Types of Small Scale Businesses in Nigeria by sxw13031

VIEWS: 3,199 PAGES: 19

Types of Small Scale Businesses in Nigeria document sample

More Info
									 Impact of Trade on Domestic Rice
Production and the challenge of Self-
       sufficiency in Nigeria


              Chuma Ezedinma
            Integrated Cassava Project



International Institute of Tropical Agriculture
Introduction
 • Nigeria is the largest rice producing country in the West African region.
 • By 2002, the country accounted for 57 % of the total rice producing area in
   West Africa.
 • Potential land area for rice production in Nigeria is between 4.6 million and
   4.9 million ha.
 • Out of this, only about 35 percent of available land area is cropped to rice.
 • Rice yields are however low even by West African Standards

                                          Rice Paddy Production (Mt)' by Proportion

                            1991   1992        1993       1994       1995        1996   1997   1998   1999   2000   2001   2002

           Nigeria          51.5   52.2         50.8       44.7       48.0       44.5   44.1   43.9   43.3   44.0   38.0   43.6
           Benin             0.2    0.2          0.2        0.3        0.3        0.3    0.4    0.5    0.4    0.7    0.8    0.9
           Burkina Faso      0.6    0.7          0.9        1.1        1.4        1.6    1.2    1.2    1.2    1.4    1.5    1.2
           Cameroon          0.6    0.8          0.5        0.7        0.6        0.5    0.5    0.7    0.9    0.8    0.9    0.8
           Chad              1.9    1.7          0.4        1.7        1.3        1.4    1.5    1.6    1.8    1.2    1.5    1.6
           Cote d' Ivoire   10.5   10.6         11.2       12.9       12.6       16.2   17.4   16.0   16.0   16.4   16.7   11.2
           The Gambia        0.3    0.3          0.2        0.4        0.3        0.3    0.2    0.3    0.4    0.5    0.4    0.3
           Ghana             2.4    2.1          2.6        3.0        3.3        3.1    2.7    2.6    2.8    3.3    3.8    3.8
           Guinea            8.0    8.2          8.8       10.0       10.4        9.6    9.7   10.2   10.8    9.9   10.9   11.5
           Guinea-Bissua     2.0    2.0          2.1        2.4        2.2        1.7    1.4    1.2    1.1    1.4    1.2    1.1
           Liberia           1.6    1.8          1.1        0.9        0.9        1.3    2.3    2.8    2.6    2.4    2.0    2.6
           Mali              7.3    6.6          7.1        8.6        7.8        8.9    7.8    9.6    9.6    9.9   12.9   12.7
           Mauritania        0.7    0.8          1.1        0.8        0.9        1.0    1.1    1.4    0.7    1.0    0.9    0.9
           Niger             1.2    1.1          1.2        1.1        0.8        0.7    0.8    0.8    0.8    0.8    1.1    1.0
           Senegal           2.7    2.8          3.2        3.0        2.6        2.1    2.3    1.7    3.2    2.7    3.4    2.4
           Sierra Leone      8.0    7.7          8.1        7.5        5.8        5.6    5.6    4.4    3.3    2.7    3.2    3.4
           Togo              0.6    0.4          0.6        0.9        0.8        1.1    1.2    1.2    1.1    0.8    0.9    0.9
           Total            100    100          100        100        100        100    100    100    100    100    100    100
The Paradox
 Nigeria is the largest importer of rice in the world
 The annual demand for rice in the country is estimated at 5 million tons
 Domestic production accounts for 3 million tons
 Imports account for about 2 million tons
 Between 1990 and 2002, Nigeria imported 5,132,616 tons of rice
 In 2002 alone, the country imported 1.882 million tons of rice.

                             Value of rice imports ('000US$)

              450,000

              400,000

              350,000

              300,000

              250,000
        US$




              200,000

              150,000

              100,000

               50,000

                  -
                    61

                    63

                    65

                    67

                    69

                    71

                    73

                    75

                    77

                    79

                    81

                    83

                    85

                    87

                    89

                    91

                    93

                    95

                    97

                    99

                    01
                  19

                  19

                  19

                  19

                  19

                  19

                  19

                  19

                  19

                  19

                  19

                  19

                  19

                  19

                  19

                  19

                  19

                  19

                  19

                  19

                  20
                                                Year
Objectives
 Describe the effect of rice trade (imports) on domestic rice
   production and marketing

 Assess the competitiveness of domestic rice relative to
   imported rice in Nigeria

