Ahead of the 2015 deadline for attaining self-sufficiency in rice production, foremost industrialist Alhaji Aliko Dangote has invested $1 billion (about N165 billion) on rice production and processing in five states. The investment is expected to save Nigeria an estimated N360 billion spent yearly on rice importation, reports Chikodi Okereocha.
It remains a paradox that despite the availability of arable land and manpower to support local rice production, Nigeria spends an estimated N360 billion yearly on importation. Nigeria is ranked the world’s second largest importer of rice behind China, consuming nearly six million tons of the commodity yearly.
More than half of this (over three million tons) is imported mostly from India, Thailand, and Brazil. “Total import volumes oscillate from 1.7 million tons to 3.2 million tons, depending on the tariff structure, volume of local production and the prevailing local circumstances, weather and other vagaries in the rice value chain,” says former Minister for Industry, Charles Ugwuh. However, there are indications that the situation, which has since kept the Federal Government and stakeholders in the agric sector worried, might be reversed soon to pave the way for the nation to meet the 2015 deadline set for self-sufficiency in rice production.
Already, Alhaji Aliko Dangote, Africa’s richest man and President, Dangote Industries Limited (DIL), is investing $1 billion (about N165 billion) in rice production and processing in Edo, Jigawa, Kebbi, Kwara, and Niger states. The Nation learnt that DIL, Africa’s quoted and most diversified indigenous conglomerate, has acquired farmland in those states totalling 150,000 hectares for the project, which is expected to become the largest single investment ever made in rice production in Africa. The project, seen as a shot in the arm of the present administration’s on-going reforms of the Agricultural Transformation Agenda (ATA) launched in 2011, was sequel to the signing of a Memorandum of Understanding (MoU) between DIL and the Federal Ministry of Agriculture and Rural Development (FMARD).
Under the MoU, the indigenous multinational will also establish two state-of-the-art large-scale rice mills with a capacity to mill 120,000 Metric Tons of rice paddy each. This brings the total capacity to 240,000 Metric Tons, with plans to double the capacity within two years. The rice plant is estimated to produce 960,000 metric tons of milled rice, representing 46 per cent of rice imported into Nigeria.
For the FMARD, the ambitious investment could not have come at a more auspicious time considering the fact that the Ministry has been working with various stakeholders to catalyse increased investments in agriculture with a particular emphasis on private sector investments.
For the Ministry, therefore, the investment represents a significant boost for the current effort of the Federal Government in achieving its total import replacement by 2015. The Minister of Agriculture, Dr. Akinwumi Adesina said that much at the signing of the MoU.
Hear him: “This investment by DIL is transformational for Nigeria and the rest of Africa. The 150,000 hectares of rice farms and the planned 240,000 Metric Tons processing capacity of international quality grade rice is guaranteed to turn Nigeria away from being a rice importing country to a major rice exporter. Through this billion dollar commitment, Dangote, Africa’s leading business man, has clearly attested to the policies and approach that the Federal Government has undertaken to transform the nation’s agricultural sector.”
The Minister noted that the rice self-sufficiency policy of the Federal Government was directed at saving Nigeria N356 billion annually and putting this into the hands of Nigerian rice farmers and rural communities. He said that within three years, Nigeria’s national paddy rice production rose by an extra seven million Metric Tons, while the number of integrated modern rice mills in the country rose from just one in 2011 to 18 by 2014, all processing the local paddy into high quality finished rice. He said high-quality and well-packaged Nigerian rice is now in the local market, including Quarra Rice, Umza rice, Ebony super rice, Eko rice, Mikap rice, Ashi rice, Queen of the Niger, and Mama’s Pride.
Dangote could not agree less on the potential of the investment to transform the nation’s agric sector. He explained his company’s investment decision thus: “Our goal of making Nigeria a net exporter of rice will be achieved faster by this significant investment, and I congratulate the Minister of Agriculture and his team on the very strong demonstration of public-private sector partnerships and collaboration to drive significant transformation in Nigeria’s agriculture sector.”
