Day 1, Session 2 of the Nigeria Strategy Support Program's 2012 Research Conference

1. Overview of the Rice Economy and Research
Questions to Address Key Policy Challenges
Kwabena Gyimah-Brempong, Paul Dorosh, Oluyemisi Kuku, Angga
Pradesha, and Akeem Ajibola (IFPRI)
NSSP National Conference 2012:
“Informing Nigeria’s Agricultural Transformation Agenda with Policy Analysis
and Research Evidence”
Abuja, Nigeria – November 13-14, 2012

2. ACHIEVING RICE COMPETITIVENESS
AND GROWTH IN NIGERIA
Policy and Research Questions
Kwabena Gyimah-Brempong
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3. Background of the Rice Study
• Rice is a very important staple for most Nigerians and is
becoming the most important food item in the process of
rapid urbanization and income growth
• The Nigerian government has identified rice as one of
the most important agricultural products for achieving
agricultural transformation and food security in Nigeria
• IFPRI has been required by the government to provide
research evidence and help the government identify
priority policy areas in the rice development strategy
• The following four presentations are drawn from the
preliminary research results of the “rice research team”
of NSSP
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4. Key Policy and Research Questions
• What is the potential to increase rice production
(quantity and quality) in Nigeria? Does local rice
have the potential to realize a higher growth rate
in yield and production?
• What are the alternative strategies to effectively
reduce imports and achieve self-sufficiency in rice
production?
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5. OVERVIEW OF THE RICE ECONOMY
Oluyemisi Kuku
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6. Historical and socio-cultural context of rice
consumption
• Indigenous rice species (local rice) have been grown in
Nigeria for hundreds of years
• Local rice demanded for price, taste and specialized
uses
• Local rice is often not properly processed, includes foreign
matter (e.g stones)
• Treated as an inferior good
• Imported rice preferred for higher quality and versatility:
• cleanliness (non-broken and free from stones and other
debris)
• swelling capacity
• taste
• grain shape (long grained)
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7. Local rice in Northern Nigeria
• Local names include
Galaware ,Dukusa,Yar
Yarmidi, Yar Kera,
Jamila, Zaira, Jar-Naira,
Kwandalla, Yar Das or
Yar Mubi
• Traditionally consumed
as Tuwo Shinkafa : and
the rice is boiled and
pound into paste to
prepare.
• Boiled rice and stew is
also consumed, but
Tuwo is a local favorite
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8. Local Rice in Southern Nigeria
• Local rice is primarily
boiled and consumed
with a tomato and pepper
based sauce in Southern
Nigeria. The varieties of
rice differ, but mode of
consumption is the same
• Special mention: Ofada
rice (South West)
• Premium local rice
• Importance of branding
and marketing
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9. Imported Rice across Nigeria
Jollof rice Fried rice
Origin : Sene Gambia Origin: chinese
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10. Imported Rice across Nigeria
Coconut rice Rice and stew
Origin: South east Asia –Thai/indian Origin: Local adaptation
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11. Rice has become one of the most important staples in Nigeria:
Trends of milled rice production and imports, 1960-2012
6.0
Million tonnes
Milled Rice Imports (tonnes)
5.0
Milled Rice Production (tonnes)
4.0
3.0
2.0
1.0
0.0
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
Data source: USDA international database (2012)
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12. Aggregate consumption of top six
staples (million tons)
6
5.4
5.2
5 4.6
3.9
4
3.2
2.9 2.9
3
2.3
2
1
0
All rice Local Imported
rice rice
Rice Maize Sorghum Millet Cassava Yam
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13. Rice is a very important staple for most Nigerians
(Per capita staple consumption and their ranks)
Urban Rural
Rank according to Rank according to
Commodity kg/pc kg/pc
kg/pc kg/pc
Rice 35.0 2 30.6 2
Maize 18.2 4 27.5 4
Sorghum 8.7 5 39.3 1
Millet 8.5 6 26.2 5
Cassava, processed 38.2 1 30.3 3
Yam 22.7 3 15.7 6
• An average Nigerian household spent 6% of total income on rice consumption
• In monetary term rice ranks No.1 among all staple items for both rural and urban
households.
Source: authors’ calculation according to NLSS 2011
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14. Why the preference for imported rice?
• Urbanization (50 percent of Nigerians now live in
urban centers)
• Urban lifestyles encourage easy to prepare foods such
as rice
• More sedentary lifestyles are opposed to the heavier
starchy foods
• Rural dwellers – mostly on the farm, need heavy
sustenance (bird food).
• Urban dwellers are more exposed, less dogmatic about
food, more likely to adopt foreign recipes that utilize
imported (parboiled rice)
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15. Domestic and Imported Rice are not Perfect Substitutes
220
Enugu Agric/Long Grain Enugu Imported
200 Enugu Local Enugu Import Parity w Tariff
180
160
Naira/Kg
140
120
100
80
60
40
Jul-11
Mar-11
Nov-08
Jul-01
Nov-01
Jul-02
Nov-02
Jul-03
Nov-03
Jul-04
Nov-04
Jul-05
Nov-05
Jul-06
Nov-06
Jul-07
Nov-07
Jul-08
Jul-09
Nov-09
Jul-10
Nov-10
Mar-01
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Nov-11
Per capita rice consumption (kg/pc) Income elasticity of demand for rice
Local Rice Imported Rice Local Rice Imported Rice
Urban Rural Urban Rural Urban Rural Urban Rural
National
10.9 21.4 24.1 9.1 0.20 0.64 0.53 1.03
average
Page 15
Source: authors’ calculation using NLSS 2011

