Will The Price of a Bag of Rice Fall Anytime Soon?
By Abdulazeez Kuranga, Gifted Hands Research. Image Credit: philstar.com
Today makes it 42 days since Nigeria closed the Seme border basically to fight smuggling and improve local production of rice. According to the United States Department of Agriculture, World Markets and Trade, Nigeria Produces 3.7 million tonnes of rice annually. BBC report on “Boosting rice production in Nigeria”, put total demand for rice in Nigeria at 7 million tonnes. This means that Nigeria produces 3.7 million tonnes of rice and consumes 7 million tonnes annually. This leaves us with deficit production of 3.3 million tonnes which is filled by imports.
It is necessary to recognize the effort of the CBN in boosting local production as it set up a 130 million dollars fund to support farmers who have at least 1 hectare of land at a single digit interest rate of 9%. However, this has not been enough as supply of rice is still far below the demand for rice.
According to BDSUNDAY market survey, the price of rice has skyrocketed as one bag of 50kg of imported parboiled rice, which formerly goes for N14,500 now sells for as much as N25,000 while local rice, which hitherto goes for N13,500 now sells for N18,200. Also, PUNCH Newspaper reported that a 50kg bag of imported rice that hitherto sold between N13,000 and N14,500 has now shot up to between N24,000 and N30,000, while the local variants of 50kg bag had risen from N14,000 to N18,000 at Ile Epo Market, Daleko, Mile 12, Isheri and Ogba, all in Lagos.
|
Average Price of 50kg Bag of Rice Before and After Border Closure |
||
|
Variant |
Price Before Closure |
Price After Closure |
|
Imported |
N14,500 |
N27,000 |
|
Local |
N13,500 |
N16,500 |
Source: Kalu Aja.
In theory, border closure is meant to boost local production in the long run, thereby reducing the price of the commodity in the long run. However, for this to happen, there must be some necessary conditions in place such as an existing local supply to meet local demand. Therefore, closing of border is meant to be associated with making citizens patronize local commodities.
In contrast, the Nigerian situation is such that border closure is associated with boosting local supply even when the existing supply is no where near the level of existing demand. Border closure in Nigeria is also associated with checking of massive smuggling of rice from neigbourboring countries into the country. We should also factor in the Nigerian mentality of always wanting to increase prices even when border closure is associated with trying to help boost local supply. Therefore, an increase in the price of local rice after border closure should not come as a surprise.
In conclusion, instead of looking at ways to improve the rice value chain while aiming to boost supply to meet the level of demand for rice, the Government is trying to control demand for rice of which is not that possible because it is what is mostly eaten by every household in the country. In the meantime, citizens should be worried about what the price of rice will be during the yuletide period as the border closure continues. That being said, the price of rice is not expected to fall anytime soon with the border closure as the level of local supply is still far below the demand, and as well as there are still issues in local milling of rice (coupled with other challenges facing the rice production value chain).
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2 Comments
Abiola
Nice one…..govt should try to regulate d prices of d local rice, its of very low quality and yet expensive. They ain’t encouraging d citizens with these.
Kuranga Abdulazeez
Thank you for the comment Abiola.
While we also believe the price of the local rice is expensive even though it is of low quality, we do not think the government can regulate the price because it is not the one in charge of producing it. For the government to have a say in regulating the price, then it should be ready to give subsidy to the producers so as to cater for the shortfall in revenue as a result of regulating the price. And we both know subsidy should not even come into this at all, given what we have been seeing with petroleum subsidies.