The Federal Government’s backward integration plan for the rice industry may suffer a major setback if key issues of discretionary approval of waivers and unrealistic supply gap are not addressed.
Indeed, the country may continue to lose at least N20 billion to smugglers of the commodity and another N20 billion to discretionary concessions and waivers, especially to non-committed stakeholders under the scheme.
With at least $183.6 million enjoyed in bonds, there are questions bordering on the sincerity of government under the backward integration plan, considering the fact that investors who have only expressed interests enjoy higher imports than those who have remain committed to the plan, especially now that some of them are already trading the import quotas at higher prices to interested importers.
Findings by The Guardian have shown that the Federal Government through the indiscriminate granting of waivers under the backward integration plan may be promoting activities of smugglers while putting the rice policy under threat.
Documents obtained and investigations by The Guardian showed that indiscriminate approach of the Federal Government in granting waivers and import allocation quotas to investors who have no investments in the industry, either in form of paddy or rice milling may be a dysfunctional approach to the backward integration plan in the sector.
According to the list of beneficiaries of the preferential import quotas, quantities of rice imports approved and corresponding size of performance bond to be submitted shows that of the 28 beneficiaries, only 16 have mills, while the remaining 12 have no mills and account for higher imports than millers.
Investigations also show that many of the investors who got import allocation quotas are already trading it to interested stakeholders at between 60 to 80 per cent levy having got the same at 20 per cent levy.
Specifically, documents obtained showed that investors who have only submitted expression of interests without commensurable form of investments in the sector, may be enjoying waivers amounting to at least N20 billion under the exercise.
For instance, allocation of rice import quotas under the new rice policy by the Federal Ministry of Agriculture and Rural Development showed that a move to bridge the supply gap of import-grade rice of 1.5 million metric tonnes as determined by the Federal Government was designed to ensure that existing rice millers and new investors receive a preferential levy of 20 per cent and duty of 10 per cent while other importers pay a higher levy of 60 per cent and duty of 10 per cent.
In a letter from the Minister of Agriculture and Rural Development, Dr. Akinwunmi Adesina to the Coordinating Minister of Economy, Dr. Ngozi Okonjo-Iweala on the allocation of rice import quotas, Adesina noted that the criteria for allocation of quotas under a methodology which assigns weight to key criteria of self-sufficiency in rice production and milling in Nigeria include the submission and approval of a Domestic Rice Production Plan (DRPP) among others.
According to Adesina, a supply gap of import-grade rice was determined to be 1.5 million metric tonnes for 2014 while an inter-ministerial committee discussed the methodology for allocation of the import quotas.
“Subsequently, a letter was sent to existing rice millers and new investors, to submit a DRPP, and based on their submissions; a total of 1.3 million metric tonnes of rice import quotas was issued to 25 qualifying millers at the preferential levy of 20 per cent and duty of 10 per cent. The remainder 0.2 million metric tonnes of rice imports will be at the higher levy of 60 per cent and duty of 10 per cent for other rice importers”, the letter read in part.
However, documents obtained showed that the supply gap estimate is unrealistic when compared to a total of 2.74 million metric tonnes of imported rice that made its way into the country in 2014 (representing a combination of rice imported into the country from Thailand and India and the smuggled commodity from neighbouring West African countries like Benin, Cameroun, Niger and Togo).
Similarly, the documents further showed that new investors without milling capacity or investments in the country received the highest quota of the allocations to approved rice millers, while millers did not receive allocations and in some instances, received very low allocation.
Industry players have, however, raised questions on the composition of the inter-ministerial committee and the strategy deployed in arriving at the supply gap considering that about three million metric tonnes of rice was smuggled from Cotonou in 2013, while an estimate of 1.5 million has been accounted for in 2014.
Furthermore, with President Goodluck Jonathan approving the backward integration policy plan in May 2014, the stakeholders have raised concerns on the delayed implementation of the policy till December.
For instance, a USDA review of the agricultural situation in Benin, published earlier in the year, notes that “Benin serves as a delivery corridor for West Africa, reaching more than 100 million people in the landlocked countries of Niger, Mali, Burkina Faso, Chad and the northern states of Nigeria.”
USDA observes that “Benin’s relatively efficient port services and liberal trade policies mean it is an important cog in the regional trade flows to nearby countries.”
In the rice sector, according to the USDA review, traders from Benin can sell a 50-kg bag of rice in Nigeria at prices 75 per cent higher than they can obtain on the Benin side of the border.
According to USDA, in order to avoid the high Nigerian levies, Nigerian traders have been directing their rice consignments to ports in neighbouring countries “where they are cleared and moved into the Nigerian market through informal trades activities”.
Indeed, the Comptroller General of Customs in Nigeria has “identified the low tariff on rice in neighbouring countries as one of the major factors contributing to smuggling of rice into the country.”
Already, snippets from the Mbeki report reveal that Illicit Financial Flows (IFF) of funds from African countries are not unconnected with corrupt practices by state actors and agents of the multinationals, through the concession of grants, incentives and tax waivers to commercial entities.
Nigeria, the most populous and leading economy in African, is adjudged to be responsible for over 30 per cent of the entire illicit flow, the report says.
Stakeholders in the country are therefore worried that while Nigeria and other African countries are unrelenting in their bid to attract foreign investors and multinationals into their economies, several of the agreements are being done under the table and shrouded in secrecy. Often hidden in the agreements are tax rebates or outright waivers that had been negotiated in the agreements.