16. The high import tariff policy seems unlikely to
be enforced
• Officially reported imports are much lower than the number estimated from
exporting countries’ reports
• Using exporting countries’ data, Nigeria imported 2.1 mn tons of rice in 2010
• Aggregated from household consumption data of NLSS 2011, imported rice is 2.3
mn tons
• Nigeria reported imports were 711K tons, equivalent to 35% of world rice exports to
Nigeria
• Most rice imported by Benin reported to Nigeria
• In 2010 Benin imported 600K ton of rice and exported 550K to Nigeria
• Unreported cross-border trade was about another 150K ton smuggled into Nigeria
• Local sources say that around 8,000 bags of rice are smuggled into the country
every day through waterways between Nigeria and Benin (Oryza, 2012):
• (8000 bags x 50 kgs/bag = 400tons/day = 146,000 tons/year)
• The high tariffs may encourage under-reported imports to avoid tariff
payment
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17. Nigeria Rice Import Data and World Export
Data, 2006-2010
3000
2500
(thousand metric tons)
2000
1500
1000
500
0
2006 2007 2008 2009 2010
Nigeria Imports Exports to Nigeria
Source: COMTRADE data.
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18. Conclusions and policy implications
• In order to meet the ATA goals of rice self
sufficiency, consumers must be persuaded to
consume locally produced rice
• Locally produced rice must compete favorably on
attributes with foreign rice.
• High quality must be achieved and maintained
• Import substitution is taking place in other sectors:
• Fashion
• Entertainment
• Proper branding and marketing is key for
acceptance to take place
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19. Growth Potential for the Domestic Rice Economy
Hiroyuki Takeshima, Michael Johnson, Jawoo Koo, Tewodaj
Mogues, Akeem Ajibola (IFPRI)
NSSP National Conference 2012:
“Informing Nigeria’s Agricultural Transformation Agenda with Policy
Analysis and Research Evidence”
Abuja, Nigeria – November 13-14, 2012

