The Nigerian Rice Economy

In The Nigerian Rice Economy the authors assess three options for reducing this dependency - tariffs and other trade policies; increasing domestic rice production; and improving post-harvest rice processing and marketing - and identify improved production and post-harvest activities as the most promising. These options however, will require substantially increased public investments in a variety of areas, including research and development, basic infrastructure (for example, irrigation, feeder roads, and electricity), and rice milling technologies.

Published for the International Food Policy Research Institute.

This publication sets out an integrated assessment of the economic, social and environmental impacts of rice production in Nigeria within the framework of trade liberalisation, particularly the WTO Agreement on Agriculture (AoA). This is part of an UNEP research project which has also examined impacts on other rice producing countries including China, Colombia, Senegal and Indonesia.

This study analyzed the financing gaps relative to production frontier of rice farmers in Southwestern Nigeria. A multistage sampling technique was used to collect cross sectional data from 360 rice farmers selected from three States in the region. A Cobb-Douglas stochastic frontier and an adapted form of Harrod-Domar (HD) Growth model was employed to determine the financing gap required for the farmers to be at the frontier level. The empirical results of the frontier model show that quantity of labor, quantity of rice as planting material and herbicides were statistically significant in explaining the variations in the efficiency of rice production in Nigeria. However, age, gender, farming experience, household size, access to credit, access to information, adoption of improved variety and location of rice farmers as sources of technical inefficiencies. As revealed by the result of the HD growth model, the average amount of credit per season that farmers had access to was, ₦38,630.56 while the mean financing in the form of credit required to produce at the frontier level was ₦193,626.50, showing a financing shortfall of about 80%. As unravelled by the result of the study, it can thus be concluded that technical efficiency of rice farmers can be improved by improving access to timely credit and agricultural information for improving rice productivity. These findings suggest that filling the financing gap of smallholder rice farmers will improve rice productivity in Nigeria. The study, therefore, recommends that strengthening the existing technology by building farmers’ capacity on farm management practices would be surest means of improving rice productivity growth in Nigeria. This would not only contribute to the intensification of rice production in Nigeria to meet its increasing rice demand, but also improve rice farmers’ productivity and their households’ incomes.

Utilizing a spatial multi-market model for rice in Nigeria that explicitly takes into account the potential for smuggling, in this paper we analyze the welfare implications of alternative rice tariff rates given the government’s goals of spurring domestic production and reducing imports. Because smuggling occurs through the diversion of imports from Lagos, the official port of entry in the south, to the north, our modeling framework also captures the spatial effects of higher tariffs on changes in rural and urban prices, production and consumption, the flow of trade in rice, and welfare across different parts of the country. Results show that tariff rates that exceed about 40 percent introduce some smuggling of rice through the north when smuggling becomes more profitable than importing through official channels in the south. It is also at this tipping point that government tariff revenues are maximized. At higher tariff rates with smuggling, the south experiences greater welfare losses, especially in urban areas.