The backward integration policy in the agric sector, particularly on major food items such as rice and fish, raised stakeholders’ hopes of a substantial cut in the country’s huge import bills. But that has not happened. Instead, the policy may have been hijacked by phoney investors and importers who, despite not having any record of investments in rice and fish production, enjoy Federal Government’s waivers and import allocation quotas. This has implications for Federal Government’s Agricultural Transformation Agenda, writes Assist. Editor CHIKODI OKEREOCHA.
When the Federal Government, through the Ministry of Agriculture and Rural Development, moved to extend the implementation of the Backward Integration Policy (BIP) to the agric sector, stakeholders in the sector lauded the initiative.
To stakeholders, the policy, which worked wonders in the cement sector where it was first implemented in 2002, would replicate its success story in the agric sector, particularly on rice and fish, two major food items, where the BIP was extended in the hope of cutting the country’s huge import bills on the items.
Minister of Industry, Trade and Investment, Dr. Olusegun Aganga, said Nigeria spends an estimated N360 billion yearly on the importation of rice. The country is ranked world’s second largest importer of rice behind China, consuming nearly six million tons yearly. The country also imports an estimated 1.9 million metric tons of fish valued at N125.38 billion annually. Such huge import bills are considered outrageous and unacceptable by the minister and stakeholders in the agric sector.
For one, Nigeria is blessed with arable farm land and manpower to support local rice production. For another, the country also has abundant aquatic resources in form of inland and territorial water bodies in addition to a huge local consumer market to support fish production. What was lacking perhaps, is a policy in the mould of BIP to encourage fish importers to engage in fish farming enterprises with the aim of increasing local production and reducing import, with genuine local rice processors or investors with verifiable investment in the local processing of rice being issued import quotas that attract lower levies and taxes.
In other words, the BIP empowers only genuine investors in local production and processing of rice as well as fish importers with genuine investment in fish farming to import the difference between what the country could produce locally and the shortfall that must be covered through importation. This was why the policy raised the adrenalin of stakeholders who embraced it. Their expectation was that its success in the cement sector would be replicated in the agric sector.
Aganaga said in the cement industry where it has been implemented since 2002, the policy has seen the country’s cement capacity increase from two million to about 28 million tons, with total installed production capacity of 45 metric million tons per annum (MMTPA) and bagging capacity to 27.7 MMTPA. He also said the industry attracted investment of about $6billion, provided direct and indirect employment for about two million people. In addition, Nigeria has been able to save about N210billion in foreign exchange per year according to the minister.
However, the policy which worked magic in the cement sector has failed to reposition the agric sector much to the disappointment of key stakeholders, especially farmers. Rather than improve the fortunes these two sub-sectors, the BIP is threatened by a rash of discretionary waivers and import allocation quotas to phoney investors. Most of the investors, it was alleged, have no track record of investments, either in form of paddy or rice milling. Same for the fisheries sub-sector. Here, investors with considerable investments in cold storage facilities and well-established supply chains across the country are denied import allocations. Rather, individuals and companies with little or no track record in fish importation are allegedly allocated import quotas.
Analysts say discretionary grant of waivers and concessions to non-committed investors appears to be more pronounced in the rice sub-sector where industry stakeholders are now screaming blue murder over possible loss of huge investments by committed investors.
In a protest letter to the government through the Ministers of Finance/Coordinating Minister for the Economy, and Industry, Trade and Investments, Dr. Ngozi Okonjo-Iweala and Aganga, respectively, the stakeholders drew attention to the “indiscriminate and wrongful award of import licences as well as concessions to businessmen with absolutely no investments in the rice sector.” They alleged that such businessmen are now “making billions of naira selling those licences to importers in the market.”
It was alleged that many of the non-committed investors who got the import allocation quotas for rice are trading it to interested stakeholders at between 60 and 80 per cent levy after obtaining same at 20 per cent.
