People & Money

What Impact Does India’s Rice Ban Have on Nigeria?

On the 20th of July, the Indian government imposed a ban on the export of non-basmati white rice. According to them, this is part of efforts to guarantee sufficient domestic availability at reasonable prices. The Economist notes that Indian officials are taking action in response to the anticipation of an undesirable rise in rice prices, caused by heavy rains in early July that devastated paddy fields.

In 2022, citing similar reasons, the Indian government imposed 20% export duties on non-basmati rice and prohibited the export of broken rice grains, which are typically sold at lower prices.

Also Read: Nigerian Rice Millers Threaten to Shutdown Warehouses

Since the Nigerian government claims the country is rice sufficient, how does this news concern Nigerians?

Let’s delve into the intricacies surrounding rice production and consumption in Nigeria and explore how India’s ban impacts Nigerians.

To begin with, claims of Nigeria’s rice sufficiency may be overhyped, considering the country still ranks as the largest importer of rice in Africa, and one of the largest in the world. Officials under the previous administration including the suspended CBN Governor, Godwin Emefiele have always made claims that Nigeria has found a fix to its rice importation problem. However, the data disagrees.

In 2022, Nigeria produced an all-time high of 5.4 million tonnes of rice, however, the country’s rice consumption was almost 7 million tonnes. If the government claims to have banned the importation of rice, how did Nigeria make up for this shortfall? The short answer is, through importation.

Now, back to India. In terms of global trade by volume, India holds the position of being the world’s largest rice exporter, contributing 40% of the world’s total. In 2022, it successfully shipped 22 million tonnes of rice to over 140 countries. And half of India’s exported rice last year was non-basmati rice which is popular in lower and middle-income countries especially sub-Saharan Africa.

Even before announcing the export ban, the rice-price index published by the Food and Agriculture Organization shows that rice has hit its highest price since 2008 when there was a food price crisis. Coincidentally, in 2008, Vietnam banned the export of rice to ensure sufficient domestic supply. After Vietnam took that step, India, China, and Cambodia followed suit, causing the global price of rice to rise by 52% and hit an all-time high.

Also Read: How not to make public policy

There is no gainsaying that a decrease in rice supply from India will result in higher prices for the countries purchasing rice from India. And there’s also a threat of other big rice producers in the world following suit in banning exportation, just like in 2008. Essentially, this move would affect big-time rice importers like Nigeria.

In 2021, India was the largest exporter of rice to Nigeria, as Nigeria imported $5.78 million of rice from the country. Thus, with this move by India, Nigerian traders now face the challenge of finding an alternative source for rice, which comes at a significantly higher price in US Dollars and is subject to a higher exchange rate. Essentially, these additional costs will be transferred to the final consumers. Nigerians are big-time consumers of rice, PwC records that Nigeria has a rice consumption of 32 kg per capita.

For a set of people already challenged with a 25% food inflation rate plus a cost-of-living crisis triggered by the hike in petrol price, Nigerians are already battling sufficient economic pressure. Hence, it is prudent for the government to proactively devise a contingency plan in anticipation of a potential brewing problem as an increase in the global price of rice will inadvertently affect the price of rice in Nigeria.

In 2022, Nigeria was hit with one of the worst flooding disasters in its history that left more than 600 dead and millions displaced across over 450 local governments in the country. The floods caused many paddy rice fields in Nigeria to be washed away such that industrial rice millers had to resort to importing paddy rice from neighbouring West African countries. Despite the events of 2022, analysts have reported that Nigerian state governments are grossly unprepared for a reoccurrence of the disaster despite NiMET’s predictions of heavy rainfalls and possible flooding.

For the Nigerian government to formulate an effective plan to address any potential rice price increase, it must approach the issue with transparency, avoiding any influence from political considerations. To provide context, despite the closed borders with Benin Republic since 2019, Benin Republic has remained the second largest importer of rice in Africa. Despite the Nigerian government’s stance against imported rice, a significant amount of rice from Benin continues to make its way to the Nigerian border, thereby posing a challenge to the country’s rice production capacity, which is already under considerable strain.

The lack of transparency among government officials regarding the rice issue has presented a significant challenge for economic planners, ultimately impacting Nigeria’s long-term prospects.

Also Read: Why the cost of food is not yielding to Nigeria’s government policies

Another brewing issue that may need to be addressed is the exportation of rice albeit domestic supply is not enough to meet demand. Nigeria is not a big exporter of rice. The country did a meagre $280,000 worth of rice exports in 2021, however, this can change. With a drop in global supply from the big players, there’s a tendency for commodity traders to focus on other sources, and as the highest producer of rice in Africa, the country may grab attention.

In November 2022, Tiamin, a Nigerian rice production company, entered into a Memorandum of Understanding (MOU) with the Rice Farmers Association of Nigeria (RIFAN) to export rice from Nigeria to Egypt. The possibility of rice export appears to be a significant milestone that the stakeholders in the rice value chain eagerly anticipate. However, one must consider whether this could come at the expense of Nigerians’ well-being. Therefore, it is anticipated that the government should take proactive measures now instead of merely reacting to a crisis in the future.

David Olujinmi

David Olujinmi studies Engineering but his true passion is research and analysis. He writes about finance, particularly the capital market, investment banking, and asset management. More »

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