Unending Controversy About Nigeria’s Rice Policy

By Joke Falaju, Abuja   |   24 January 2015   |   4:28 pm  

Adesina--

•Stakeholders Seek Investigation Of Quota Regime 

THE backward integration policy of the Federal Government in the rice value chain for some time have been generating heated debate in the media, with some investors accusing government of granting import waiver to stakeholders who do not have investment in the rice sector. 

   Of concern to them is the granting of arbitrary waiver and import quota to investors still planning to invest locally, at the expense of some others already having rice farms and mill factories in Nigeria. For instance, whereas Elephant Group, which has a planned investment, got an investor allocation of 61,770, Ebony Agro with two functional rice mill got an Existing Miller Allocation of 15,000mt without getting allocation as an investor. Also, MIKAP rice got an allocation of 82,897mt as an investor and existing miller, while Stine Rice, an investor with existing rice mill, got allocation of 30,000mt.

   Although a group of rice millers told The Guardian that the policy is the best any government can venture into to encourage local investors at the expense of stiff competition from foreign products, many of them have faulted the manner by which the policy is being implemented. 

   But President Goodluck Jonathan, during the AgriFest  2015 Celebration of Nigeria’s Agriculture, held at Eagles Square, Abuja on Friday, read the riot act, insisting that “all those owing Nigeria on rice import duties must pay.”

 “Nigeria, our dear country, will not be held hostage by rice importers. There will be no sacred cows under my watch. All those owing Nigeria on rice import duties must pay,” said Mr. President.

 According to him, “high quality Nigerian rice is now competing favourably with imported rice in the markets. Our rice millers have taken advantage of these new opportunities, and the number of integrated rice mills has expanded from 1 (one) at the beginning of this administration, to 24 today. And they are all here today. I celebrate you all. I eat Nigerian rice and can tell you it is better than imported rice.” 

 In his opening speech, Minister of Agriculture,  Dr. Akinwumi Adesina, said: “We have here today over 20,000 farmers and agribusinesses from the 36 states of Nigeria and the FCT. Today, they are here to celebrate the achievements of your Agricultural Transformation Agenda.  The agricultural transformation agenda has turned around the lives and destinies of millions of farmers. 

   ‘Farmers from across the country daily besiege my office asking to have an opportunity to thank the President who has done so much for them. If I were to request for appointments for the delegations that daily want to meet you, your calendar for two years cannot accommodate them,” Adesina said. 

   Co-chairman of the rice investor Group, Mr. Tunji Owoeye, took sides with government, stating that the view being expressed by some stakeholders are unfair to government officials, who have worked hard to midwife the policy.

Indeed, the government had come up with the new rice policy as part of its efforts to ensure self-sufficiency in production, and to protect local investors, to the point they can reasonably stand on their feet. The policy was developed based on what is produced presently against the obvious shortfalls. Supposedly, the policy should encourage local investors against those whose core interest was importing and selling locally without the mind of contributing to the national dream of self-sufficiency; but some stakeholders allege that ‘portfolio investors” without clear investments on ground are truncating the policy by reselling their quotas.   

   The Nigeria Rice Investor Group had explained that the quota allocation given to both existing rice miller and investors in equity was based on the supply gap of import grade rice of 1.5million metric tonnes, “existing millers and others with expressed interest submitted Domestic Rice Production Plan (DPP) and based on the submissions, a total of 1.3million metric tones of rice import quota was issued to 25 qualifying millers at the preferential levy of 20 percent and duty of 10 percent. The remaining 0.2 million metric tonnes of rice imports was given at a higher levy and duty of 10 percent.

    To the group, government should be commended for its transparency, “This is the first time that the government is so transparent in allocation of quota in this industry, because they ensure that nobody is shut out, farmers, millers, traders and outgrowers (smallholder farmers) have all being considered”.

   Owoeye said that the government had contacted them as an association to provide a list of their investments in the rice value chain. “We contacted all our members to send details of their investment to the government, which they all complied with; and, based on this list, allocations were given. If government had wanted to sweep the allocation of quota under the carpet they wouldn’t have contacted the association.”

   He, however, agreed that some quota beneficiaries are trading their slots to interested buyers at 60 to 80 percent levy having got the same at 20 percent. He said it implied that 60 percent levy is lower than what is charged as penalty, otherwise why would anyone pay above that to buy from those who got the waiver.

  “It may not be the best policy, but we moved from a static position to a position where investors were encouraged, and government came up with the criteria for assessing and qualification to be part of the investment concession. Government had looked at four areas in assessing investment in local rice value chain. They looked at Domestic Rice Production Plan, Paddy Purchase Outlook –from paddy Application Center, Paddy Purchase from out-grower scheme and farmers purchase and ownership of milling facility.

