Tuesday 29 September 2015

How smugglers hamper rice policy, frustrate investors


Apparently to halt the yearly loss of N360 billion to rice importation, the Federal Government came up with a policy aimed at achieving self-sufficiency in local production in 2013. It has a plan to ban rice importation by the end of this year. But, the policy is threatened by  smuggling, which has also put investors in the rice value chain under intense pressure. The investors fear their multi-billion naira investment might go down the drain, unless measures are taken now to stem smuggling, writes Assistant Editor CHIKODI OKEREOCHA.  


AFTER sinking a princely $100 million into the cultivation of rice on  7, 500 hectares of farm and on the construction of two integrated rice mills, each with capacity to process 150, 000 tons of paddy rice per annum, Messrs Pearl Universal Impex, a major rice importer has every reason to be expectant.  The prospect of a bountiful return on on its investment and other spin-offs, have put owners of the company in a joyous mood.


Company Chairman Pulkit Jain personified the owners’ excitement when he gleefully announced that the investment would create over 4, 000 direct jobs and 20, 000 indirect jobs through its out-grower’s scheme. He broke the news when he hosted Niger State Governor Abubakar Sani Bello at the company’s rice farms in the state.


Jain’s announcement was also a sweet melody to residents and rice farmers in Borgu and Bida local government areas of the Northcentral state, host communities of the company’s parboiling mills’ and drying facilities.


“We will also support the out-grower farmers by providing them with technical know-how, improved seedlings, fertilisers, pesticides and subsequently procure high quality paddy from them to feed the rice mills,” he said.


According to him, by investing in the cultivation and milling of scientifically-tested high-yielding varieties of rice, his company was helping the Federal Government achieve its target of self-sufficiency in rice production.


Three years ago, the Federal Government launched a new rice policy and set a 2015 target for the realisation of self-sufficiency in rice production. The policy, initiated by the immediate past administration of President Goodluck Jonathan, is part of the Backward Integration Policy (BIP) and economic diversification agenda, which President Muhammadu Buhari has promised retain and pursue.


The objective is to cut down on  daily rice import bill, estimated at N1 billion, encourage local production of rice and offer investors in the rice sub-sector incentives to invest.


It (policy) is directed at saving the country the embarrassing paradox of a nation that boasts of more than 60 per cent arable land and manpower to support local rice production, but spends N360 billion to import rice.


“Our target is that we should produce enough rice locally to feed our people and ultimately become a net exporter of rice,” President, African Development Bank (AfDB), Dr. Akinwumi Adesina said at the launch of the policy during his tenure as the  Minister of Agriculture & Rural Development.


Expectedly, many investors bought into the policy in the rice sub-sector and encouraged by a combination of patriotism and anticipation of a highly rewarding investment, investors across the entire rice value chain including farmers, processors/millers, importers, and marketers embraced the policy.


Apart from Pearl Universal Impex, which was importing 350,000 metric tonnes of rice annually, but decided to invest in local production to aid the government’s self-sufficiency target in rice production, Dangote Industries Limited (DIL) has also thrown its hat into the rice production ring.


DIL President Alhaji Aliko Dangote, recently announced in Abuja, the investment of $1 billion (about N165 billion) on rice production and processing in five states of Edo, Jigawa, Kebbi, Kwara and Niger.


The Nation learnt that DIL has  acquired 150,000 hectares of land in those states for the project, which when developed, will be the largest single investment in rice production in Africa.


The project, seen as a shot in the arm of government’s on-going reforms of the Agricultural Transformation Agenda (ATA), which was launched in 2011, followed the signing of a Memorandum of Understanding (MoU) between DIL and the Federal Ministry of Agriculture and Rural Development.


According to the MoU, the indigenous multinational will establish two state-of-the-art mills with a capacity to process 120,000 metric tons of paddy each, bringing the combined capacity to 240,000 metric tons, with plans to double the capacity in two years. The rice plant is estimated to produce 960,000 metric tons of milled rice, representing 46 per cent of imported rice.


Olam Nigeria Limited, another major investor, has unveiled plans to increase its stake in the rice industry. Specifically, the company, according to its General Manager, Mr. Reji George, will begin the processing of  200,000 metric tonnes of paddy rice in Doma Local Government Area of  Nassarawa State this year. He said his firm’s integration plan will aid local rice production and job creation.


