day 1, session 2: achieving rice competitiveness and growth in nigeria i

Overview of the Rice Economy and Research Questions to Address Key Policy Challenges

NSSP National Conference 2012:

“Informing Nigeria’s Agricultural Transformation Agenda with Policy Analysis and Research Evidence”

Abuja, Nigeria – November 13-14, 2012

Kwabena Gyimah-Brempong, Paul Dorosh, Oluyemisi Kuku, Angga Pradesha, and Akeem Ajibola (IFPRI)

INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

ACHIEVING RICE COMPETITIVENESS AND

GROWTH IN NIGERIAPolicy and Research Questions

Kwabena Gyimah-Brempong


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


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?


OVERVIEW OF THE RICE ECONOMY

Oluyemisi Kuku


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)


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


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


Imported Rice across Nigeria

Jollof rice Fried rice

Origin : Sene Gambia Origin: chinese


Imported Rice across Nigeria

Coconut rice Rice and stew

Origin: South east Asia –Thai/indian Origin: Local adaptation


Rice has become one of the most important staples in Nigeria: Trends of milled rice production and imports, 1960-2012

Data source: USDA international database (2012)

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Milled Rice Production (tonnes)


Aggregate consumption of top six staples (million tons)

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Rice Maize Sorghum

Millet Cassava Yam

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Rice is a very important staple for most Nigerians

(Per capita staple consumption and their ranks)

• 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

Urban Rural

Commodity kg/pc Rank according to kg/pc kg/pc Rank according to

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


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)

Domestic and Imported Rice are not Perfect Substitutes

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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 RuralNational average 10.9 21.4 24.1 9.1 0.20 0.64 0.53 1.03

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 payment


Nigeria Rice Import Data and World Export Data, 2006-2010

Source: COMTRADE data.

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Nigeria Imports Exports to Nigeria


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

Growth Potential for the Domestic Rice Economy

NSSP National Conference 2012:

“Informing Nigeria’s Agricultural Transformation Agenda with Policy Analysis and Research Evidence”

Abuja, Nigeria – November 13-14, 2012

Hiroyuki Takeshima, Michael Johnson, Jawoo Koo, Tewodaj Mogues, Akeem Ajibola (IFPRI)


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

Rice Production Potential: A suitability assessment

Area (1000 ha) Output (1000 ton)

Category High suitability

area

Medium suitability

area

High suitability

area

Medium suitability

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

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

Source: IFPRI Spatial Production Allocation Model (SPAM), Global Irrigation Map (University of Frankfurt), Various literature

Low suitability


An assessment of biophysical potential for rice production: Assumptions in the crop simulation model

Inputs Baseline

Simulation scenarios

1: Seeds share of Improved varieties

2: Seeds+fertilizer Improved varieties Fertilizer

3 All three Improved varieties Fertilizer Irrigation

SeedsShare of improved seeds

Rainfed- 50% Improved (IR-8 type), 50% Traditional

Irrigated- 100% Improved

Rainfed- 100% improved varieties in high suitability area- 75% improved varieties in medium suitability area- 50% improved (unchanged) in low suitability areaIrrigated- 100% Improved

Fertilizer (Nitrogen in kg/ha)

Rainfed North Rainfed Southimproved: 56 kg/ha improved: 8 kg/hatraditional: 0 traditional: 0

Irrigated North: 64 kg/ha South: 95 kg/ha

Rainfed North Rainfed Southimproved: 56 kg/ha improved: 40 kg/ha

Irrigated North: 128 kg/ha South: 150 kg/ha

IrrigationShare of irrigation area

10% (Assuming some of the irrigated area is not fully developed irrigation system)

21%(By substituting irrigation area for all other crops to rice)


Biophysical potential: Irrigation expansion in the crop simulation model

High Medium Low

Baseline (1000 ha)

Total rice area 71 946 573

Rainfed rice area 68 843 520

Irrigated rice area 3 103 53

Irrigation scenario (1000 ha)

Total rice area 71 955 662

Rainfed rice area 67 818 447

Irrigated rice area 4 137 215

Areas of rainfed and irrigated rice in baseline and “irrigation” scenario

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

Source: IFPRI Spatial Production Allocation Model (SPAM), Global Irrigation Map (University of Frankfurt), Various literature

33% 306%


Biophysical potential: Crop simulation yield results

Rice yields under different technology inputs

High suitability

Medium suitability

Low 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


Biophysical potential: Crop simulation output resultsHigh

suitabilityMedium

suitabilityLow

suitabilityTotal

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 Expansion

0.19 2.37 1.41 3.97

Source: Crop simulation model results


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

Farm Behaviors Natural resources and others

Crop patternsInput use intensity (fertilizer, other

agro-chemicals, seed purchase)Production scale (farm size, sales)IrrigationMechanization (tractor / animal

traction) Market orientation

Rainfall variationSoil typesProximity to rivers / damsPopulation density / access to townHousehold characteristicsAssetsNon-farm income earning activitiesWage rates

Variables used for typology analysis

Source: Authors


4 major types of rice producers identified

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Market oriented (78%)

Mechanized producers

Intensive small-scale irrigators

Other producers

Subsistence

(%)Shares of different types of rice producers, total rice producers = 100

Source: Authors’ analysis based on LSMS 2010


Competitive rice producers

Intensive small-scale irrigators Mechanized producers

• Operate on typically 1 acre of plots• Use labor and modern inputs

intensively• Mostly located within canal irrigation

systems rclose to dams in the North / North Central zones (e.g.: Gbako LGA in Niger state and Kebbe LGA in Sokoto state)

• 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

• Use tractor for land preparation• Use modern inputs intensively• Some with irrigation• Typically found in Donga, Lau LGA

(Taraba state), and Patigi LGA (Kwara state)

• Totally 51,000 producers• Produced 108,000 tons of rice

Source: Authors’ analysis based on LSMS 2010.


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


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

Improving competiveness along value chain

Consumption shares Domestic Market

Trade (milled)

Milling

Parboiling

Trade (Paddy)

Production

Small scale (for service)

Medium-scale (service and for market)

Large-scale (industrial for market)

Imported Rice

Source: Authors, data on consumption shares are from the Nigeria LSMS 2011 and other from the literature.

Importers

Imported Rice (45%)

Domestic Rice (55%)

Own Consumption

Smallholder famers

40% 60% 22%

14%

Estate farms

Village & Clustered barboilers

Industrial Millers

Smallholder out-grower schemes (Nucleus Farm)

Rural Rice Paddy traders

63%

Rural Markets

Urban Markets

Wholesale Traders (domestic and imported)

Rural Markets

Urban Markets

Village & Clustered Millers (small and medium) 80% 20%

Comparing rice value chains between Nigeria and Thailand, 2009

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Local rice Imports of Thai rice

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• Production cost in Nigeria is 39% of total value chain and is 1.7 times higher than in Thailand

• Wholesale and retail margins in Nigeria are 27% and 18% of total value chain, respectively, and wholesale margins are 100% higher than in Thailand

• The key to improve local rice’s competitiveness is to lower 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).

Source: For Nigeria, MARKETS Study (2010) and Maneechansook (2011) for Thailand

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

Sources: For India, Harris-White, 2005 and for Nigeria, Lancon et al. 2002

1965 1970 1975 1987 1995 2001-2

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Yield (Tons/ha)

No. of Mills per 1000 ha of rice area


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

day 1, session 2: achieving rice competitiveness and growth in nigeria i

Documents

rice study rice

boiled rice

rice productionquantity

rice competitiveness

varieties of rice

southern nigeria local

specialized uses local

hundreds of years local