Price hike looms for rice as paddy scarcity rocks local production

By Onome Amuge.

Nigerians may have to brace themselves for a hike in the prices of rice amid incessant smuggling of the commodity, scarcity/surge in prices of raw materials for millers,as well as the inflationary pressure attributed to the fuel subsidy removal by the President Bola Tinubu administration.

Traders, distributors and local producers of the country’s major staple food have expressed concerns that the hostile economic factors are compelling rice millers to shut down their operations, especially in the northern region where a larger chunk of the commodity is produced locally.

A recent report by the National Bureau of Statistics (NBS), showed that the average price of rice increased about N9.55 per cent from N555.18 per kilogramme in May 2023 to N608.20 in June 2023.  On a year-on-year basis, Nigerians paid more for a kilogramme of rice which rose 32.17 per cent when compared to the corresponding period of 2022 when it sold for N460.17 per kilogramme.

Market survey by Business A.M revealed that  a 50kg bag of rice which sold for an estimated cost of N32,000-N35,000 in June, currently sells for at least N45,000 in Lagos and as much as N46,000-N50,000 per bag in some parts of the country.

With the price of a  50kg bag way more than the country’s N30,000 minimum wage, analysts noted that the price might rise further beyond the financial capability of average wage earners if the supply/demand challenges are not addressed urgently.

The Northern Chamber of Commerce Industry, Mines, and Agriculture (NACCIMA), recently disclosed that rice millers were forced to shut down operations in the commercial city of Kano due to the scarcity of paddy.

Dwelling on this, Dalhatu Abubakar, chairman of  NACCIMA,northern region, said the shortage of paddy poses potential danger  to rice production, warning that this might lead to severe food insecurity in the country.

Abubakar, who also holds the position of Chairman at Al-Hamsad Integrated Rice Mill in Kano, explained that the scarcity of paddy could result in an increase in the price of processed rice which is already selling beyond the reach of many Nigerians. `

He also noted that numerous millers have already reduced their production hours, some from 24 to 12 hours, leading to the unfortunate layoff of factory workers.

In his words, “Today, hundreds of millers, both integrated and small-scale, are in a serious dilemma and finding it extremely difficult to break even. It is difficult to sustain production now because of the scarcity of paddy. As I speak, I know many millers that have completely closed their factories.”

Apart from the scarcity of raw materials, the NACCIMA chairman pointed out that a significant portion of integrated rice millers in Kano are grappling with sourcing paddy at exorbitant prices amounting to N400,000 per tonne, compared to the N330,000 price in June 2023.

“Wherever you find paddy now, you purchase it at exorbitant prices, and you’re still burdened with high fuel costs, taxes, and electricity bills. How many factories can survive this challenging economic climate? The inevitable outcome is the cost of finished rice, which Nigerians will soon face,” he said.

Abubakar noted that this could lead to more increase in the cost of locally produced rice, potentially fueling demand for foreign rice, as well as smuggling of the commodity into Nigeria.

Such a scenario, he said, could undermine the progress the federal government has achieved in ensuring local rice security over the past eight years, which has seen  Nigeria ranked the largest rice producer in Africa, with an annual production of approximately 8,435,000 tonnes, followed by Egypt, Madagascar, Tanzania, and Mali.

The increase in rice prices not only concerns Nigeria as rice prices surged globally to their highest in almost 12 years on the back of India’s rice export ban and adverse weather conditions that could impact production.

Consequently, the Food and Agriculture Organization (FAO) All Rice price index for July rose by 2.8 per cent to 129.7 points,up 19.7 per cent compared to 2022, and the highest nominal value since September 2011, data from FAO showed.

The report also stated that concerns over the potential impacts of El Nino on production in some suppliers provided further underpinning to prices, as did rain-induced interruptions and quality variability in Vietnam’s ongoing summer-autumn harvest.

However, stakeholders in Nigeria’s rice production sector, as well as industry analysts have attributed the persistent escalation in rice prices in the domestic scene to several factors such as scarcity of paddy, a major raw material for rice processing/production; surge in transportation costs following the fuel subsidy removal;naira volatility in the exchange market,insecurity, among other factors.

In light of these challenges, Dalhatu Abubakar called on the current government to intervene by focusing on mechanization and providing necessary inputs to farmers to enable year-round production.

Christopher Akinbile, professor of Agricultural Engineering at the Federal University of Technology, Akure (FUTA), called for the establishment  of a specialised rice institute in Nigeria as a strategy that would significantly boost rice production and counter price hikes.

Akinbile opined that for Nigeria to become more than just Africa’s highest producer to becoming a major player in the global market, the government should create a specialised rice institute that will handle all research relating to rice production, from breeding through processing and post-harvest operations.

He added that such an institute should be empowered to provide relevant information and other technical support to rice farmers and other stakeholders in the value chain.

Akinbile also advised that Nigeria should take a cue from successful organisations such as the International Rice Association Research Institute (IRRI) and the Philippines Rice Research Institute (PRRI) which hinged their domination of rice production on specialised rice institutes.

In addition, he recommended that the government introduce an agricultural insurance scheme to protect farmers investment in rice production in the unlikely event of colossal losses of farm lands and produce to climate change effects and unforeseen circumstances.

Ilyas Nazifi, the CEO of Prime Integrated Mills, Idu Industrial Area, Abuja, blamed the shortage of paddy on Nigeria’s agriculture system which he described as largely subsistence, lacking sufficient large-scale commercial productivity through mechanised farming systems to sustain industrial demands.

According to Nafizi, Nigeria’s demand for milled rice stands at about 12 million metric tonnes per annum,combined milling capacity stands at around 8 million metric tonnes per annum, while the total paddy produced is around 5 million tonnes per annum.

Commenting further, he said, “Going by these approximate statistics, it shows that the milling capacity is almost 80% higher than the quantity of paddy produced. This pushes the rice mills into competition with themselves for the insufficient paddy to keep their operations running.

“If demand exceeds supply, prices go up unnaturally. This is the reason why a bag of 50kg of rice in Nigeria costs twice as much as anywhere else in the world. As at the last time it was checked, a 50kg bag of rice in India costs less than N20,000.”

The CEO of Prime Integrated Mills also noted that insecurity has prevented a significant increase in farming in the rural regions and decreased the total number of acres under cultivation, as farmers are being kidnapped and murdered almost on a daily basis.

In his recommendations on how rice prices can be made affordable for the average Nigerian, Nafizi called on the government to make security a priority to protect farmers and enable increased production without fear of being attacked or kidnapped.

He also stressed on the need for serious intervention in infrastructure to allow for cost-effective production, noting that Investments in dams and irrigation facilities are necessary to cut production costs and ensure the availability of raw materials for rice mills.

Nafizi, who opined that commercial agriculture is the way forward through any sort of arrangement for a significant decline in rice prices, said private-public, joint ventures or any other methods must be encouraged to boost investment in commercial agriculture. He added that governments at all levels should be prevailed upon to provide adequate lands for such purposes.