  Owoeye submitted that it was not possible for any investor without veritable production plan to benefit from quota allocation, as the ministry has a team that goes to verify this fact, in terms of production, rice farming, milling capacity and outgrowers scheme.

   Chairman Mikap Rice and former Attorney General of the Federation, Michael Andoaka, said before the administration of President Jonathan came on board, the issue of quota was not made public, as nobody knew how it was being distributed. “But this government changed; and now, local rice millers are getting the quota. So people who monopolised it feel that something is wrong.” He alleged that it was the cabal (the big-time rice importers) that are faulting government’s action.

  He said he was not going to speak as if he is taking sides with the government on the new rice policy, but maintained that no government in recent times have given attention to agriculture like the current administration is doing, “because I am a direct beneficiary of the transformation in that sector, I started a small mill and in less than five years I have expanded to 8.5 tonnes because of the support have received from the government.

    On the Rice Quota, he said he never knew what it was all about. “I was surprised when I got a call from the Ministry of Agriculture that, based on what the Minister saw in my factory and Ashi Rice owned by the Governor of Benue State, we should come over and get the rice quota. I never lobbied for it, even when I was in government, it never happened. I am the Secretary of the Rice Millers Association, many of our members have confirmed to have gotten the quota. We simply went to the registry and were given the quota. Anybody who doubts this level of transparency has other things in mind,” he noted.

   Meanwhile, another rice investor commended the backward integration policy, but faulted the manner in which the policy was being implemented. He noted that government applied the backward integration policy in an effort to stop cement importation and today, Nigeria has not only attained self-sufficiency in cement production but will soon become a net exporter.”

    He said: “During the period, government did not allow investors to import finished goods; it had to be the unfinished ones, so that it is brought to their factory and processed, and gradually importation of cement was reduced. That was the same advice we gave to the minister to discourage importation of finished rice and then encourage importation of brown rice so that it is milled and packaged in the country. However, the reverse is the case.”

   He expressed the fear that, with the way government is going about the implementation of the policy, local rice millers may be forced out of business, because they may not be able to compete favourably with the foreign rice, thereby discouraging many of the farmers from growing paddy, which would in turn affect plans to attain self sufficiency in rice production.

   It would be noted that presently there is glut in the rice market, as it is flooded with foreign rice. Distributors would rather buy cheaper foreign rice at N6500, as against the local rice which gets to the market at the price of N8,700.

The rice investor disclosed that due to late release of the quota allocation, and the removal of the embargo placed on rice importation, many of the investors went ahead to import rice at 30 percent duty, having seen that they qualify for quota allocation, thereby flooding the market with over 1.2million mt of rice.

 He lamented that because of the present glut in the rice market, many local millers have stopped production, because there is no market for their produce.

  On the way out of the crisis,  the investor said the Federal Government should do all it can to end smuggling, as foreign rice still makes its way into the Nigerian market through the Cotonou/Seme borders. He also called for proper management of the import regime and the quota allocation.

   The source urged government to provide mechanisation and irrigation facilities, as well as planting materials for rice farmers across the country. He said with the glut in paddy rice in the north, there is still less production in the Southeast, as rice farming is still being done with hoe and cutlass; and, since there are no irrigation facilities, rice farming is done once a year.

     Chairman of Stine rice, Akai Egwuomwu, noted that the policy was a good one that could ensure self  sufficiency in rice production. However, government need to look into the manner in which it was being implemented, especially in the area of granting waivers. He said waivers should not be given randomly, rather government should anchor it on the milling capacity of  the so-called investors.

   He lamented that government was giving preferential treatment to investor, who had planned investment against some others that have been in the business for the past four years. He said:  “A miller spend not less that N2billion in establishing a mill, and after spending so much money, it would be unfair if government do not give them consideration.”

   He also advised that waiver should be given for brown rice as this would further strengthen the capacity of the local millers.

  A representative of one of the rice farms, told The Guardian that there is no truth in the claim that they are owing the Federal Government, as the minister cannot retroactively impose a quota in December 2014 and request payment of excess duties for importations made when quota was not in place and then want to impose penalty on them.

He said: “There are about 10-11 of them who imported beyond the allotted quota and their names were not mentioned. The importation we did was based on our level of investment in the rice value chain. We have an existing investment of $100million.”

    He said though the government mean very well, the way quotas are being given to people without established mills, as against those with established mills, needs to be checked.

    He further observed that there is an existing production gap of 3million metric tonnes, with government only giving concession of 1.3million mt. He wondered what would happen to the remaining gap of 1.7million metric tonnes.

   On the way out of the crisis, he said there is the need for the Ministry of Agriculture, Finance, Trade and Investment, National Planning to do a thorough investigation of the quota regime and also streamline the method in which it is being granted, and ensure that it is not done randomly.

     He, however, frowned at the granting of waiver to import brown rice, saying it would affect paddy production.



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