Back in August last year Nigeria’s President, Muhammadu Buhari, announced that the country’s land borders will be closed to curb the smuggling of rice. According to the president, his import substitution policy has started to yield successes and is being threatened by smuggling across the borders.
“Now that our people in the rural areas are going back to their farms, and the country has saved huge sums of money which would otherwise have been expended on importing rice using our scarce foreign reserves.“
“We cannot allow smuggling of the product at such alarming proportions to continue.”
The Nigerian leader has set-up a cross-border committee to come up with recommendations regarding the border issue. According to the President the border will remained closed until then:
“Once the committee comes up with its recommendations, we will sit and consider them.”
In this post, I will analyze the impacts of the border-closure on rice farmers, millers, customers and the Nigerian economy at large. Moreover, I will explore the rice industry of Thailand and deduce the reasons why it has a sustained advantage over that of Nigeria. Finally, I will give recommendations on the steps the country should undertake to attain a sustainable rice self-sufficiency industry based on the paths undertaken by other countries and principles of strategic innovation.
Why the focus on rice self-sufficiency?
Nigeria is a rice-loving country as shown by the huge amount it consumes annually. The country consumes 7 million tonnes of rice and spends $1.65 billion annually on rice importation mainly from Thailand and India. The country has abundant arable land to grow rice, hence it is a wise policy to ensure self-sufficiency. This will save the country a lot on importations at the same time provide huge employment opportunities to its teeming population.
What has been the impact of the border closure?
The farmers, millers and consumers have lamented the several constraints they have been grappling with since the border closure.
Smallholders farmers account for nearly 80% of the country’s rice production. These farmers do not have access to enough inputs such as fertilizers, tools, machinery, irrigation etc., due to either the high costs or unavailability. As a result, the yield per hectare for small-hold farmers in Nigeria is about 2.5 tonnes-half the global average.
Similarly, rice millers have been struggling with the high costs of running their mills. Small and medium scale millers account for 80% of rice millers in the country. These mills are powered by diesel generators due to the erratic supply of electricity in the country.
The consumers certainly are not contented with the rice situation in the country. The country’s minimum wage is 30,000 Naira monthly. The above constraints facing farmers and millers have aggregated to exponentially increase the price of rice for the consumers. A 50kg bag of rice used to cost about 12,000 Naira before the border closure now costs as much as 24,000 Naira. As if that was not enough, customers have also complained of stone-riddled rice.
On the other hand, farmers are receiving high-income due to the high prices they sell a bag of rice for. But deep down, many of them know it is not sustainable in the long run so they are rushing to profit as much as they can whilst the price boom lasts.
The economy too has not been spared as the country suffered its highest inflation rate since May 2018.
The rice farming industry of Thailand
Thailand is an agricultural country with about 49.8% of the agricultural land devoted to rice growing. Thailand gained a competitive advantage in rice production through well-thought-out policies and planning. The country introduced modern agricultural technologies such as high-yield seeds, fertilizers and mechanization and other inputs. I will briefly explore the mechanization process the country went through to gain a competitive advantage in rice production.
In 1957, the agricultural engineering division of the country released a design of an axial flow pump. This was subsequently manufactured and adopted by the farmers.
Between 1967-1969, a Thai firm began manufacturing a 4-wheeled tractor powered by a 15hp single-piston diesel engine modified from a 2-wheel tractor. These locally manufactured tractors had a high demand from Thai farmers due to the low cost and being suited for local conditions. Suddenly, the imported tractors had no market because the locally manufactured tractors had a higher competitive advantage. Consequently, a chain of reaction was ignited as local firms started manufacturing these tractors further lowering the price. As a result, farmers from all around the country were able to afford them.
In the early 1990s local firms successfully developed Thai-made rice combine harvesters and the innovation was successfully adopted by Thai farmers. It was mass-produced by local firms lowering the cost. Farmers all over the country were able to afford them.
To sum up, farm mechanization of Thailand began with locally manufactured power-intensive machines such as irrigation pumps, power tillers, and threshers. These local innovations meant that the costs of the equipment to farmers were cheap and expertise was available to repair them and/or provide spare parts. Consequently, this manufacturing capability and the resulting economy of scale gave the country a significant comparative advantage.
How should the ideal rice industry in Nigeria look like?
The dream rice ecosystem of Nigeria should be highly organized and productive for it to compete with foreign rice. The farm inputs such as fertilizers, equipment and seeds should be affordable and of high quality. Farmers should have access to trained technicians to guide them to adopt the best practices in rice cultivation. Local firms should have the capability to design and manufacture farm equipment and rice mills. Power supply should also be affordable.
How can Nigeria achieve the ideal rice industry?
Well, Rome was not built in one day. As shown by the Thai case study innovation is hard but it is a must before a country achieves capabilities that will lead to competitive advantage. On the bright side, through proper organization and strategic innovation, Nigeria can accelerate the achievement of a sustainable rice industry making the country self-sufficient.
The attainment of this dream requires the collaboration of both the government and entrepreneurs in the county. My recommendations are based on principles of innovation as well as observations from similar industries in other countries.
Firstly, the entire rice ecosystem of the country should be mapped out by constructing a value blue-print. The value blueprint maps out the rice ecosystem and its dependencies. This includes farmers, millers, input suppliers and all other players in the rice industry. This map will be used to assess whether the entire players in the ecosystem can come together smoothly for efficient rice production.
Secondly, An engineering department must be set-up to develop locally made farm equipment. This also implies that the country should have the capability for steel production to ensure that components are sourced locally. The country has enough engineers from diverse fields who could contribute to the realization of this stage. All that is needed is proper organization.
Finally, once a firm equipment has been innovated successfully, the patent should be distributed to all interested firms in the country to manufacture. This will enable competition among the firms leading to economy of scale and consequently lower prices for farmers.
Benefits of having local manufacturing capabilities to the economy
There are several benefits to the economy once the country attains capabilities and competence in farm equipment production.
Firstly, farmers will be able to afford them and consequently, rice productivity will dramatically increase. Similarly, customers will be able to afford food due to the lower production cost.
Secondly, the country will attain rice self-sufficiency in a sustainable manner and the smuggling of rice will cease effortlessly.
Thirdly, it will have a ripple effect on the industrial sector of the country. This is because manufacturing capabilities in basic farm equipment will lead to the manufacturing of more advanced machines. Furthermore, more advanced capabilities can be developed such as constructing fertilizer and refinery plants.
Finally, jobs will be created at unprecedented rates solving perennial unemployment issues. Consequently, banditry, kidnapping and terrorism will be greatly reduced.
Indeed, there is no doubt that President Buhari wants the best for his country by taking such a drastic measure as closing the borders and even straining relations with neigbouring countries.
The president was also correct when he said the country should attain self-sufficiency in rice production. But the process of achieving this self-sufficiency is coming at a heavy cost to farmers, consumers and the economy at large.
Instead of closing the borders, the president should set up a team that will come up with a sustainable plan that will enable the country to attain self-sufficiency in rice production.
As it stands now, once the borders are re-opened, foreign rice will ultimately dominate the Nigerian markets again due to their competitive advantage.
The country may still ban the importation of rice but without developing comparative advantages in rice production, the citizens will continue to pay high prices for their locally produced commodity.
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