Nigeria plans to suspend duties, tariffs and taxes on imports of wheat, maize, husked brown rice and cowpeas for 150 days to bring food inflation under control.
S&P Global Commodity Insights interviewed Ramesh Moochikal, CEO of Rwanda-based Africa Improved Foods, said lifting the import ban for 150 days would ensure Nigeria's short-term supply needs were met.
"While the import ban might offer short-term relief, in the long run, Nigeria can't rely on imports. Sustainable local food production and processing are essential to address food inflation effectively," Ramesh Moochikal said in the interview.
Following is a Q&A lightly edited for clarity.
S&P Global: Food inflation in Nigeria has reached 40%, the highest in 25 years. How does this policy help to achieve self-sufficiency?
Ramesh Moochikal: Before the import ban in 2014, Nigeria was the largest importer of rice, including widespread cross-border supplies from Benin and other countries bringing imported rice, edible oils, dairy and other staple foods across the road borders. Stabilizing food inflation requires consistent farming and agricultural output and processing which starts from quality seeds and good agricultural practices, which Nigeria has been slow in embracing. While the import ban might offer short-term relief, in the long run, Nigeria cannot rely on imports. Sustainable local food production and processing are essential to address food inflation effectively.
S&P Global: There has been some criticism of the government's plan to lift the import ban for staple foods. What is your reaction to it?
Ramesh Moochikal: Yes, the Nigerian government often chooses to import because it does not want the population to suffer shortages or the resultant high prices, without staple food while waiting for the local harvest. In the long run, an import ban is a good idea, to enforce reliance on local production. Further, Nigeria cannot continue reliance on importing food due to a consistent foreign exchange shortage. However, allowing imports will not curb food inflation because using foreign exchange to fund imported goods will further devalue the Naira. When the paddy is produced locally it is more a circular economy because costs, labor, and inputs are all paid in Naira, and sales are in Naira as well. However, the policies to support Nigerian farmers and implement changes at the farming level need much better implementation.
S&P Global: Can this policy bridge the gap between production and consumption in the market?
Ramesh Moochikal: If import is banned for a few years, it can help close the gap. For a long time, Nigeria was the world's largest rice importer, but that changed after the import ban, prompting farmers to start cultivating. Paddy crop more than doubled in 4-5 years. Lifting the ban again will take the country back to its previous state. The import ban being lifted will provide short-term gains but sacrifice many long-term advantages.
S&P Global: What will happen in the Nigerian market if the import ban is lifted for 150 days?
Ramesh Moochikal: When the import ban is lifted for 150 days, farmers may reconsider producing paddy. The idea of importing de-husked milled brown rice is outdated; it does not benefit farmers but ensures a one-shot supply for the country. When importing starts, the large rice mills near the port will take the husked rice, mill it, and sell it in the local market. The locally produced paddy cannot compete at a cost level with these imported grains produced at scale in high yield farms and hence the local farmers will quit the crop. What happens next year then to the farmer or the miller who no longer has imported brown rice?
S&P Global: What is your reaction towards the Anchor Borrower Policy in Nigeria? The policy was to create economic linkages between farmers and companies, providing loans, creating employment opportunities and to reduce food import.
Ramesh Moochikal: Nigeria has been the largest provider of support funding to farmers in Africa, especially immediately after COVID-19. However, there is a significant problem with how the system is implemented; funds often do not reach the farmers. The farming system in Nigeria needs better organization and the aging small-scale farmer needs a lot of support to get out of the poverty circle and attract the youths.
The government has funded the local cotton sector, and the crop has been stagnant over decades. Meanwhile smarter implementation in neighboring Benin, Africa's largest cotton producer and even Chad, through privatization, has found results. Implementation of a well-intentioned scheme in Nigeria has been flawed. However, in the case of paddy, financing arrangements and the import ban worked very well. Private partners were committed and protected by an import ban. The average paddy yield in Africa is about 2.1 mt/hectare. Benin produces at 3.5 mt/ha, but Nigeria's average, before the import ban was 1.8 mt/ha. After the import ban policy, private companies supported farmers, and the yield increased in certain parts to as high as 5-7 mt/ha from the same field, with two crops a year. This improvement is due to the necessity to produce more from the same land, along with the assurance that what they produce can be sold in the market very competitively to millers who were awaiting raw material.
S&P Global: What are the challenges in Nigeria and other African countries in the agriculture sector in the coming years?
Ramesh Moochikal: To produce more from less available resources, we need to improve yields with better quality seeds, like hybrid seeds, good agricultural practices, sensible import policies, input subsidies, as agricultural inputs are costly in Africa, with Ivory Coast, Rwanda and Zambia being a role models in this regard.
S&P Global: Can you give an overview of the agricultural sector in Rwanda?
Ramesh Moochikal: Nigeria and Rwanda are incomparable countries. The size and scale of opportunities, as well as the number of well-entrenched players are at a totally different scale. Agricultural policies, practices, and execution are well-established in Rwanda. Despite limited resources and a hilly terrain, Rwanda is achieving food security quickly. Africa Improved Foods (AIF) undertook direct interface with farmers doing maize cultivation, and the production has doubled in five years, reaching 550,000 mt/year, becoming self-sufficient. People in Rwanda use locally grown maize and soy. Rwanda is primarily a coffee-growing country, producing high-altitude, specialty Arabica coffee for export, which helps coffee farmers earn well. AIF is the biggest buyer of maize in Rwanda. The agriculture sector is well-organized, with strong cooperatives and funding for research and irrigation, and inputs are controlled. Maize yield in Rwanda in select cooperatives that AIF works with is as high as 6-7 mt/ha. That needs comparison with the other large countries in Africa.
With the smaller scale in Rwanda, there is an advantage. We can bring change quicker. Initially, AIF rejected 98% of the corn produced in Rwanda due to aflatoxin contamination. This contamination needs to be removed at the post-harvest treatment level from the field, otherwise it is impossible to eliminate it later in the process. We installed signature post-harvest practices resulting in 99% acceptance of the maize crop that comes to us. Imagine the value transformation for the farmers and their renewed enthusiasm to grow more. That is the power of close association in a small market like Rwanda.
S&P Global: AIF is expanding into Nigeria. What will be the first problem you address?
Ramesh Moochikal: The usual challenges for starting a business in Nigeria is to ensure that basic needs such as electricity, water supply and infrastructure are in place and sustainably settled. Tolaram Group manages Lagos Free Zone which is a special economic zone with a deep-sea port that provides water, land, energy, and other resources. For the output to meet the World Food Programme standards, the quality of input is very important. Implementing quality systems in the farms and fields will be another challenge. In Nigeria, getting technical talent and support with vendors for construction is a bit easier due to the large manufacturing sector in the country.
Platts assessed the price for Parboiled 5% STX at $609/mt on CFR basis to Cotonou on July 25.
