Bloomberg’s disturbing findings on Nigeria and rice import business

Workers unload 42,494 tonnes of Thai rice at the Tanjung Priok harbour in Jakarta January 25, 2011. Indonesia's state procurement agency Bulog is looking for at least 170,000 tonnes of Thai rice for delivery from January to March, a trader said early this month. The government has allowed Bulog to import rice this year to shore up falling stocks. REUTERS/Crack Palinggi (INDONESIA - Tags: BUSINESS FOOD)
  • $1Bn so far invested but local rice production increased marginally by 4%
  • Import/Smuggling increased by 19%
  • Benin with 11m population becomes highest world importer from Thai with 95% ending in Nigeria


At Nigeria’s normally manic border post of Seme, Lasisi Fanu says business has all but ground to a halt.

He and other customs agents who help clear goods coming into Africa’s biggest economy from its smaller neighbor Benin say the long lines of trucks loaded with rice that used to jam the crossing have eased. The slowdown is a result of import restrictions and tighter border policing as President Muhammadu Buhari seeks to diversify the oil-dependent economy by boosting agriculture, especially rice production.

Two years ago, Buhari set 2018 as a target to end Nigeria’s status as the world’s second-largest importer of the grain after China and become self-sufficient. He’s since overseen investments of almost $1 billion in farming and milling, virtually banned rice importers from buying foreign exchange, raised tariffs to as high as 60 percent and pushed the central bank to lend to farmers. Confident that his administration is making progress, he told rice growers this month that “our policies are working.”

But the numbers tell a different story: they suggest smuggling is rife because local producers are struggling to meet growing demand in Nigeria, whose 180 million people mix rice with tomatoes and spices to create jollof, practically a national dish.

Nigeria grew 3.7 million metric tons of rice in 2017, a 4 percent increase from a year earlier, according to the U.S. Department of Agriculture. At the same time, imports rose 19 percent to 2.5 million tons, the USDA said.

Most imports are smuggled in from Benin, which despite a population of 11 million — barely 5 percent of Nigeria’s population — is now the world’s biggest buyer of rice from Thailand, the number two exporter globally. Official shipments to Nigeria plummeted by more than 95 percent in the past four years, while those to Benin have surged, according to the Thai Rice Exporters Association.

“This is Nigeria and people are cutting corners,” said Fanu, the customs agent. “They bring in the rice through the many unofficial border crossings further north. The government knows it. It’s very difficult to police.”

With its far lower tariffs and better-run ports, Benin has a long history of smuggling goods to Nigeria, from frozen chicken to tomatoes and cars.

Edward George, Ecobank Transnational’s London-based head of research, estimates that 90 percent of Benin’s rice is bound for its bigger neighbor. Smugglers offload Thai and Indian rice from the port of Cotonou and take most of it to Nigeria’s largest city, Lagos, which sits just across the Seme border in the south. Some even truck it as far as Niger, where they collude with customs officials before taking it to northern cities such as Kano.

“A text message comes saying: ‘Go!,”‘ says George. “And they drive through. The border gates are open and the guards are looking in the other direction. The evidence is very clear that smuggling is continuing on a large scale. It’s a massive problem.”

A spokesman for Buhari referred requests for comment to the Ministry of Agriculture, which didn’t immediately respond to emailed questions.

While the government touts the decline of imports as evidence that Nigeria is producing more rice, smuggling fills the gap between demand and supply, according to Ade Afeko, a member of the nation’s main manufacturing body.

“It seriously needs to be curbed,” Afeko said from Kano, which he says is “swamped” with foreign rice.

Nigeria faces a tough task reviving its agricultural sector, which went into decline when oil was discovered in the 1950s. Farmers battle with a host of problems: poor-quality seeds, a dearth of financing to buy or borrow equipment such as tractors, bad roads and a lack of warehousing.

Most farmers till and harvest by hand on an average 0.4 hectares (1 acre) of land, which makes it difficult to achieve economies of scale, according to Dimieari Von Kemedi, managing director of Alluvial.

Alluvial buys crops from farmers in central and southeastern Nigeria with the aim of supplying 0.5 million tons of rice a year to millers by 2020. It’s targeting yields of 4 tons per hectare, almost double what growers currently achieve, but still only half what efficient Asian farmers produce.

“We need to get better yields,” said Von Kemedi. “If you don’t, it’s hard to make money. It’s why, despite the tariffs and currency restrictions, you can’t keep foreign rice at bay.”

Other companies moving into large-scale rice farming include Dangote Group, controlled by Africa’s richest person, Aliko Dangote, Singapore-based Olam International and TGI Group, a local conglomerate.

Dangote is investing almost $300 million this year to boost production and set up processing plants in the north, targeting a million tons annually by 2020. To achieve that, it needs to help farmers get access to cheap loans and good seeds, improve their irrigation systems and mechanize production, according to Robert Coleman, a former tobacco planter in Zimbabwe who oversees Dangote’s rice operations.

Growers have to “transition from being subsistence farmers to successful small businessmen,” Coleman said. “We see smuggling of rice through our borders as a real threat to local production and we are counting on the government to mitigate this threat. Once you can achieve this, there will be an agricultural revolution.”

George at Ecobank says demand for imported food products such as rice will increase the more urbanized Nigeria becomes, while the powerful smuggling industry will be difficult to curb.

“There are so many vested interests in the smuggling of rice and there’s so much demand that there’s no way local production can keep up,” he said.

Fanu, the customs agent at Seme, says the government is right to increase local production, but he isn’t convinced import restrictions are the way to go.

“Almost everyone eats rice — it’s the common man’s food,” he says. “The issue is whether we can grow enough at the moment.”