The plan came on the heels of the introduction of the company’s locally-produced rice to the Nigerian market in Lagos. Olam’s Business Head for Rice, Anil Nair, explained that the company is into commercial rice production with 6, 000 hectares in two cities. The 12,000 hectares would definitely assist in bridging the demand and supply gap.


According to him, Olam’s involvement in local rice production  will assist Nigeria in becoming self-sufficient in rice production.


 


Spanner in the works


 


However, palpable fear and apprehension has gripped investors over the fate of their investments following the rising wave of rice smuggling into the country.


The latest figures made available by the Patriotic Rice Association of Nigeria (PRAN), show that 80,000 metric tonnes of rice are smuggled into the country through the porous land borders with Benin Republic every month, with the revenue loss hitting N10 billion.


In the conservative estimate given by the Nigerian Customs Service (NCS), the economy lost over N27 billion to rice smuggling through the land border with Benin Republic in the last four months.


According to reliable sources, thousands of metric tonnes of rice from India, Thailand, Singapore and other Asian countries berth at the ports of Benin Republic and Cameroun for onward dumping in the country.


The President, Rice Millers Importers and Distributors Association of Nigeria (RiMIDAN) and Chairman, Rice Investors Group, Mr. Tunji Owoeye, echoed the frustrations of investors when,  at a meeting with the Presidential Committee on Trade Malpractice in Abuja,  he lamented that while the local rice producers are working hard to aid government’s self-sufficiency plan, some importers are taking advantage of the free trade zones to import rice and deny the country of much needed revenue.


Owoeye alleged that neighbouring countries are taking advantage of the disconnect in the rice policy to exploit Nigeria.


“They ship in quite a large number of parboiled rice into Benin Republic and Cameroun, but we know that the rice is destined for Nigerian markets and government has taken note of that,” Owoeye told the Committee, claiming that the country loses $1 billion daily on rice smuggling.


 


Why smugglers hold the ace


 


Apparently to achieve self-sufficiency in local production, the Federal Government increased the tax on imported rice from 50 to 110 per cent in January 2013. That was a 60 per cent increase. The tax was to encourage locally produced and processed rice and significantly trim down import, that has been gulping N360 billion annually in foreign exchange before a total ban this year.


However, government’s solution in form of a higher tariff regime on importation became the problem. The tariff imposed on the commodity and the consequent higher market prices opened the floodgate for smugglers to push large volumes of rice into the local market with zero duty, a development that is now making the self-sufficiency target in rice production to hang in the balance. Also at stake are the multi-billion investments of by private investors in local production.


Some industry operators told The Nation that as soon as Nigeria announced the tariff hike, some


neighbouring countries such as Benin, Niger, Cameroon, Chad and Gabon, among others, pulled a fast one by quickly lowering their own tariffs on rice. The duty differentials between Nigeria and its


West African neigbours encouraged smuggling from all parts of the globe.


For instance, in response to Nigeria’s 110 per cent tariff on imported rice, the Republic of Benin and Cameroun are said to have crashed their import duty on rice to as low as 30 per cent. Some unscrupulous Nigerian businessmen also relocated their businesses to Benin and Cameroon, a development that is further fuelling smuggling.


Benin and Cameroon have become the destinations of choice for rice imports meant en route the Nigerian market. For these neighbouring countries, Nigeria’s large market size of 170 million people and over 300 entry points are too tempting to ignore. Through such illegal entry points, shipments diverted to neighboring countries by major rice exporters from South and Southeast Asia found their way into the country.


The illegal routes are located in Lagos, Ogun, Oyo, Kwara, Cross River, Rivers, Taraba, Borno, Adamawa, Kastina, Sokoto and Zamfara states.


With the influx of cheaper rice through these routes, local rice producers and processors have been losing sleeps because they cannot compete with the prices of smuggled rice.


Globally, Nigeria ranks next to China in rice importation, consuming between 5.5 million metric tonnes and six million metric tonnes of rice yearly at an estimated value of N360 billion, according to Dr. Olusegun Aganga, the former Minister of Industry, Trade & Investment.


