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The rice crisis
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Despite the pervading poverty in the country, rice has become the major staple food for most homes.
The average family could afford regular meals of rice, a clear departure from the earlier days when rice was seen as a special meal reserved for major festive occasions. At prices ranging from N4,500 to N7,000 for every 50 kilogram bag, rice was fairly affordable.
In the last five weeks, however, the prices of rice have risen astronomically by more than 100 per cent. The fact that the price increase coincided with current worries of global food crisis explains the situation as part of the global phenomenon.
Beyond the global perspective is a peculiar twist in the Federal Government's handling of the rice issue that gives the Nigerian situation a distinct colouration. Although reliable statistics are hard to come by, local production of rice is grossly inadequate, apart from its perception as being inferior compared to imported foreign brands.
To a large extent, Nigeria has met its rice consumption needs through importation.
For many years, a tariff regime that imposed 100 percent duty on imported rice has been in force. When in January 2007, the Economic Community of West African States (ECOWAS) introduced the Common External Tariff (CET), the same regime was retained. This is contrary to the provisions of the CET which main objective was to institute a harmonised tariff structure within the sub-region and a way outside the 20 percent maximum ceiling allowed in the four-band tariff structure.
The 100 percent duty was also retained this time with 50 percent designated as rice development levy. By implication, proceeds from the levy are supposed to be disbursed to local rice producers in order to boost production and protect the indigenous rice production industry.
A similar arrangement exists in Benin Republic, Nigeria's nearest ECOWAS neighbour, whose 38 percent charge on imported rice comprises 18 percent duty and 20 percent levy. The huge disparity of 62 percent in taxes imposed on rice by Nigeria and Benin has played a critical role in the fortunes of consumers than our policy makers would want to acknowledge. Operatives of the Nigeria Customs Service have had a hectic time containing the flood of rice smugglers that sought to take advantage of the irresistible lure of saving more than 62 percent in extra costs occasioned by the high tariff in Nigeria.
One of the major effects of this state of affairs was that the inevitable large scale smuggling led to the evolution of a price regime that was low, unrealistic and unsustainable. The current food crisis has only served to demonstrate the illogical nature of Nigeria's tariff regime on rice.
It is contestable that local rice production is too low and lacking in capacity for expansion to take advantage of the seeming opportunity provided by the import duty regime. Again, the fact that Benin Republic and Nigeria share a loosely guarded and barely discernible land border should have informed a more realistic tariff policy by Nigerian government.
Government's decision to urgently import 500,000 tonnes of rice, announced last week, in the hope of forcing down price is ill-advised. The apparent disruption in massive smuggling of rice and the fact that the major source of supply now is from the ones imported through the official channel should account for the steep rise in retail price.
We are convinced that this panicky measure will fail in its major objective - forcing down the retail price of rice.
In our view, a more realistic approach will be to reduce the tariff on rice to the level that obtains in our neighbouring countries and evolve medium and long-term strategies to boost local production. It is after this target term that a discriminatory import duty as the one in place presently should be instituted. Foods, especially staples, are too crucial to be subjected to armchair and unrealistic policies.
In the last five weeks, however, the prices of rice have risen astronomically by more than 100 per cent. The fact that the price increase coincided with current worries of global food crisis explains the situation as part of the global phenomenon.
Beyond the global perspective is a peculiar twist in the Federal Government's handling of the rice issue that gives the Nigerian situation a distinct colouration. Although reliable statistics are hard to come by, local production of rice is grossly inadequate, apart from its perception as being inferior compared to imported foreign brands.
To a large extent, Nigeria has met its rice consumption needs through importation.
For many years, a tariff regime that imposed 100 percent duty on imported rice has been in force. When in January 2007, the Economic Community of West African States (ECOWAS) introduced the Common External Tariff (CET), the same regime was retained. This is contrary to the provisions of the CET which main objective was to institute a harmonised tariff structure within the sub-region and a way outside the 20 percent maximum ceiling allowed in the four-band tariff structure.
The 100 percent duty was also retained this time with 50 percent designated as rice development levy. By implication, proceeds from the levy are supposed to be disbursed to local rice producers in order to boost production and protect the indigenous rice production industry.
A similar arrangement exists in Benin Republic, Nigeria's nearest ECOWAS neighbour, whose 38 percent charge on imported rice comprises 18 percent duty and 20 percent levy. The huge disparity of 62 percent in taxes imposed on rice by Nigeria and Benin has played a critical role in the fortunes of consumers than our policy makers would want to acknowledge. Operatives of the Nigeria Customs Service have had a hectic time containing the flood of rice smugglers that sought to take advantage of the irresistible lure of saving more than 62 percent in extra costs occasioned by the high tariff in Nigeria.
One of the major effects of this state of affairs was that the inevitable large scale smuggling led to the evolution of a price regime that was low, unrealistic and unsustainable. The current food crisis has only served to demonstrate the illogical nature of Nigeria's tariff regime on rice.
It is contestable that local rice production is too low and lacking in capacity for expansion to take advantage of the seeming opportunity provided by the import duty regime. Again, the fact that Benin Republic and Nigeria share a loosely guarded and barely discernible land border should have informed a more realistic tariff policy by Nigerian government.
Government's decision to urgently import 500,000 tonnes of rice, announced last week, in the hope of forcing down price is ill-advised. The apparent disruption in massive smuggling of rice and the fact that the major source of supply now is from the ones imported through the official channel should account for the steep rise in retail price.
We are convinced that this panicky measure will fail in its major objective - forcing down the retail price of rice.
In our view, a more realistic approach will be to reduce the tariff on rice to the level that obtains in our neighbouring countries and evolve medium and long-term strategies to boost local production. It is after this target term that a discriminatory import duty as the one in place presently should be instituted. Foods, especially staples, are too crucial to be subjected to armchair and unrealistic policies.
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