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Forex restriction: Rice, others face major price increase

By BusinessNews Staff on July 17, 2015

Long grain or imported rice and other food items on the list of items that have been barred by the Central Bank of Nigeria from accessing foreign exchange will witness double digit increase in prices, according to stakeholders in the affected sectors.

The CBN in a recent policy had stopped the use of foreign exchange for the importation of 41 goods.

Among the 41 goods are rice and other food items such as margarine, palm kernel, palm oil products, vegetable oils, meat and processed meat products, vegetables and processed vegetable products, poultry (chicken, eggs and turkey), tomatoes/tomato paste.

Stakeholders predicated the increase in prices of the products on the huge gap between the local production and the demand of the items, which had been regularly filled by imports.

Observers noted that since most of the items are staple consumables, Nigerians would always buy them and the added cost of importing them would be transferred to the end users.

An importer, Emeka Okorie said the high rate of dollar in the parallel market would lead to high price for any item barred from the interbank forex window.

He said, “Tin tomatoes, margarine and vegetable oil are usually cheap consumables because of their original cost prices.”

As of last month, a tin of tomato puree sold for N50 against the former price of N25. The reason for the increase was attributed to the seasonal scarcity in fresh tomato fruits.

But Okorie said the situation with the forex would force the price of the product to increase by 200 per cent, irrespective of the season.

The Economist magazine, in an article published on July 4 titled, “Toothpick alert” criticised the CBN policy based on the assumption that local production of the items placed under ban was not enough to cater for local demand to warrant discouraging importation.

According to statistics from Federal Ministry of Agriculture and Rural Development, Nigeria consumes about five million metric tonnes of rice annually.

Nigeria importers imported 1.1 million metric tonnes of rice valued at N73.5bn in the second half of 2014, going by the data from the Nigeria Customs Service.

Imported rice thus accounted for 40 per cent of the rice consumed in the country last year.

At a time, the government sought to discourage rice importation by raising its import tariff to 110 per cent, but that only fuelled smuggling because local production was not sufficient to fill the gap. This reportedly forced the government to bring down the tariff.

But stakeholders noted that the situation with locally produced rice had not improved, especially with a large section of the grain producing northern part of the country being shut out as a result of insecurity.

They therefore noted that the forex restriction policy would open more room for smuggling of the product.

A key stakeholder, Mr. Tunde Adelani, said the figure quoted for local paddy had been grossly exaggerated.

He said that the mills were lacking paddy to produce rice.

The President, Badagry Rice Farmers Association, Ibrahim Iroko, reportedly admitted that farmers were unable to produce enough rice to meet local demand.

He said although the rice produced in Nigeria was more nutritious than the imported variety, the demand was too high and the quantity farmers produced was small.

But the National Chairman, Rice Millers Association of Nigeria, Mr. Tunji Owoeye, said the policy by the CBN was a laudable one and would boost local rice production.

He, however, urged the government to put structures in place to check smuggling of the product, which would become inevitable with the increase in price.

He said that there were more than 10,000 illegal routes where smugglers could bring rice into Nigeria and advised government to beef up the security in those areas, noting that more NCS personnel would be needed to check the influx of smuggled rice into Nigeria.

He agreed that there would be price increase since rice is Nigeria’s staple food but added that people would cope.

The Managing Director, Flour Mills Nigeria Limited, Mr. Paul Gbededo, an integrated rice miller, noted that the price increase would not be for long.

He said the policy was necessary in order to grow the local rice industry.

According to him, when producers of the crop see that Nigerians are no longer coming to their country to buy, they will be forced to come down to Nigeria and set up rice milling factories.

[Punch]

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