20. Research Questions and Methodologies
Research questions
• What is the potential to increase rice production
and improve rice quality in Nigeria?
• Does local rice have the potential to realize
higher yield growth?
Methodologies
• Bio-physical production potential
• Rice producer typology
• Optimal rice processing sector development
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21. Rice Production Potential: A suitability assessment
Highly suitable and rice is grown
Highly suitable and other crops are grown but rice is not grown
Highly suitable but no crops are grown
Medium suitability and rice is grown
Medium suitability but no crops are grown
Low suitability
Source: IFPRI Spatial Production Allocation Model (SPAM), Global
Irrigation Map (University of Frankfurt), Various literature
Area (1000 ha) Output (1000 ton)
Category High Medium High Medium
suitability suitability suitability suitability
area area area area
Rainfed rice 68 843 96 1,162
Irrigated rice 3 103 11 403
Other crops 1,231 1,231
No crops 2,871 24,617
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22. An assessment of biophysical potential for rice production:
Assumptions in the crop simulation model
Simulation scenarios
Inputs Baseline 1: Seeds 2: Seeds+fertilizer 3 All three
share of Improved varieties Improved varieties
Improved varieties Fertilizer Fertilizer
Irrigation
Seeds Rainfed Rainfed
Share of - 50% Improved (IR-8 type), 50% - 100% improved varieties in high suitability area
improved Traditional - 75% improved varieties in medium suitability area
seeds - 50% improved (unchanged) in low suitability area
Irrigated Irrigated
- 100% Improved - 100% Improved
Fertilizer Rainfed North Rainfed South Rainfed North Rainfed South
(Nitrogen in improved: 56 kg/ha improved: 8 kg/ha improved: 56 kg/ha improved: 40 kg/ha
kg/ha) traditional: 0 traditional: 0
Irrigated Irrigated
North: 64 kg/ha South: 95 kg/ha North: 128 kg/ha South: 150 kg/ha
Irrigation 10% 21%
Share of (Assuming some of the irrigated area is not fully developed irrigation system) (By substituting
irrigation irrigation area for all
area other crops to rice)
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23. Biophysical potential: Irrigation expansion in the
crop simulation model
Irrigated rice area assumed to expand to the areas others crops are grown and currently
irrigated (information obtained from Global Irrigation Map, University of Frankfurt).
Under “irrigation” scenario, most expansion in irrigated area occurs in the medium
and low suitability areas
Areas of rainfed and irrigated rice in baseline and “irrigation” scenario
High Medium Low
Baseline Total rice area 71 946 573
(1000 ha)
Rainfed rice area 68 843 520
Irrigated rice area 3 103 53
Irrigation scenario Total rice area 71 955 662
(1000 ha) 33% 306%
Rainfed rice area 67 818 447
Irrigated rice area 4 137 215
Source: IFPRI Spatial Production Allocation Model (SPAM), Global Irrigation Map (University of Frankfurt), Various
literature
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24. Biophysical potential: Crop simulation yield results
Rice yields under different technology High Medium Low
inputs suitability suitability suitability
Current Area (1000 ha) 71 946 573
Yield (mt/ha)
Baseline, Rainfed 1.3 1.4 1.2
Seed Simulation, Rainfed 2.1 1.7 1.2
Seeds + Fertilizer Simulation, Rainfed 2.3 1.9 1.2
Seeds + Fertilizer Simulation, Irrigated 5.8 5.6 4.4
Source: Crop simulation model results
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25. Biophysical potential: Crop simulation output results
High Medium Low Total
suitability suitability suitability
Current rice area (1000 ha) 71 946 573 1,590
Output (million ton)
Baseline (current) 0.11 1.57 0.77 2.45
Seeds + Fertilizer Simulation 0.15 1.84 0.77 2.76
Seeds + Fertilizer Simulation 0.18 2.25 0.88 3.31
Seeds + Fertilizer + Irrigation 0.19 2.37 1.41 3.97
Expansion
Source: Crop simulation model results
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26. Growth potential at farmer level: A rice producer
typology
• Can Nigerian farmers take advantage of biophysical rice potential?
• A rice producer typology developed to assess farm level potential
• Typology based on behavioral characteristics and resource
constraints
Variables used for typology analysis
Farm Behaviors Natural resources and others
Crop patterns Rainfall variation
Input use intensity (fertilizer, other Soil types
agro-chemicals, seed purchase) Proximity to rivers / dams
Production scale (farm size, sales) Population density / access to town
Irrigation Household characteristics
Mechanization (tractor / animal Assets
traction) Non-farm income earning activities
 Market orientation Wage rates
Source: Authors
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27. 4 major types of rice producers identified
Shares of different types of rice producers, total rice producers = 100
(%)
5
Mechanized producers
7
Market oriented Intensive small-scale
(78%) irrigators
66
Other producers
22
Subsistence
Source: Authors’ analysis based on LSMS 2010
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28. Competitive rice producers
Intensive small-scale irrigators Mechanized producers
• Operate on typically 1 acre of plots • Use tractor for land preparation
• Use labor and modern inputs • Use modern inputs intensively
intensively • Some with irrigation
• Mostly located within canal irrigation • Typically found in Donga, Lau LGA
systems rclose to dams in the North / (Taraba state), and Patigi LGA
North Central zones (e.g.: Gbako LGA (Kwara state)
in Niger state and Kebbe LGA in • Totally 51,000 producers
Sokoto state) • Produced 108,000 tons of rice
• Higher farmgate rice price
• Low wage rate
• Some mechanized land preparation
• Totally 68,000 producers
• Produced 89,000 tons of rice, of which
more than 50% sold to the market in
2010 rainy season
Source: Authors’ analysis based on LSMS 2010.
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29. Small commercial rice farmers in Ghana:
Lessons learnt
Kpong Irrigation Scheme
• Small-scale: 1 ha per farm (2000 farm households in
total)
• High yield: 5.5 tons/ha (dry paddy)
• Profitable varieties: Aromatic (ex. Jasmine rice)
• Intensity farming – 70% with 2 season rice
• Mechanization and fertilizer:
• Power tillers for land preparation – 100%
• Combine harvesters – 60%
• Fertilizer –500 kg / ha
• Easy access to certified seed
• Sufficient crop husbandry knowledge
• Qualified extension staff in the area
• High labor use despite high wages
• Private sectors provide credit, milling, trading, canal
maintenance
=> A similar study in Nigeria is planed in next year
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30. Assessing growth potential: Key messages
• Nigeria has huge biophysical potential in rice production
• Competitive farmers are at the forefront for achieving
growth potential
• Competitive production to be scaled up through:
• Intensive irrigated rice production (double season)
• Intensive use of fertilizer and improved varieties
• Mechanization to overcome labor constraints
• However, number of more competitive rice producers is
currently small and increasing their number is a key to
increase supply response at the farmer level
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31. Improving competiveness along value chain
Consumption
Domestic Rice (55%) Imported Rice (45%)
shares
Own Rural Urban
Rural Markets Urban Markets
Consumption Markets Markets
22% 40% 60%
Domestic 14% 63%
Market
Trade
(milled)
Wholesale Traders (domestic and imported)
Village & Clustered Millers Industrial
Milling Millers
(small and medium) 80% 20%
Village & Clustered barboilers
Parboiling
Rural Rice Paddy traders
Trade
(Paddy) Importers
Smallholder out-grower Estate
Production Smallholder famers schemes (Nucleus Farm) farms
Small scale Medium-scale Large-scale Imported
(for service) (service and for market) (industrial for market) Rice
Page 31
Source: Authors, data on consumption shares are from the Nigeria LSMS 2011 and other from the literature.

