Tue, Apr 01, 2014
Honourable Minister of Agriculture and Rural Development, Dr. Akinwumi Adesina says Federal Government’s policy on rice, a core strategy under the Agricultural Transformation Agenda (ATA) has succeeded beyond all expectations and that the proposed tariff regime on the commodity is needed to protect local investors in rice, including farmers and millers, as well as create jobs and wealth for Nigerians.
The Minister made the assertion recently during his presentation at the National Assembly public hearing on rice policy.
Adesina posited that Nigeria had the capacity to become not only self-sufficient, but a net exporter of rice and that the Federal Government and forward looking stakeholders in the rice sector are determined to reduce the ridiculously high foreign exchange of over N365 billion being spent annually on rice import.
According to the Minister, it made no sense at all that Nigeria, with an arable land area of 84 million of arable land, is the second largest importer of rice in the world. The country, he said, definitely can grow rice and end the decades of dependence on rice imports from India and Thailand, as they don’t have anything that we do not have to produce rice. He said it is time we realized that the more Nigeria imported food items that can be grown locally, the less local production and the high level of unemployment and the worse our national insecurity.
That, Adesina said, is why President Goodluck Jonathan's government is driving a major import substitution drive on rice and other commodities under the Agricultural Transformation Agenda.
The Minister said Nigerians needed to frown upon the heavy flow of import of low quality and sometimes very unsafe foods, including rice and fish, wondering why some citizens are vigorously campaigning and taking sides with importers, wondering why we must import what we can produce, a situation he called "prodigal economics".
According to Adesina, international trade experts say the only option for Thailand and India to get rid of their excess rice stockpile of 18 and 14 million metric tones respectively is to dump it on foreign markets at a loss. Thailand, he said, subsidized its farmers paying them 200% price above the market price, costing the Thai government $15 billion this year. If allowed to happen, rice import has a potential of scuttling the bold drive of the government to make Nigeria self-sufficient in rice. The rice importers, Adesina argued, simply want to take advantage of huge profits they would make from the cheap rice imports to harp on the need to lower rice tariffs.
The Minister said Nigeria is not an exemption in using high tariffs on rice. All over the world, rice is the most protected and subsidized of all commodities, with tariffs, tariff-rate quotas and tariff escalation for processing and value added.
The US spends on average $1 billion per year in subsidy support, as well as high tariffs on rice imports. Analysts show that tariffs on rice imports and subsidies may account for 75% of incomes of farmers in rice producing countries. This leads to a depression of world price for rice, displacing local production and creating poverty for millions of rice farmers in rice importing countries.
India, which spends a US $7 billion on market price support has bounded tariff level of 131% on imported rice, with effective import duty of 70-80%.
According to the Minister, information being peddled by rice importers and rice processors that Nigeria is not producing enough paddy is wholesomely incorrect and mischievous. Declaring that he had commissioned an independent USAID-Markets program and the Africa Rice Center to verify the situation, which shows that there is sufficient paddy available, but the problem was accessibility by millers. While farmers complain of paddy glut, millers complain of lack of enough paddy.
Accessibility was linked to high cost of paddy, long distances between production zones and location of mills, high transport cost from the production zones to the location of their mills, variable quality of paddy due to high moisture content or poor cleaning, lack of standardization of bags (farmers insist on selling in 75 kg bags instead of 100 kg bags or by weight), lack of storage facilities to stock up on paddy and limited financing to buy up the paddy rice., the minister disclosed.
To address the situation, Adesina said the Ministry of Agriculture swung into action and bought some of the paddy into strategic grain reserves. Some of the states also put in place guaranteed minimum prices and bought back paddy rice from their farmers. He said Nigeria must put in place guaranteed minimum price for rice and be ready for government to be buyer of last resort, to assure incentives for farmers, as is done in the rice exporting countries. Government, he said needs to make paddy affordable to our millers.
He gave the following reasons for a new tariff regime:
· The high tariff has helped to jump-start great interest in domestically produced rice. The next phase now is to protect our local investors and our farmers who are now producing a lot more paddy rice, as well as the local millers.
· A major challenge facing the rice sector is the spate of smuggling of rice from Benin Republic.
· While the 100% duty on rice was effective in January 2013, the goal being to protect the domestic rice sector from highly subsidized rice being dumped on Nigeria, the unintended result has been massive wave of smuggling of rice across the borders, because of the aforementioned issues with the porosity of our borders. The duty rate in Benin Republic is very low and huge cartel of smugglers take advantage of the high margin from arbitrage and our porous borders.
· Challenges have arisen: loss of legitimate duty at the port, some corrupt officials rake in huge rents and substandard rice floods our markets, which creates disincentives for local rice producers and millers, and legitimate rice importers suffer.
The Ministry, Adesina said, in November of 2013called a meeting of all the rice stakeholders and proposed that the rice tariff rate be reduced from 110% to 40%: 10% duty and 30% levy. At this level, it would cut off the arbitrage opportunities from the divergence with tariff in Benin Republic, and will revert importers to the ports in Nigeria.
He suggested fiscal tariff structure for the next three years to bridge the gap between locally produced rice that is milled to international quality grade, in order to exit the current situation where the raised domestic paddy production is milled mostly by small scale millers with integrated rice mills contribution still low.
Adesina said measures are needed to incentivize those millers who are doing vertical integration into commercial rice production locally and/or buying paddy locally. This will involve giving license for the import of the deficiency to millers who have invested heavily in local milling to bring in rice, at their allotted quota, at a suggested rate of 10% duty (or effective tariff and duty rate of 20%).
On the other hand, general merchants, who import rice but do not have local production nor buy local paddy, will pay the full rate of the tariff bound (duty and levy of 40%). The idea is to encourage local paddy production, purchase and milling of locally produced paddy, and discourage free range import of finished rice.
Dr. Adesina also proposed that a Rice Levy Fund should be introduced and fully domiciled and managed by the Ministry of Agriculture to achieve the set goals among which are:
1. Support domestic paddy production by farmers, including subsidies for high quality improved seeds, fertilizers, provision of mechanized planting, harvesting and threshing implements, to assure availability of sufficient quantity and quality of rice paddy.
2. Provide subsided loans to rice farmers, rice collection centers and rice millers, including the establishment of large out grower schemes around the integrated rice mills
3. Support for research and development activities to improve technologies, extension and dissemination of technologies to farmers.
4. Upgrade, rehabilitate and expand irrigation and water management infrastructure for rice production
5. Support provision of low interest financing for establishment of new rice mills to expand the presence of integrated rice mills around the rice production clusters.
6. Provide subsidies for transport of rice paddy to rice mills, to equalize the price at which locally produced paddy is available to integrated rice mills.
7. Upgrade physical infrastructure, including roads, power and water around the integrated rice mills in the country to further reduce the cost of doing business.
8. Provide guaranteed minimum price support for rice farmers and rice millers to ensure incentives for accelerated production and milling of domestically produced rice.
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