSHA

IKOM

OKIGWE

PORTHARCOUT

OGOJA

AFIKPO

OMOR

ADANI

BENDE

80%

16.9%

36.9%

45%

7.9%

90%

69.9% 20%

EKWULOBIA

0.7%

0.3%

11.1%

29.1%

7.9%

8.5%

1.6%

18.5%

5.7%

5.8%

Effect of policy Inconsistency on domestic rice production

Self sufficiency trend

0

20

40

60

80

100

120

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

Year

Pe

rce

nta

ge

PRE-BAN CRISIS BAN TARRIFF

• Pre ban period: 1960 – 1976

• Period of crisis (import license, etc) 1976 – 1985

• Period of outright ban 1986 – 1994

• Period of tariff 1995 – 2005 Domestic self sufficiency in Nigerian rice production was adversely affected during the crisis years of 1977 – 1985

Self sufficiency in rice production is still a major challenge for Nigeria to date

Conclusions

The demand for local rice in Nigeria is far less than the

demand for imported rice

Local rice production costs are high and uncompetitive

Improving the post harvest quality of domestic rice is

critical but can only be achieved if production costs are

low

Local transport costs for rice output are sticky

downwards at least in nominal terms

Policy Interventions

Intensify rice production and increase on-farm yield to

reduce production costs

Improve quality and standard of rice and reduce post

harvest losses

Facilitate rural enterprises and businesses especially in

small mills to sustain productivity, incomes and

employment

Strengthen human and institutional capacities to produce,

process and market rice competitively in Nigeria

Thank you