RICE MILLING
IN
NIGERIA

Introduction
The production and consumption levels of rice in the sub Saharan region remain to be substantial. The region is projected to import 6.7 million tonnes in 2006, down 10% from the 2005 which was a record performance. According to industry sources, the reduction is because of increased rice production in the region at 8.53 million tonnes (9% up on the previous year).

Apart from Nigeria and South Africa, the region mainly imports low quality rice. Nigeria accounts for 20% of sub-Saharan Africa’s rice imports. South Africa accounts for 11% of imports into the region, mainly high-quality parboiled rice from India and Thailand. Senegal also accounts for around 11% of imports, mainly broken rice, with imports rising substantially after 1995, as consumption growth has outpaced production

Ghana with 5% of the region’s imports is increasing production by raising yields. Guinea and Mozambique have similar levels of imports, while Madagascar imports 100,000 tonnes, despite being the region’s second largest rice producer.

As far as Nigeria is concerned, rice consumption has dramatically increased since the 1970s and creating a substantial surge in rice imports since then, making rice a political commodity in the country. On one side rice became a critical component of the Nigerian diet and the other side, a major consumer of the country’s foreign exchange. The Nigerian government imposed a ban on rice imports in 1985 with the objective of increasing domestic production in meeting the increasing demand for the product. However in 1995 the import ban was removed as the local supplies, although showing improvement, failed to meet the demand. The lifting of the ban resulted in rapid increase in imports, inspite of repeated hikes on duty levels. Nigeria has continued to be an attractive market as compared to other West African markets as it imports parboiled rice which of relatively higher value unlike other regional countries.

Rice Milling - Nigeria

Nigeria in the meanwhile is making visible efforts under the government’s stated policies to increase local production and eliminate need for imports in the medium term. President Obasanjo is spearheading an aggressive pursuit for self sufficiency that includes subsidy on basic farm inputs and improved varieties.

The government is promoting the adoption of the new hybrid rice varieties to help boost rice production. These new varieties are high yielding, early maturing, disease resistant, and high in protein content. The government aims to have 3 million hectares under rice cultivation by 2007. Nigeria is the largest producer of rice in West Africa, but the country with an estimated population of 125 million people still relies on a massive rice importation.

The total domestic rice demand is estimated at about 5 million metric tonnes. However it is anticipated that Nigeria would continue to depend on imports for some time to come given the fact that Nigeria imports a third of its total rice supplies. Imported parboiled rice meets the consumer demand in urban areas where incomes are higher. Locally milled rice is of poor quality and is consumed mainly in the rural areas.

Government sources said recently that 6 million tonnes of milled rice was to be produced from over 10 million tonnes of paddy rice by 2005, while 3 million hectares were expected to be put under cultivation in 2007 to produce 15 million tonnes of paddy rice, resulting in 9 million tonnes of the milled product. The government is also planning to procure rice milling machines designated for rural areas and provide irrigation access to farmers for rice cultivation.

Milling in Nigeria has witnessed a fairly basic processing technology on the both the aspects of parboiling and milling. Typical issues faced are lack of access to improved technologies, high costs of energy for parboiling, lower output quality (post processing), limited government incentives etc.

Other issues relate to irrigation systems, research & development, pests and disease management, soil fertility management, effective farm implements, access to institutional and infrastructural support credit facilities, unorganized delivery of inputs and sales & distribution channels.

However, opportunities exist in the rice milling sector if there is an inclination to invest in better processing technologies. The returns would be attractive given the large price spread between clean imported rice and the lower quality local rice, justifying investments into latest technologies on areas like destoning. However the imported product supply/marketing chain is well established unlike the local rice market structure which typically involves many different agents across the production, processing and sales functions. This area needs significant improvement to be able to encourage more risk taking by large investors in the industry. Otherwise this market structure would not be able to achieve the economies of scale necessary to meet government objectives of self-sufficiency on rice.

Progress on Rice Milling Projects

The government is said to be discussing with a Japanese company for the supply of rice milling machines to farmers at an affordable price to improve rice processing.

Given the large demand-local supply gap, it is likely that the government may issue more licenses to local rice mills to import bran or paddy rice. Two such companies with annual milling capacities of 120,000 tonnes of bran rice each have been issued licenses and have already commenced production. Trade sources forecast imports of bran rice in 2006 to be around 250,000 tonnes. The importers of bran rice with licenses (renewable) are assessed at a lower duty of 50%. Due to concerns on environmental effect, the government decided against allowing import of paddy rice for which the duty could have been as low as 20%

The industry is also witnessing major restructuring by major importers to prepare for a possible government ban on rice importation. Highly established industry heavy weights like the Stallion group (Number One market leaders in rice with well established branded products like Caprice) have already embarked on large scale agriculture/ rice milling ventures throughout the country. It is learnt that Stallion (owned by the Vaswani Brothers Sunil Vaswani, Haresh Vaswani and Mahesh Vaswani) has collaborated with world leaders in rice industry like Buhler to make a major impact on local farming/rice milling in the coming years.

Given Stallion’s financial power and well entrenched distribution system, Stallion’s entry into Agriculture/rice milling might propel Nigeria to meeting local production targets sooner than anticipated. This may also attract other business houses jumping into the fray.

The ChurchGate group in Nigeria is also foraying into rice milling and is reportedly setting up farms in five states in the country in addition to their importation of rice from India and Thailand.

The government’s initiatives seem to be working reasonably well in its hugely challenging task of minimizing dependence on rice imports.

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