Increase in Rice Prices to Drive Food Inflation?

Based on a BusinessDay report, the price of a 50kg bag of locally parboiled rice in Nigeria grew by 53.6% in two months driven by the floods that ravaged many parts of the country. According to the report, a 50kg bag of locally parboiled rice now sells for N43,000, up from N28,000 in September. The price of a 50kg bag of foreign parboiled rice has risen to N45,000 from N31,000. Chairman of the Rice Processors Association of Nigeria, Mohammed Abubakar noted that the floods submerged hundreds of rice farmlands and caused the price of paddy to jump from N200,000 to N300,000 per tonne. Thousands of hectares of rice farms have reportedly been washed away in Taraba, Jigawa, Kano, Benue, Niger, Kogi, and Kebbi, among other states. 

Based on data from the United States Department of Agriculture (USDA), Nigeria with average 2023 forecast local consumption of c.8.25million metric tonnes (MMT) per annum versus average milled local production of 5.5 million MT (rough production 8.73MMT), was the second highest importer of rice. The Buhari administration had in 2016 set 2018 as a target period to end importation of rice and become self-sufficient. Since 2011, the government has been making substantial efforts to encourage the domestic cultivation of rice and to eliminate imports using incentives such as subsidised loans, cheap fertilizers, free farmland, and tax rebates. Other strategies to discourage imports were also put in place such as stopping rice importers from buying foreign exchange from the official market and raising tariffs to as high as 60%. 

These restrictions led to a gradual decline in imports and resulted in an increase in the price of imported rice. Consequently, the price gap that made cheaper imported rice more attractive began to narrow. The most effective measure against rice imports however was the closure of the land borders in August 2019. The price of rice, a major staple in the country rose substantially during the period of the closure of the land borders. The price of a 50kg bag of imported rice, which was selling at N14,500 before the closure of the border, rose to c.N33,000 while locally produced rice also a c.25-50% increase in price. The prices never declined even after some of the land borders were reopened. Food inflation, which we had assumed will see some respite due to harvest season will most likely continue to rise due to the substantial increase in rice prices, which is forecasted to rise further as the yuletide season approaches.

Show More

Related Articles

Leave a Reply

Back to top button