 Assess the effect of policy inconsistency on rice production

 Determine the optimal efficiency of local rice mills
Methodology
Primary sources:
Field level survey involving small scale
mills, rural and urban markets in north and
south of Nigeria
Secondary sources:
IITA and other Libraries, internet
    Rice Production Systems
    In Nigeria, cultivable land to rice is spread over five ecologies, namely:

   rain fed upland

   rain fed lowland or shallow swamp

   irrigated rice

   deepwater or floating rice and                                            Rained Upland
                                                  3%   1%                     Rained Lowland
                                                              17%             Irrigated
   tidal mangrove swamp                                                      Deep Water Floating
                                                                              Mangrove Swamp
                                     27%




                                                             52%

                                       Rice production features and systems in Nigeria
In geopolitical terms rice is produced mainly in the central region of Nigeria



                                       Rice Output in Nigeria by Zones (2000)



                                              5%
                                       10%
Major Rice producing                                        23%

States:                                                                         Northwest
                                                                                Northeast
                                                                                Northcentral
Kaduna - 22 %,                                                                  Southeast
Niger - 16%                                                    15%              Southwest

Benue - 10%                           47%

Taraba - 7%
Effect of rice trade (imports) on domestic rice production and marketing


     Table: Market share of foreign rice to local rice in selected urban markets.

      Urban           Local      rice   Foreign rice    Total volume   Percent of
      market          volume (tons)     volume (tons)   (tons)         foreign rice
      Enugu           2270.00           5935.80         8205.80        72.33
      Umuahia         417.00            14202.90        14619.90       97.14
      Owerri          1786.90           15493.40        17280.30       89.60
      Uyo             290.70            887.00          1177.70        75.53
      Port Harcourt 442.90              26306.50        26749.40       98.34
      Onitsha         4284.90           157600.00       161884.90      97.35
      Calabar         321.00            790.10          1111.10        71.11
      Aba             847.97            23177.10        24025.07       96.47
     Source: Field survey, 2001.

The proportion of local rice available in Nigerian markets is far less than that
of imported rice
Effect of rice trade (imports) on domestic rice production and marketing

  Capacity utilisation in selected rice processing mills    Three types of rice
                                                            processing mills

           Location              Capacity utilisation (%)
           Abakiliki                      7.06              Traditional/hand
            Afikpo                       40.27
            Adani                        20.46
            Omor                         60.36              Small rice mills
            Ogoja                         8.89
            Bende                         5.41
                                                            Large rice mills


• The small rice processing mills are the most dominant in Nigeria


• Low effective capacity utilisation in small rice mills
Effect of rice trade (imports) on domestic rice production and marketing




                                               Afikpo
                                                                                                Taraba
                                                                 30%              20%
                           15%

      Nassarawa                            Abakaliki
                           30%                                            15%                 Benue

                                                                  15%
                           20%
                                                                   30%
                                                                                                Gombe
                                               Adani

           Figure External sources of paddy rice to Abakaliki, Adani and Afikpo rice mills.




   Loss of rural farm labour to urban migration
   Rise in intra regional trade
Effect of rice imports on domestic production

 • The growth in domestic rice output declined with
 growth being negative in 1995
 • The growth rate in domestic rice production is still
 negative to date
                      G ro wth ra te o f R ic e P ro d u c tio n in Nig e ria
      400000



      300000



      200000


      100000



            0
         62




                 68




                             74




                                         80




                                                     86




                                                                 92




                                                                                98
      -100000
      19




                19




                           19




                                       19




                                                   19




                                                               19




                                                                           19
      -200000


      -300000



      -400000



      -500000
   How competitive is local rice ?
    Table: Comparing price competitiveness for domestic and imported rice from selected rice mills
     Mills     Millers   Additional      Marketing      Estimated     Price     of Percentage
               price     processing      margin         Urban         imported       Difference
               N/25kg    cost (25%)      N/25kg         market price rice N/25kg
                         N/25kg                         N/25kg

     Abakaliki   900.00    225.00         613.00         1738.00        1575.00       10.30

     Adani       1018.75   254.68         431.00         1704.55        1575.00       8.23

     Omor        1068.75   267.18         531.00         1866.93        1575.00       18.53

     Bende       1137.5    284.37         461.00         1882.87        1575.00       19.50

    Source: Field survey, 2001.
On the average an extra cost of 25 percent is needed to process domestic rice to the
quality and standards of imported rice

Improving the standards of local rice is feasible and desirable, but it may not be
competitive for local rice mills

Compounded by the issue of grading and uniform rice varieties from local farmers
  How competitive is local rice ?
 Table International rice prices relative to domestic rice prices in Nigeria 1993 to 2001