While 1.8 million metric tonnes are produced locally, the country imports 3.7 million metric tonnes annually. More than 50 per cent of this 3.7 million metric tonnes that find their way into the country are said to be smuggled in through the land borders and other unapproved routes.


Presently, local rice production accounts for less than 50 per cent of the country’s total consumption, leaving a huge demand gap for polished/milled rice imported from India, Thailand and Brazil.


The Chairman of Seaport Terminal Operators Association of Nigeria (STOAN), Vicky Haastrup, puts the local production capacity at 30 per cent.


“It is a fact that local production cannot match local demand, which creates a recipe for smuggling,” she said.


According to her, “our neighbouring countries are profiting from the policy by dropping their own tariffs on rice, and because they are benefitting, they give tacit support to these smugglers.”


She said that rather than encourage local production, the 110 per cent policy will stifle it because of the high smuggling rate.


To Haastrup and other stakeholders, the nation’s chances of achieving the rice self-sufficiency target by this year will continue to getting slimmer unless government stems cross-border smuggling. The country is already in the last quarter of the year and the anti-smuggling campaign has not gathered enough steam for the realisation of the target.


Beyond cross-border smuggling, which has been a pain in investors’s neck, the consumption preference of Nigerians for imported rice to the detriment of locally-produced rice has not helped matters.


The market boasts of high-quality and well-packaged Nigerian rice such as Quarra Rice, Umza Rice, Ebony Super Rice, Eko Rice, Mikap Rice, Ashi Rice, Queen of the Niger, Ofada Rice, Abakaliki Rice and Mama’s Pride, among others, which are more nutritious than foreign brands. But, partly because of their penchant for foreign-made products, and partly because of the price difference between the local and foreign brands, many Nigerians still prefer imported rice.


However, rice investors insist that they have the capacity to meet local demand for rice if the right policy and investment climate are put in place to de-emphasize massive importation of the commodity, which in turn breeds smuggling. The investors are therefore of the view that government should assist rice farmers to boost the rice value chain by helping them secure arable land for rice cultivation and providing other inputs such as pesticides, fertilisers, and high-yielding, disease-resistant varieties, among others.


“We, as Nigerian investors have made sacrifices by paying higher duties for the importation of rice through the official channels, while some of our members have begun the backward integration process for rice value-chain. We cannot allow smugglers to keep destroying these investments,” said Bunmi Owolabi, a local rice farmer in Kogi State.


 


Economy, investors hurting


 


The Chairman of PRAN, an association of local growers and legal importers of rice, Alhaji Habilu Maishinkafa, is livid. He said a bleak future is steering investors in the face because of the upsurge in the activities of rice smugglers.


He lamented that the rate of smuggling of the commodity remains quite high, with concomitant effects of loss of investment, market share, job losses, revenue and increase in youth unemployment. The PRAN chair said large scale investments in farming and milling industries by private businesses are being jeopardised by the free reign of rice smugglers.


Explaining the process of rice production, experts say the farmers must plant rice and produce paddy (raw) rice, sell the paddy rice to the processors, who turn the rice into finished products.


They lamented that the processors no longer buy paddy from the farmers in sufficient quantities because the price is not attractive for business.


Noting, for instance, that local rice farms and milling plants have been unable to impact on host communities as they are supposed to following the ugly development, Maishinkafa expressed fears that the rice policy is gradually being eroded in view of the unrestrained activities of economic saboteurs, illegal importers and smugglers. He appealed to the Federal Government to tighten the porous borders.


Against the backdrop of the Buhari administration’s avowed commitment to boost the nation’s agricultural sector, PRAN appealed to the government to help its members contribute to the realisation of the dream of self-sufficiency in rice, stating that it was ready to partner with the administration to realise the dream.


The rice dealers added that there is the need to sustain the synergy earlier formed between the Federal Government and the organisation to achieve the production and supply value chain on rice.


According to them, the new rice policy of backward integration was a step in the right direction, which should not be reversed by the current administration, the group observed that for the first time, the government was making conscientious efforts to jump-start local production and shield investors from the onslaught of international importers and daring smugglers.


 


 





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