According to the World Bank Food Security Update released at the end of July 2023, prices of agricultural products, exports, and cereals increased by 6%, 4%, and 10% respectively by the end of the month. Additionally, the prices of Maize and Wheat rose, closing at 12% and 14% higher at the end of July 2023.
The report also highlighted that high food inflation was prevalent in most low- and middle-income countries, with inflation rates surpassing 5%. Africa, North America, Latin America, Southeast Asia, Europe, and Central Asia were the most affected regions, experiencing food price inflation exceeding 80% in real terms.
Subsequent investigations by Nairametrics revealed that the price of rice, a staple food in Nigeria, surged by 29% within two months, causing widespread concern among traders and consumers. Nairametrics tracked the price of rice in Lagos, noting an increase from N32,000 in June to N45,000 by the current date.
In the Federal Capital Territory, locally produced rice is currently priced at N37,000 per bag, while imported rice is selling for N48,000.
By the 20th of July, Nairametrics recorded the price of a bag of Mango rice in Port Harcourt at N39,000; Mama’s Pride at N38,000; and Cap rice at N42,000. By August 10, the price had risen to N48,000.
With the ‘Ember Months’ looming, speculations are rife that the cost of a rice bag might escalate beyond the financial capability of average wage earners by December.
What is fuelling price increases?
Distributors who discussed the matter with Nairametrics attributed the price hike to an increase in transportation costs after the removal of the fuel subsidy on May 29, coupled with the escalating expenses associated with acquiring foreign exchange.
While rice importers were previously unable to access foreign exchange from the I&E window, they claim they obtained it at more favorable rates.
One importer, who requested anonymity, mentioned he sources rice from Cotonou before importing it into Nigeria. He emphasized that the depreciation of the local currency played a significant role in the rice price increase over the past two months.
Another importer, also speaking anonymously, informed Nairametrics that his rice supply comes from the Republic of Benin. Before recent events, the local currency held a stronger position against the CFA francs.
However, of late, he has had to purchase dollars at a rate of N890/$, which he then converts to francs. He pointed out that after accounting for the high costs of acquiring this expensive foreign exchange, the end consumers inevitably bear the burden.
- “I need to ensure my profit margins. I’m not running a charity,” he asserted.
In discussions with wholesale distributors, Francis Uwhakenan informed Nairametrics that the escalating cost of transportation over recent months has contributed to the rise in rice prices.
He pointed out that the expense of transporting a truckload of rice has doubled within this period. Uwhakenan declined to disclose to Nairametrics the port of entry for the foreign rice he distributes within Nigeria.
It’s important to note that the Nigerian federal government has banned rice importation, emphasizing its import substitution policy.
Furthermore, the Federal Government has recently increased tariffs on rice imports, both for packages larger than 5kg and those 5kg or smaller, raising the rate from 50% to 60%. Economists argue that this policy may inadvertently promote smuggling.
Moreover, following the outbreak of Covid-19, several nations, in an effort to bolster food security, have enacted non-export policies on specific commodities. For instance, to maintain the availability of non-basmati white rice and control domestic price surges, the Indian government altered its export policy.
In September 2022, the policy on non-basmati white rice shifted from “Free with an Export Duty of 20%” to “Prohibited,” effective immediately.
Given that India dominates the global rice export market, accounting for nearly 40% of worldwide sales, this export ban might reduce domestic prices for both Indian consumers and producers. However, it could also be a driving factor behind significant global price hikes and increased price volatility.
Local rice not “moving market”
Investigations by our team indicate that Lagos markets are almost devoid of locally produced rice. Retailers explained to Nairametrics that Lagos residents rarely seek out local rice, explaining its scant presence.
For instance, Big Bull, considered by many to be Nigeria’s top-quality milled rice, is scarcely found in markets throughout the state. Numerous retailers in major Lagos markets communicated to Nairametrics that customers seldom ask for local rice.
- “Nigeria made rice no dey move market,” quipped Mama Uche, a retailer at the Igando Market in Alimosho Local Government Area.
Godwin Imafidon, a wholesaler in Iyana Ipaja Market, echoed this sentiment. He emphasized that dealing in local rice isn’t lucrative because customers largely shun it.
- “Despite the buzz around local rice, people aren’t buying. They opt for foreign variants, praising its quality and lack of impurities,” he remarked.
Nweneda Tugbe, a resident of Port Harcourt, conveyed a similar perspective.
- “While we aim to support our nation by purchasing local rice, it’s often a disappointing experience. Encountering stones while enjoying a meal isn’t pleasant,” she noted.
Although taste preferences might diverge in northern Nigeria, the pricing of local rice suggests that Nigeria’s production volume is insufficient, especially given the existing importation ban.
It’s worth recalling that the previous administration’s Anchor Borrowers’ Program invested a substantial N1.09 trillion, with a significant portion dedicated to rice cultivation. This initiative generated considerable optimism during the rice pyramid exhibition in Abuja in January 2022.
However, post-event, despite claims of a yearly production of 9 million metric tonnes, rice prices have persistently surged. This suggests Nigeria is far from achieving rice self-sufficiency. Interestingly, all six rice importers interviewed by Nairametrics chose not to reveal their rice’s entry port.
Impact of floods
Additionally, the Nigerian Meteorological Agency (NiMet) has cautioned that the impact of the 2023 floods could surpass that of 2022.
Reflecting on the 2022 nationwide floods, Ade Adefeko, vice president of Olam Nigeria Limited, described its effect on their rice farm and the subsequent influence on rice prices. “A considerable 25% of the rice crop was lost after the October 2nd incident,” he disclosed.
This setback for Olam, according to various farmers, typifies the widespread devastation experienced by rice cultivators nationwide.
Given the interplay of factors—rising transportation costs, escalating foreign exchange rates for rice importation, subpar local production, anticipated nationwide flooding, and heightened demand due to the approaching ‘Ember months’—rice prices might become prohibitively high for many Nigerians by December 2023.
Source: Nairametrics