Documents obtained by The Nation showed that investors, who have only submitted expressions of interest in the sector without any visible form of investment, might be enjoying waivers amounting to about N20 billion under the exercise. This means that the development may have cost the government N20 billion in form of Customs revenues.
Under the new rice policy, a core strategy under the Agricultural Transformation Agenda (ATA), allocation of rice import quotas by the Federal Ministry of Agriculture and Rural Development showed that a move to bridge the supply gap of import-grade rice of 1.5 million metric tons was designed to ensure that existing rice millers and new investors receive a preferential levy of 20 per cent and duty of 10 per cent. But other importers pay higher levy of 60 per cent and duty of 10 per cent.
The Minister of Agric and Rural Development, Dr. Akinwunmi Adesina had in a letter to Mrs Okonjo-Iweala, on the allocation of rice import quotas, noted that the criteria for allocating quotas under a methodology, which assigns weight to key criteria of self-sufficiency in rice production and milling in Nigeria, include the submission and approval of a Domestic Rice Production Plan (DRPP) among others. Adesina said a supply gap of import-grade rice was determined to be 1.5 million metric tons for last year while an inter-ministerial committee discussed the methodology for allocation of the import quotas.
“Subsequently, a letter was sent to existing rice millers and new investors to submit a DRPP, and based on their submissions, 1.3 million metric tons of rice import quotas were issued to 25 qualifying millers at the preferential levy of 20 per cent and duty of 10 per cent. The remaining 0.2 million metric tons of rice imports will be at the higher levy of 60 per cent and duty of 10 per cent for other rice importers”, the letter read in part.
However, documents made available to The Nation showed that the supply gap estimate is unrealistic when compared to a total of 2.74 million metric tons of imported rice that made its way into the country last year – representing a combination of rice imported into the country and the smuggled commodity from neighbouring West African countries. In other words, through the indiscriminate granting of waivers, government may have been promoting the activities of rice smugglers, losing an estimated N20 billion in the process.
Also, the allocations released by the Ministry of Agriculture include several beneficiaries who fail to meet the finance ministry’s stipulated criteria. Documents further showed that new investors without milling capacity or investments in the country received the highest quota of the allocations to approved rice millers, while millers did not receive allocations and in some instances, received very low allocation. Of the 28 companies, only 16 allegedly have mills. The remaining 12 have no milling capacities, but account for higher imports than the qualified millers.
The composition of the inter-ministerial committee and the strategy deployed in arriving at the supply gap also raised eyebrows in the industry. This is so considering that about three million metric tons of rice was smuggled from Cotonou in 2013, while an estimated 1.5 million was accounted for last year. Also, with President Goodluck Jonathan approving the BIP plan in May last year, the delayed implementation of the policy till December did not go down well with stakeholders.
Rice investors react
For the President, Rice Millers Importers and Distributors Association of Nigeria (RiMIDAN) and Chairman, Rice Investors Group, Mr. Tunji Owoeye, the BIP on rice is work in process.
He said: “It’s still a new programme subject to amendments. These kinds of actions happen in the oil industry too. The policy would be reviewed by May and the flaws would be corrected.”
On those who traded the allocation quotas they got, he said: “If anyone is disgruntled, the issue should be addressed as the policy is still in its early stage. It’s not a perfect plan.”
According to Mr. Owoeye, 22 companies have been given allocation, adding that some of them never expected they could get it because many of them were not even prepared for it. “They did not even apply. Government just gave them allocations to encourage local content investments. Some don’t even have structures to do the business. I’m not supporting them to trade, but very few are doing that,” he explained, adding that what government has been doing between the last two and three years is to get across the rice value chain to get an investment plan in the industry.
He said consequently, inspection was conducted based on the claims, while proposals were also requested through expression of interest from other investors. “This is the first time government is doing something right in the sector. The Millers who got the allocation did not even know the Minister of Agriculture,” he said, adding that the interests of those who have expressed huge investment stake were also taken care of. While noting that members of the association have come a long way to ensure that the policy works, he said it was intended to encourage millers to build capacity.
