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Phased import substitution policy the way forward – Tunji Owoeye

Release Date: 

02-12-2013

Mr. Tunji Owoeye (FCA) is the National Chairman Rice Millers Association of Nigeria (RIMIDAN). He has been involved in the commodities business for over 25years. He also holds other strategic positions in the Nigerian Agro-Allied industry; former Chairman, Board of Trustees Association of Cashew Importers/Exporters. He is the current Chairman Agric Import Association of Nigeria and the MD/CEO of Elephant Group of companies with offices in Senegal, Cameroun, Ghana and Cote d Ivoire. In this interview, he posited that phased import substitution is the lasting solution to the challenges facing the rice industry in the country. Excerpts:

Rice import policy
The policy of the Federal  government is noble and desirable. Any country that is forward looking, will want to pursue that route. The Minister of Agriculture is clear in his vision to grow rice locally, as we have more than 60 percent arable land in Nigeria. Government felt that we should discourage import and encourage our local rice production. The government did not take into consideration, the harm that smugglers will unleash on this noble policy. Now, the importers are put on hold because they cannot compete with the prices of smuggled rice, neither could the farmers and processors.

Efforts to make the policy work
The Government did encourage the farmers by giving them fertilisers. This gesture has produced the modest result of raising commercial rice production from zero level to the state it is now. Apart from fertilisers, the government was willing to get the millers to buy rice paddy from them. Paddy rice is raw rice that has not been processed.
RIMIDAN (Rice Millers Importers association of Nigeria) as a body donated 150(One hundred and fifty) patrol vehicles to the Customs to assist in policing the borders.

Why the policy
First, the Government did not collaborate effectively with the real stakeholders in the rice business.
Second is the damaging effect of duty differences between Nigeria and neighbouring West African countries. Nigeria’s duty is 110 per cent, whereas that of Benin and Cameroun remained at 30 per cent. People who do not have the interest of the country at heart moved their businesses to Cotonou and Cameroun. Although not directly involved in smuggling, their action facilitated the smugglers activities.

The cost of smuggled polished rice at N6, 000 is cheaper than N6, 500 paddies that the farmers sell to millers. The farmers needed to make some margins to cover the cost of clearing and maintaining the land.

The process of rice production is as follows; Farmer plants rice and produce paddy (Raw) rice. The farmer sells the paddy rice to the processors who turn the rice into finished products. The Processors are no longer buying paddy from the farmers because the price is not attractive for business. As a result, the farmers are threatening to stop producing.

Government involvement
At this point, the  government was informed of the situation. The Government has seen that there is disconnect and they are trying to fix it. In the last three weeks, there have been some attempts at reducing smuggling activities but how long this will last? We do not know.

As we talk now, Cotonou port is awaiting to discharge half a million tons of rice. This year about 1.5million tons of par- boiled rice has been discharged in Benin all heading for the Nigeria market through land routes that are supposed to be banned. While the Benin importer is getting wealthier, his Nigerian counterpart is closing shop.

How to address the problem
Government should introduce a Phased –Import- Substitution- Policy. They should begin by inviting the Drivers of The Value Chain in the rice business: Farmers Association, Processors/Millers and the Importers/Marketers associations. Added to this will be, representatives of the Ministry of Agriculture, Finance and Central Bank of Nigeria; the Customs and Police. We call the body Rice Development Council. Its objective will be to make sure that Nigeria is self sufficient in rice production within a reasonable time limit. The Government should include these three value chain drivers in their planning.

How they will deliver
Farmers: The government gives farmers fertilisers and asked them to produce X quantity. Both parties will agree on targets. Those who meet target will be given further incentives, while those who fail will have to work more to earn incentives.

Processors: Look at their capacities, task them according to their capacities.

Importers: The remaining capacity, you give to importers. Give a time frame to this arrangement.
There must be a monitoring unit to ensure that all parties work towards the planned outcome. This is the only way the industry can grow. Depending on foreigners to sort out our agric challenges will not work.

How prepared is RIMIDAN?
As long as we are factored in, we will go all the way. The importers have the largest capacity and have access to funding. We are ready to invest in all the levels of the chain; Farmers, Processors and encourage the people in the market. We are ready to encourage local production and take over the mills from the Minister but the government must be ready to agree with the import substitution strategy we put in place. The marketers and importers are the ones that own the business; they must be encouraged to make sure that the backward integration intention of the government is achieved.

Government losing revenue
Local production presently  is less than one million tons. The market requirement is over 5 million tons. The difference presently is taken up by smugglers, while the government is recording zero revenue at the borders.
This body should have the backing of the government to divulge/expose economic saboteurs in the sector and government must be ready to deal with these saboteurs decisively. For smugglers to be having their way some people must be giving them backing.

Customs
The top hierarchy in the customs command is serious about checking smugglers activities but they need empowerment in the areas of equipment and manpower. A number of customs officials have lost their lives in recent times in the hands of desperate smugglers.

The Import Substitution Policy will work when the government considers the input of the Value Chain Drivers – The real stake holders.

Source: http://www.vanguardngr.com/2013/12/phased-import-substitution-policy-way-forward-tunji-owoeye/

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