Rice mills in Northern Nigeria are shutting down as escalating production costs and the cessation of intervention financing over the past 18 months strain operations. Between 2015 and 2020, a surge of rice mills emerged, driven by the federal government’s push for self-sufficiency in rice production. Former President Buhari famously promoted the mantra, “we must grow what we eat,” aiming to reduce food import dependency.
Farmers like Retson Tedheke from Nasarawa State, who invested heavily in the initiative, are now grappling with unsustainable operating costs. Tedheke spends about N1 million on diesel alone due to unreliable electricity, as diesel prices have more than doubled recently. He operates a 300KVA generator, reflecting the widespread challenge among millers. Another farmer, Sadiq Abubakr, echoed these concerns, noting that maintenance costs for mills, heavily reliant on imported parts, have made operations unprofitable, prompting many to shut down or auction their facilities.
The federal government recently eliminated the 7.5% VAT on diesel imports in an effort to curb rising diesel prices, following a similar move in December 2023. However, high operational costs persist. AY Hassan, another mill operator, reported his facility has been non-operational for over a year, awaiting better economic conditions before reopening.
Challenges in Sourcing Rice Paddy
The difficulties extend beyond rising costs. The availability of rice paddy has significantly decreased, with some millers traveling as far as Cameroon for supplies. The 2022 floods disrupted local rice production, exacerbating shortages. The Lagos state government’s substantial rice processing plant remains underutilized due to a lack of paddy. Although the federal government recently approved the importation of rice paddy, delays in implementing this policy continue to hinder operations.
High Borrowing Costs and Lack of Government Support
Another major hurdle is the increased cost of borrowing, with the Central Bank of Nigeria (CBN) raising interest rates from 18.75% to 27.25% in a bid to control inflation and stabilize the foreign exchange market. Farmers like Tedheke argue that these rates, reaching as high as 37%, make sustainable business operations nearly impossible. Many millers are opting to sell their mills to recover capital rather than face ongoing losses.
The current CBN leadership has moved away from previous interventionist policies, citing concerns over money supply. Dr. Augustine Maduka, President of the Community Allied Farmers Association of Nigeria, noted that the economic reforms following the removal of fuel subsidies have inevitably led to challenges for the agricultural sector. He called for government subsidies on inputs for rice millers and a focus on upcoming dry season farming to boost rice paddy supply.
Rising Inflation and Rice Prices
As mills close and costs rise, rice prices continue to soar, with the National Bureau of Statistics reporting a 140% increase in rice prices over the past year. Currently, a bag of rice costs around N100,000, surpassing the recently revised minimum wage. This inflationary pressure is severely impacting the purchasing power of many Nigerians, raising concerns about food security in the country.
The combination of high production costs, supply chain disruptions, and a lack of supportive policies poses a significant threat to the viability of rice production in Nigeria, necessitating urgent government intervention to stabilize the sector.