As an integrated operation, the Dangote farms and the mills are expected to significantly boost smallholder rice production in the regions through a nucleus and out-grower farming model, thereby transforming livelihoods in rural Nigeria. Besides, the selected sites are rice-growing communities and they will be supported by Dangote’s provision of agro-inputs, training, and marketing linkages in order to improve community farming operations. Employment opportunities will also be created for at least 8,000 Nigerians.
Dangote commended the government for evolving a robust and consistent policy that has made Nigeria an irresistible place to invest. He urged other entrepreneurs to join the moving train, rather than sit back and complain of not having a level-playing field and later on wave the flag of monopoly for successful entrepreneurs.
President Goodluck Jonathan commended Dangote for building a strong industrial base in Nigeria. “It takes a lot of hardwork, commitment and discipline to achieve the feat by Dangote. Today is a great day for Nigeria and this investment is worth the risk. The country is capable of producing rice that can feed the whole of West African sub-region,” he said, assuring Dangote that his investment will be protected.
But there are challenges, one of which is the nation’s numerous porous borders. The President however, cautioned that the days of smugglers are numbered and that Government is determined to install electronic surveillance equipment that will depend less on human manipulations and interventions. He also vowed to put an end to the high spate of smuggling in the next 12 months. But it is not clear how the President intends to achieve this in 12 months considering the complex nature of smuggling.
According to experts, cross-border smuggling, particularly via the Cotonou Port, remains one of the greatest huddles before local rice producers and this may frustrate the current move by Dangote to complement government’s efforts in realising its rice self sufficiency policy. Smuggled rice often find their way into various communities and towns in Nigeria through the neighbouring countries. The penchant of most Nigerians to consume imported rice at the detriment of local ones has not helped matters either.
This is partly responsible for why local rice production accounts for less than 50 per cent of the country’s total consumption, leaving the huge demand gap for polished/milled rice imported mostly from India, Thailand, and Brazil. Experts and stakeholders argue that until and unless Government stems the rising tide of cross-border smuggling, the latest intervention by Dangote may not enhance the nation’s chances to achieve the rice self-sufficiency target by 2015.
Another issue that might pose a challenge for the foremost industrialist is the issue of tariff. Early last year, the Federal Government imposed a new tariff on imported rice to cut down imports and encourage local production of the commodity as well as offer incentives for investors in the sector. However, the policy became counter-productive, as the government was said to have lost over N300 billion revenue to smuggling through the borders with neighbouring countries.
As Ugwuh pointed out, “It is absolutely critical that government manages the tariff regime to ensure product availability, fair/stable consumer prices, and protection of local producers/processors that are rendered cost uncompetitive by environmental factors and infrastructural handicaps. Elimination of tariff manipulations and other abuses including smuggling/corruption should provide stable ground for the enormous investments and hard work needed to grow local capacity to displace imports.”
He listed other major challenges and difficulties facing the rice value chain to include capital mobilisation, limited irrigation facilities, lack of basic mechanisation, and seasonal availability of paddy, as well as the absence of a marketing board, and payments system for paddy. According to him, “to establish a 25,000-30,000 ton capacity rice mill based on Indian or Chinese equipment costs about $6 million. To keep the mill supplied with paddy requires $12 million per year. Funding difficulties, in terms of the quantum of funds, level of interest rate, issues of collateral securities and very short repayment options, kill off dreams/ambitions of indigenous private sector ownership of mills.”
The former Minister, therefore, said the government intervention and assistance in the form of a long term loan is absolutely necessary. He said a great deal of excitement and momentum has been created by the government in favour of local rice production by deploying high tariffs and import-substitution strategies aiming to achieve total import replacement by 2015, noting that although cross-border smuggling via the Cotonou Port is a great threat, new investments by the government and the private sector into all aspect of the value chain give hope that success could be achieved in the medium term if current policies and direction are sustained.
Hope by stakeholders that new investments into all aspect of the rice value chain particularly by private investors led by Dangote would achieve result is largely anchored on the pedigree of the man globally acknowledged as a serial investor. The consensus is that given the pan-African entrepreneur’s success story in all the sectors where he has ventured, his intervention in local rice production would drive the nation’s match towards attaining self-sufficiency in rice.
