Alternative policy mechanism for increasing rice self-sufficiency in Nigeria

Tariffs on rice imports complemented with fertilizer subsidy has been the longstanding instruments of the Nigerian government that was meant to regulate the importation of rice, protect and encourage rice farmers, and support the drive for achieving rice self-sufficiency goal of the country. Unfortunately, despite continuous government’s efforts and initiatives, rice production response has been minimal, resulting in unimpressive self-sufficiency levels. If this current trend in rice self-sufficiency level is maintained, the consequences can be far-reaching not only to the rice industry but to the entire economy as well – with important implications to the general welfare and ultimately, food security of the society. Hence, this study was aimed at exploring the effects of alternative policy mechanisms on rice self-sufficiency levels, and on welfare of various stakeholders. Results of this study can assist the government in proactively designing and introducing appropriate policy interventions and investments towards increasing the country’s self-sufficiency level in rice. Using time series data for the period 1980 to 2018, a market model was developed to replicate Nigeria’s rice market. The model was analysed in a policy framework through a partial equilibrium approach while treating the country as a small rice importing nation. The model consisted of a supply system, a demand system, and a price linkage. Four equations were specified for area harvested, yield, per Capita consumption demand and producer price with three identities representing paddy production, rice production and import demand. The completed market system was econometrically estimated using 'autoregressive distributed lag' ARDL approach for each of the equations and the resulting elasticities were used to project Nigeria’s rice industry trends and also to quantitatively evaluate the impact of alternative policy scenarios on rice self-sufficiency. Simulation analysis of four alternative policy scenarios, which consisted of either introduction of a new mechanism or adjustments in the import tariff rates, either in combinations or in isolations were made and their impacts on self-sufficiency levels were examined. Specifically, Scenario 1 involved an increase of 10% import tariff rate; Scenario 2 involved an introduction of a deficiency payment program to the baseline; Scenario 3 was a replacement of the baseline tariff with a deficiency payment program and Scenario 4 was a policy mix of a 10% increase in tariff and an introduction of a deficiency payment program. Results of the baseline scenario showed a bleak projection for rice self-sufficiency. This unimpressive forecast strengthened the need for a policy reform in the country’s rice industry. However, the simulation of alternative policies offered potential prospects. The findings of the study have provided an important policy pathway for designing future rice industry policies: any policy that is aimed at increasing self-sufficiency level must be directly targeted at producers, otherwise, outcomes will be insignificant. The reason is that Nigeria’s rice industry is dominated by smallholders and our analysis of an alternative policy of an increase in tariff (Scenario 1) failed to yield the desired self-sufficiency response, most likely because the benefits of tariff are not directly transmitted to producers. Therefore, an alternative policy mechanism that guarantees the desired self-sufficiency response was Scenario 2, which simulated the impact of complementing the current tariff policy with a deficiency payment program. This scenario guaranteed a self-sufficiency level of 87% by 2028, a 12% growth from the baseline estimate. A breakdown of its impact projected annual paddy production growth of 6%, consumption growth remained unchanged at 0.6% annually and import volumes declined by 10% each year for the projected period. The present study concluded that increasing rice self-sufficiency level in Nigeria was possible with a policy of deficiency payment program which resulted in gains in producer surplus while preserving consumer welfare. It was suggested that for the purpose of increasing self-sufficiency levels in rice, Nigeria’s policy focus needs to be concentrated towards paddy producers by introducing a deficiency payment program which could encourage a transition from the country’s dominant smallholder system to a larger scale, business-oriented system through investments in productivity enhancement inputs and larger area harvested efforts.

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