Nigerian rice traders could owe up to $103m in duty

Nigerian rice traders could owe up to $103m in duty

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In Nigeria a dispute has erupted over the alleged non-payment of duty on rice imports by traders, despite the government having lowered duties last year. The Nigerian House of Representatives’ Ad Hoc Committee on Rice Imports Quota and Duty Payments has convened a public hearing over the alleged non-payment of duty on rice imports by 25 traders, totalling NGN21bn (more than $103 million). The matter has been further complicated by allegations that duty had been waived by the ministry of agriculture for some traders, who claim never to have received a directive to pay the import duty.

The government’s reforms to the rice import regime—its key policy tool to boost local rice production to meet annual demand of 6 million tonnes —have rankled many traders investing in rice cultivation projects. In response to urging from traders, last year the government agreed to reduce the flat 110 percent levy on rice imports to a total 30 percent tariff (comprising a 20 percent levy and a 10 percent duty) for importers investing in rice mills, and to a total of 70 percent (a 60 percent levy and a 10 percent duty) for pure traders. The draconian 110 percent import tax and levy had been designed to encourage backward integration in the rice sector, but it prompted traders to stop all official imports, which collapsed to zero in 2014, and instead run down their stocks, while rice smuggling surged via Benin and Niger where the import tax is significantly lower.

However, there are signs that the reforms are starting to have an impact on local production, which is rising. New projects, such as Olam’s $90 million integrated rice project in Nasarawa state, appear to be having an impact on rice imports, which are expected to fall by 3.3 percent this year, to 2.9 million tonnes, the first fall in nearly a decade. Nonetheless, given the rising demand for rice, the capital investment required in new mills and the difficulties to structure robust out-grower models for integrated rice projects, Nigeria’s domestic rice production will not be able to keep pace with demand. This will ensure that the country remains dependent on rice imports for the foreseeable future.

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