Smugglers Thrive as Nigeria Tries to Keep Foreign Rice Away

(Bloomberg) -- At Nigeria’s normally manic border post of Seme, Lasisi Fanu says business has all but ground to a halt.

He and other customs agents who help clear goods coming into Africa’s biggest economy from its smaller neighbor Benin say the long lines of trucks loaded with rice that used to jam the crossing have dwindled. The slowdown is a result of import restrictions and tighter border policing as President Muhammadu Buhari seeks to diversify the oil-dependent economy by boosting agriculture, especially rice production.

Two years ago, Buhari set 2018 as a target to end Nigeria’s status as the world’s second-largest importer of the grain after China and become self-sufficient. He’s since overseen investments of almost $1 billion in farming and milling, virtually banned rice importers from buying foreign exchange, raised tariffs to as high as 60 percent and pushed the central bank to lend to farmers. Confident his administration is making progress, he told growers this month that “our policies are working.”

Thai Rice

But the numbers tell a different story: they suggest smuggling is rife because local producers are struggling to meet growing demand in the nation of 180 million people, where rice is favored over traditional staples such as yams and cassava by an increasingly urbanized population.

Nigeria grew 3.7 million metric tons of rice in 2017, a 4 percent increase from a year earlier, according to the U.S. Department of Agriculture. At the same time, imports rose 19 percent to 2.5 million tons, the USDA said.

Many imports are smuggled in from Benin, which despite a population of 11 million -- barely 5 percent of Nigeria’s population -- is now the world’s biggest buyer of rice from Thailand, the number two exporter globally. Official shipments to Nigeria have plummeted by more than 95 percent in the past four years, while those to Benin have surged, according to the Thai Rice Exporters Association.

“This is Nigeria and people are cutting corners,” said Fanu, the customs agent. “They bring in the rice through the many unofficial border crossings further north. They’re everywhere. The government knows it. It’s very difficult to police.”

With its far lower tariffs and better-run ports, Benin has a long history of smuggling goods to Nigeria, from frozen chicken to tomatoes and cars.

Edward George, Ecobank Transnational Inc.’s London-based head of research, estimates that 90 percent of Benin’s rice is bound for its bigger neighbor. Smugglers offload Thai and Indian rice from the port of Cotonou and take most of it to Nigeria’s largest city, Lagos, which sits just across the Seme border in the south. Some even truck it as far as Niger, where they collude with customs officials before taking it to northern Nigerian cities such as Kano.

“A text message comes saying: ‘Go!,”’ says George. “And they drive through. The border gates are open and the guards are looking in the other direction. The evidence is very clear that smuggling is continuing on a large scale. It’s a massive problem.”

Once it enters Nigeria, traders often repackage and sell it as local rice.

While the government touts the decline of official imports as evidence that Nigeria is producing more rice, smuggling fills the gap between demand and supply, according to Ade Afeko, a member of the nation’s main manufacturing body.

“It seriously needs to be curbed,’’ Afeko said from Kano, which he says is “swamped’’ with foreign rice.

While smuggling from Benin and Niger has increased, it’s still feasible to end rice imports this year, said Olukayode Oyeleye, a spokesman of the Ministry of Agriculture.

George at Ecobank thinks the powerful smuggling industry will be difficult to curb. “There are so many vested interests in the smuggling of rice and there’s so much demand,” he said.

Bad Roads

Nigeria isn’t the only country in West Africa that’s trying to be self-sufficient: Senegal and Ivory Coast have raised rice output, too. But Nigeria faces a tough task reviving its agricultural sector, which went into decline when oil was discovered in the 1950s. Farmers battle with a host of problems: poor-quality seeds, a dearth of financing to buy or borrow equipment such as tractors, bad roads and a lack of warehousing.

Most farmers harvest their crop by hand on an average 0.4 hectares (1 acre) of land, which makes it difficult to achieve economies of scale, according to Dimieari Von Kemedi, managing director of Alluvial.

Alluvial is buying crops in central and southeastern Nigeria with the aim of supplying half a million tons of rice a year to millers by 2020. It’s targeting yields of 4 tons per hectare, almost double what growers currently achieve, but still only half what efficient Asian farmers produce.

“We need to get better yields,” said Von Kemedi. “If you don’t, it’s hard to make money. It’s why, despite the tariffs and currency restrictions, you can’t keep foreign rice at bay.”

Other companies moving into large-scale rice farming include Dangote Group, controlled by Africa’s richest person, Aliko Dangote, Singapore-based Olam International Ltd. and TGI Group, a local conglomerate.

Dangote Investments

Dangote is investing almost $300 million this year to boost production and set up processing plants in the north, targeting a million tons annually by 2020. To achieve that, it needs to help farmers get access to cheap loans and good seeds, improve their irrigation systems and mechanize production, according to Robert Coleman, a former tobacco planter in Zimbabwe who oversees Dangote’s rice operations.

“We see smuggling of rice through our borders as a real threat to local production and we are counting on the government to mitigate this threat,” said Coleman. Growers need to “transition from being subsistence farmers to successful small businessmen. Once you can achieve this, there will be an agricultural revolution.”

Fanu, the customs agent at Seme, says the government is right to increase local production, but he isn’t convinced import restrictions are the way to go.

“Almost everyone eats rice -- it’s the common man’s food,” he says. “The issue is whether we can grow enough at the moment.”

©2018 Bloomberg L.P.