Reserves Depletion: CBN May Bar Rice Importers from Accessing Forex

There are indications that the Central Bank of Nigeria (CBN) may stop granting traders access to foreign exchange for the importation of rice in order to enable local production of the staple food to thrive. The decision is expected to reduce further depletion of the nation’s foreign reserves, which stood at $29.008 billion as at June 18, 2015, after falling from $29.819 billion in the corresponding date last month.

The apex bank is said to have realised that local rice farmers across the country have the capacity to cater for the needs of the rice consuming populace.

THISDAY learnt that following a fact-finding visit of relevant CBN staff to some rice producing states of the Federation, the banking regulatory authority observed that for some time, local rice farmers had been reporting substantial and sustained improvement in both the quantity and quality of their rice harvests.

THISDAY checks revealed that despite this development, the perennial demand for forex by traders for importation of huge stockpiles of rice, has contributed to the significant depletion of the country’s foreign exchange reserves.

A source at the CBN revealed that preliminary indications from reports of the staff visit to Kebbi State were very disturbing, to say the least. The local rice producers are not encouraged to continue in the business despite sustained improvement in quantity and quality of production as patronage is at a low ebb

According to the source, who volunteered information on the outcome of the visit, “in the last harvest season, farmers attained very high yields of about 7 metric tonnes per hectare, whereas the average yield is about 4.5 metric tonnes per hectare. In the absence of off-takers for this bumper harvests, the

state government indicated that they had invested about N800million to purchase over 180, 000 metric tonnes of rice for storage from local farmers, in order to encourage them to continue farming.”

The source added that, “in one of the major rice-producing belts of the State (including Jega and Yola-Augie), only 20 percent of the 500,000 hectares of land available for rice cultivation is being utilized at the moment.”

Kebbi State was reported to be “only one of nearly 20 States in the country that can grow rice in commercial quantity.”

The source wondered why the federal government still encourages rice importation at the detriment of the economy when it is very clear that the country could be self-sufficient in rice production. “While we await the findings of the CBN staff visits to other States, the results from Kebbi State alone make it difficult to understand why the country is still depleting her foreign exchange reserves for importation of rice when there is now ample and incontrovertible evidence that we can produce it locally.”

“In view of the fact that the rice being produced in the country right now is of the highest global quality, and there is still plenty of land for more cultivation, is it not yet time for the CBN to stop rice importers from accessing the interbank market and conserve the country’s very limited foreign exchange?,” the source therefore asked.

To encourage local production, the federal government led by former President Goodluck Jonathan, in its wisdom, last year, slashed levy on husked brown and semi-milled or wholly milled rice to 20 per cent for investors with rice milling capacity from 100 per cent that obtained in the former fiscal policy. On the other hand, for pure traders, the government reduced the levy to only 60 per cent from 100 per cent.

Husked brown rice or paddy rice is rice in its natural, unprocessed state.

According to the policy of government, all pure rice traders will now pay 10 per cent duty and 60 per cent levy while investors with verified backward integration like rice farm and milling capacity will now pay 10 per cent duty and 20 per cent. However, when compared with the neighbouring countries of Cameroun, Benin Republic that levy zero per cent on rice, this new rate, according to operators, is still not favourable for investors engaging in backward integration. While the operators advocate further reduction of levy for investors with verified backward integration capacity, they also called for increase in levy for pure traders to discourage smuggling of rice through neighbouring countries and encourage local production.

Statistics show that currently, three million tonnes of rice are smuggled into Nigeria while it is noteworthy to state that Indonesia, which used to be largest importer of rice, has ended importation as the country has achieved three million tonnes of local production per annum with the last three years. In the same vein, China has hit 150 million per annum of local production because duties have been significantly brought down.