32. Comparing rice value chains between Nigeria and Thailand, 2009
• Production cost in Nigeria is 1000
39% of total value chain and is 1.7 900
times higher than in Thailand 800
700
US$/mt
• Wholesale and retail margins in 600
Nigeria are 27% and 18% of total 500
value chain, respectively, and 400
wholesale margins are 100% higher 300
than in Thailand 200
100
• The key to improve local rice’s
0
competitiveness is to lower
Retail margins
Freight & handling
Production Costs
Production Costs
Potential Quality Premium
Farmer Margin
Farmer Margin
Other cost of FOB
Import Tariff (32%)
Processing margins
Wholesale trade margins
Wholesale trade margins
Processing margins
production and market costs
through yield growth and market
efficiency
• Quality premium can be 20% of
total value chain. This is an
important source of increased
competiveness (local rice considered
an inferior good, except for a few
niches - e.g. Ofada rice). Local rice Imports of Thai rice
Source: For Nigeria, MARKETS Study (2010) and Maneechansook (2011) for Thailand
Page 32

33. Lessons from India
• During Green Revolution period, number of small-medium rice mills expanded
with growth in yields and expansion in rice areas
• It took more than two decades for India to become a net exporter
Evolution of Small-Medium Rice Mills, Yields and Net Exports in India
6
Net Exports (million tons)
5
Yield (Tons/ha)
4
3 No. of Mills per 1000 ha of rice area
2
1
0
-1
-2
1965 1970 1975 1987 1995 2001
Sources: For India, Harris-White, 2005 and for Nigeria, Lancon et al. 2002 Page 33

34. Rice Value Chains: Key messages
• High production cost and high market margins are major
constraints along rice value chain
• Improving technology in milling sector is also important for
increasing competitiveness
• Medium size millers can play an important role when
they can get access to better technology
• Small-medium millers often have larger multiplier effects
in the rural economy
• Developing modern and large scale milling industry
requires significantly increasing high quality rice production
• High quality local varieties are comparable to the imported
rice and more profitable for farmers
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