Will genuine investors whose investments are currently on the line because of the alleged indiscriminate approach of the Federal Government in granting waivers and import allocation quotas to investors who have no investments in the industry be swayed by Owoeye’s explanations? Time, they say, will tell.
Fisheries sub-sector also hit
In line with the BIP, all fish importers must engage in fish farming enterprises like their counterparts in other parts of the world. The aim is to boost local production and reduce import. But the sub-sector is also caught in the web of indiscriminate grant of waivers and allocation quotas, dashing the hopes of stakeholders.
A study carried out by a committee of the fisheries sub-sector headed by Prof Doyin Salami of the Lagos Business School is said to have discovered that the dichotomy in fish price hinges on the neglect of big importers and subsequent allocation of import quota to individuals and companies with little or no track record in importation.
It was however learnt that aggrieved stakeholders in the sector may soon breathe a sigh of relief.
Dr. Adesina said government intends to review the fish import quota as a way of cutting down the increment on its price across the country. The review, the he also said, is to ensure that established importers are given import allocations that reflect their operational capacity.
According to him, the review is aimed at ensuring that established importers, with considerable investments in cold storage facilities and well established supply chains across the country are given import allocations that better reflect their operational capacities. He said the ministry would work to clear any distortion in the market, announcing an increase in fish import quota for the third quarter of the year in order to address anomalies discovered by the committee.
Envisaging a stretch in the period of importation to close the gap in supply, the Adesina reminded stakeholders that government’s plan is to reduce the import bill and encourage investment in aquaculture. He urged the Federal Department of Fisheries to support efforts at helping the companies to fall in line with reform objectives of the government which have far reaching benefits for local production.
Agric Transformation Agenda threatened
The shoddy implementation of BIP on rice and fish has far-reaching implications for the on-going reforms of the Agricultural Transformation Agenda (ATA) launched in 2011. Aside from fears that the nation may be losing N40 billion yearly in the rice segment of the agric sector alone due to the activity of smugglers and individuals pretending to be investing in the local production and processing of rice, industry sources say that the ATA may have been put on a reverse gear.
Coming barely two weeks into the 2015 deadline set by the Federal Government to attain self-sufficiency in rice, stakeholders fear that the deadline will not be met.
A petition by stakeholders read: “The way it is going, another few years will be wasted and the nation drawn back. With oil prices falling, ATA provides the best opportunity for the country to generate alternative revenue by reducing import and in the near future, join the export market. With this sort of policy, this thing is not going to work. The rice import allocations will derail the self-sufficiency efforts.”
Players across the value chain, with substantial investments said the crisis they are facing is “imminent crisis of viability and closure” following the government’s “seemingly biased” allocation of import quotas. They insist that the allocations “provide a free ride for smugglers, thereby derailing the objectives on rice self-sufficiency.”
Part of the objective of the administration is to turn Nigeria into a net exporter of rice, thereby driving the goal of the ATA to unlock the country’s large agricultural potential, diversify the economy, revive its rural areas and turn Nigeria into a global powerhouse in crop production. But with fraudulent importers and investors now capitalising on government’s shoddy implementation of the BIP on rice, experts say the objective may not be achieved.
Stakeholders in the fish business are also worried that the discrepancy in fish import experienced lately would not only impede access to one of the most affordable and veritable source of animal protein and omega-3 fatty acids, which are predominantly found in imported fish, but is said to have caused the price of the commodity to rise beyond the reach of low income earners.
Experts say because of her huge wealth and employment generation capacity, the future of Nigeria is hinged on agriculture. They say the sector is believed to hold the key for inclusive growth that will help lift millions of Nigerians out of poverty into wealth. This position is true, particularly now that government’s attention is shifting to the non-oil sector following the continued plunge in crude oil prices and the falling value of the naira against other major currencies.
The e=1xperts said the sector is capable of making up for the loss in oil revenue. The fear, however, is that with the way the sector is being managed, the expected succour may be long in coming.
