Day 1, Session 2: Achieving Rice Competitiveness and Growth in Nigeria I
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Day 1, Session 2: Achieving Rice Competitiveness and Growth in Nigeria I



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

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



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  • In domestic market, prices for imported rice are consistently higher than for local rice, indicating imperfect substitution between domestic rice and imported rice; also, the price gap became larger after 2007Domestic prices of imported rice broadly tracked import parity with tariff through December 2007The sharp world price increase in 2008 was not completely passed on to Nigerian market. Import tariffs were reduced to zero in late April 2008, import parity dropped, but domestic prices for imported rice remained high. Imports thus appear to have been constrained during the mid-2008 through late 2009 periodPossible existence of import restrictions (quota) in 2008 and 2009, and there may have been substantial rents. By early 2010, import parity prices rose and were again approximately equal to the domestic price through the end of 2011.Sources: Nigeria Bureau of Statistics data and authors’ calculation
  • Add – low suitability to legend
  • What is the crop simulation model – biophysical, not economics, Information is at pixel level – and at farm levelExplain some verbally Biophysical – 3 factors (seeds, nitrogen, water)
  • Dry-land rice yield is not high everywhere in the world (e.g. India)High yields are associated with irrigation everywhere in the world and 5-6 mt/ha can be found in Ghana and Nigeria in some irrigated areas. Also, the irrigated yield is comparable to Ghana.
  • It is obviously that achieving short-term biophysical potential, rice production is still below rice consumption
  • Characteristics of rice producers vary across Nigeria, because of diverse agro-ecological and socio-economic environment they reside. In order to grow rice production sector in competitive manner in the short term, it is important to identify the types of rice producers who are currently practicing intensive production as they are likely to respond more sharply to improved production environment (price, infrastructure, processing facilities etc).We conduct cluster analysis to classify rice producers into various groups based on their characteristics (production behaviors) and access to various resources as summarized in the table.
  • Work on 9 and 10
  • We did similar support for Ghanaian government,...
  • What are the constraints along the rice value chain? Structure of the rice supply value chain in Nigeria – starting from production, trading, processing and marketing. Most rice in Nigeria is sold – 85% is sold – so rice is a cash crop 80% of rice supplied to mills are supplied by the small-to-medium smallholder farmers Go through rural rice paddy traders, and parboiled by village-clustered parboilers Milled by village & clustered millers (small and medium) Only 20% of rice goes to industrial millers – not because of the capacity, but not getting enough paddy of pure variety. 6-8 industrial ones, but 5 of them are closed down. Constraints are on the production side – not the industrial millers side. Because of Need to improve the quality milled in medium scale millers -, instead of bringing in more larger scale millers- Need to modernize the medium ones
  • Potential quality premium – 20% - by improving quality, 20% premium can be gainedthere is additional 20% room for additional cost to improve the quality , and local rice could be made competitive, under the assumption that tariff is 32%

Day 1, Session 2: Achieving Rice Competitiveness and Growth in Nigeria I Day 1, Session 2: Achieving Rice Competitiveness and Growth in Nigeria I Presentation Transcript

  • Overview of the Rice Economy and ResearchQuestions to Address Key Policy ChallengesKwabena 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
  • 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 NSSPINTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 3
  • 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?INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
  • 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)INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
  • 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 favoriteINTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
  • 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 marketingINTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
  • Imported Rice across NigeriaJollof rice Fried rice Origin : Sene Gambia Origin: chineseINTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
  • Imported Rice across Nigeria Coconut rice Rice and stewOrigin: South east Asia –Thai/indian Origin: Local adaptation INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
  • 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) INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
  • 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 YamINTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
  • 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 INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
  • 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)INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
  • Domestic and Imported Rice are not Perfect Substitutes 220 Enugu Agric/Long Grain Enugu Imported 200 Enugu Local Enugu Import Parity w Tariff 180 160Naira/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
  • 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 paymentINTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
  • 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 NigeriaSource: COMTRADE data.INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
  • 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 placeINTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
  • 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
  • Research Questions and MethodologiesResearch 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 developmentINTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 20
  • 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 areaRainfed rice 68 843 96 1,162Irrigated rice 3 103 11 403Other crops 1,231 1,231No crops 2,871 24,617 Page 21
  • An assessment of biophysical potential for rice production: Assumptions in the crop simulation model Simulation scenariosInputs Baseline 1: Seeds 2: Seeds+fertilizer 3 All three share of Improved varieties Improved varieties Improved varieties Fertilizer Fertilizer IrrigationSeeds Rainfed RainfedShare of - 50% Improved (IR-8 type), 50% - 100% improved varieties in high suitability areaimproved Traditional - 75% improved varieties in medium suitability areaseeds - 50% improved (unchanged) in low suitability area Irrigated Irrigated - 100% Improved - 100% ImprovedFertilizer 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/hakg/ha) traditional: 0 traditional: 0 Irrigated Irrigated North: 64 kg/ha South: 95 kg/ha North: 128 kg/ha South: 150 kg/haIrrigation 10% 21%Share of (Assuming some of the irrigated area is not fully developed irrigation system) (By substitutingirrigation irrigation area for allarea other crops to rice)INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 22
  • 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 areasAreas of rainfed and irrigated rice in baseline and “irrigation” scenario High Medium LowBaseline Total rice area 71 946 573(1000 ha) Rainfed rice area 68 843 520 Irrigated rice area 3 103 53Irrigation scenario Total rice area 71 955 662(1000 ha) 33% 306% Rainfed rice area 67 818 447 Irrigated rice area 4 137 215Source: IFPRI Spatial Production Allocation Model (SPAM), Global Irrigation Map (University of Frankfurt), VariousliteratureINTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 23
  • Biophysical potential: Crop simulation yield resultsRice yields under different technology High Medium Lowinputs suitability suitability suitabilityCurrent Area (1000 ha) 71 946 573Yield (mt/ha)Baseline, Rainfed 1.3 1.4 1.2Seed Simulation, Rainfed 2.1 1.7 1.2Seeds + Fertilizer Simulation, Rainfed 2.3 1.9 1.2Seeds + Fertilizer Simulation, Irrigated 5.8 5.6 4.4Source: Crop simulation model results INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 24
  • 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 ExpansionSource: Crop simulation model resultsINTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 25
  • 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 INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 26
  • 4 major types of rice producers identifiedShares 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 INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 27
  • Competitive rice producersIntensive 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 seasonSource: Authors’ analysis based on LSMS 2010.INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 28
  • Small commercial rice farmers in Ghana: Lessons learntKpong 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 INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 29
  • 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 levelINTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 30
  • Improving competiveness along value chainConsumption Domestic Rice (55%) Imported Rice (45%)shares Own Rural Urban Rural Markets Urban Markets Consumption Markets Markets 22% 40% 60%Domestic 14% 63%MarketTrade(milled) Wholesale Traders (domestic and imported) Village & Clustered Millers IndustrialMilling Millers (small and medium) 80% 20% Village & Clustered barboilersParboiling Rural Rice Paddy tradersTrade(Paddy) Importers Smallholder out-grower EstateProduction Smallholder famers schemes (Nucleus Farm) farms Small scale Medium-scale Large-scale Imported (for service) (service and for market) (industrial for market) Rice Page 31Source: Authors, data on consumption shares are from the Nigeria LSMS 2011 and other from the literature.
  • 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
  • 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 exporterEvolution 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
  • 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 farmersINTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 34