Rice policy succumbs to rampant smuggling

The Federal Government’s gamble to revive Nigeria’s rice fortunes faces its biggest test so far, since its introduction in early January 2013.

More than six months after unveiling a ten percent import duty, as well as 100 percent levy on both brown and polished rice, and engineering a programme to support local rice production, the effort appears to be succumbing to the onslaught of smugglers who are thriving on cheap imports from neighbouring countries.

Some analysts say they are tempted to dismiss the new tariff regime as another futile exercise.

“The policy will not work for now, because the ministry of agriculture does not have control over the Nigeria customs,” says Afioluwa Mogaji of X-Ray Consulting, an agricultural consultancy, who also believes demand for and availability of local rice could eventually make imported rice take backstage.

BusinessDay investigations show that Benin Republic, which shares a border with Nigeria, has become the biggest beneficiary of the rice smugglers, with regard to revenues generated through their sea port and from the smugglers.

BusinessDay sources say the heady profits from the huge smuggling activity have given rise to the current throng of rice warehouses around the Lagos metropolis, operated by the smugglers who bribe their way through the mass of security agencies that line the routes into Nigeria.

Anga Sotonye, of Universal Quest Nigeria Limited, an agri consultant, suggest that the trend will continue, unless the Federal Government mounts adequate security and surveillance at the borders.

Their activities have a huge impact on both local production and the Nigerian government’s revenues, and have become the gain of Benin Republic. BusinessDay investigations also show that importers who also ally with the smugglers find Benin Republic most suitable for their activities because of its very low import tariff.

The average international price of Thai rice which is mostly eaten in Nigeria is $600 or N96,000 per ton, with exchange rate at N160 per dollar (20 bags in a tonne). So, for every legally imported ton of rice, the importers pay effective duty of 110 percent, taking the landing cost to N201,600 per ton. Given this calculation, it will cost between N10,000 and N12,000 per bag in the market.

But in Benin Republic, with total tariffs of about 35 percent only a 50kg bag of Thai rice in Benin Republic sells for as low as N6,480 in the market.

Even with bribes paid to ensure passage of the rice from Benin Republic to Nigeria, a bag of smuggled rice still enters the Nigerian market at N7, 000 and gets sold for less than N10, 000, usually N9,000.

“That is why they will kill to smuggle it” says a source who suggests that top level Customs officers are behind the business because of the huge ‘kick-backs’ they receive.

This is considered by some industry watchers as one of the greatest rip-offs,

Recent published reports from the Lagos Ports Complex (LPC), Apapa, which controls over three quarters of the country’s import traffic, confirmed that legal rice importation was going down. The records show that between November, 2011 and now, rice importation has declined by about 58,000 metric tons, that is 2,900 bags per week.

However, there is no scarcity or short-fall in supply of imported rice in the Nigerian market, indicating that smuggling through the land borders has increased, replacing a considerable part of legal importation.

The last published report by the Federal Government shows five million metric tons of rice, about 100 million bags is demanded annually in the country. The total value for these, is about N1 trillion annually.

Legal importers are upset that they are losing sales to smugglers, as smuggled rice is cheaper than legally imported rice, sometimes by as much as N1,000 or more, because the average Nigerian consumer would go for the cheaper imported rice.