  Year       Exchange      International Domestic Domestic Prices (milled rice)
             rate (N)      rice price      rice         rice        at 2002 exchange
                           ($/ton)*        (Paddy)      (Milled)    rate (N120.96 =
                                           $/ton        $/ton       US$1.00)
  1993        24.67        160.29**        429.27       739.76      150.88
  1994        22.00        186.12          544.09       994.55      180.88
  1995        75.92        268.50          188.09       393.44      246.94
  1996        80.00        234.06          323.0        566.00      374.34
  1997        81.25        214.02          311.14       596.43      400.63
  1998        82.75        215.16          386.1        593.35      405.91
  1999        92.08        191.46          293.55       479.47      365.00
  2000        100.6        142.96          265.00       436.28      362.85
  2001**** 112.03          135.38          334.55       532.36      493.05
  *Based on international prices for White broken rice, Thai A1 super f.o.b Bangkok
  **Source http://apps2.fao.org/servlet/org.fao.waicent.ciwp.CIWPQueryServlet
  ***Source: PCU data Average annual market prices, 1993 t0 2000
  ****Source RUSEP website: www.rusep.org

The table compares the domestic prices of paddy and milled rice in Nigeria with the
international prices of the worst grade rice (white broken rice, Thai A1 super, f.o.b
Bangkok). If we assume that exchange rates in Nigeria reflect market forces (which is
unlikely especially in 1993), then Nigerian domestic rice is expensive to produce
(compare paddy prices) and expensive to process (milled rice) and so cannot compete
in the international market.
Optimal distribution in domestic rice trade
   Domestic rice markets are                                   UYO


    shrinking due to rice imports                              OWERRI

                                                0.7%
 The closer the demand market                                 UMUAHI
                                                                 A
                                                                            80%     BEND
                                                                                    E
                                                     0.3
                                                                ABA
    to the supply zone, the less                     %
                                                      11.1
                                                       %
    optimal it becomes with                                    OBOLL
                                                               O
                                                     29.1                16.9
                                                      %                  %
    increase in transport cost                                 ENUGU     45%       ADAN
                                                                                   I
                                                     7.9                  36.9
                                                     %         NSUKK      %
 The marginal cost of non-         ABAKALI
                                                               A
                                      KI        8.5%
                                                               BENIN
                                                                         7.9
    optimal supply of rice from                                          %
                                                                            90%
                                                                                   OMO
                                                              ONITSH               R
                                                     1.6%       A
    small processing mills                                                  69.9   AFIKP
                                              18.5                                 O
                                                               IKOM         %
                                              %
    increases with increase in                                              20%
                                                                                   OGOJ
                                                 5.7                               A
                                                             OKIGWE
                                                 %
    transport cost
                                                 5.8
                                                             EKWULOBI
                                                 %
                                                             A


                                                             PORTHARCO
                                                                 UT
Effect of policy Inconsistency on domestic rice production
• Pre ban period: 1960 – 1976

• Period of crisis (import license, etc) 1976 – 1985

• Period of outright ban 1986 – 1994

• Period of tariff 1995 – 2005
                                                                                              Self sufficiency trend
  Domestic self sufficiency                                     PRE-BAN                                      CRISIS                            BAN               TARRIFF

  in Nigerian rice production                 120

  was adversely affected                      100

  during the crisis years of                  80
  1977 – 1985
                                 Percentage




                                              60

  Self sufficiency in rice                    40
  production is still a major                 20
  challenge for Nigeria to
                                               0
  date
                                                61

                                                      63

                                                            65

                                                                  67

                                                                        69

                                                                              71

                                                                                    73

                                                                                          75

                                                                                                 77

                                                                                                       79

                                                                                                             81

                                                                                                                   83

                                                                                                                         85

                                                                                                                               87

                                                                                                                                     89

                                                                                                                                           91

                                                                                                                                                 93

                                                                                                                                                       95

                                                                                                                                                             97

                                                                                                                                                                    99
                                               19

                                                     19

                                                           19

                                                                 19

                                                                       19

                                                                             19

                                                                                   19

                                                                                         19

                                                                                               19

                                                                                                      19

                                                                                                            19

                                                                                                                  19

                                                                                                                        19

                                                                                                                              19

                                                                                                                                    19

                                                                                                                                          19

                                                                                                                                                19

                                                                                                                                                      19

                                                                                                                                                            19

                                                                                                                                                                  19
                                                                                                            Year
Conclusions

 The demand for local rice in Nigeria is far less than the

 demand for imported rice

 Local rice production costs are high and uncompetitive

 Improving the post harvest quality of domestic rice is
 critical but can only be achieved if production costs are
 low

 Local transport costs for rice output are sticky
 downwards at least in nominal terms
Policy Interventions

 Intensify rice production and increase on-farm yield to
   reduce production costs

 Improve quality and standard of rice and reduce post
   harvest losses

 Facilitate rural enterprises and businesses especially in
   small mills to sustain productivity, incomes and
   employment

 Strengthen human and institutional capacities to produce,
   process and market rice competitively in Nigeria
Thank you

								
To top