DYNAMICS OF THE NIGERIAN PADDY MARKET
Rice (Oryza sativa L.) has become one of Nigeria’s leading food staples because of increasing urbanization, income, changing consumer preference and huge public and private sector investment. National consumption far overweighs production and deficit compensated through importation. Hence successive governments have tried under different policy regimes to restrict imports and encourage local production.
However, national importation have increased during the last few decades and is now a significant external reserve draining factor, making Nigeria the second largest importer of rice globally. Reducing importation and increasing national production and processing capacity is now an important policy thrust of Nigerian government.
Several interventions and initiatives have been introduced recently starting with Agricultural Transformation Agenda (ATA) and Agricultural Transformation Agenda Support Program – phase 1 (ATASP-1) to support and promote rice production and processing for increased competitiveness and food security. These steps have significantly increased local production, but vital link which require urgent improvement is the local capacity development in improved rice postharvest practices and related issues. Investment in the rice postharvest system if carefully implemented well is expected to push good quality paddy and milled rice to meet millers and consumer demand, and when this is significantly achieved, postharvest losses will greatly enhanced.
The whole chain of production operations that rice goes through from the point of harvest until it reaches the consumers table is referred to as rice postharvest system.
Good quality milled rice (parboiled or not) that could effectively compete with imported rice would save a lot of scarce foreign exchange. It will also boost local rice production and provide large employment for producers, processors, youth and women etc. The multiplier effect is certainly repositioning the economic status of the large section of people involved in the rice post-production chain and increase entrepreneurship.
The understanding of this dynamics in rice postharvest practices is expected to enhance the understanding of market dynamics of paddy marketing channels and postharvest losses and improve demand and consumption of Nigerian rice; it will also create jobs and improve national food and nutrition security.
CHARACTERISTICS OF PADDY MARKET IN NIGERIA
In 5 years that I have handle paddy purchase, out-growers scheme and value chain coordination in Niger, Zamfara, Kwara etc. I have been able to note the following as characteristics of the Nigeria paddy Market. However, they are not limited to these points alone.
MARKETING PATHWAYS FOR PADDY IN NIGERIA
When you study the characteristics that exist in the Nigerian paddy market, you will then have to find ways to buy paddy because Rice Mills need paddy in large volume.
It is advisable that rice mills should use all channels available and credible to buy paddy because paddy availability in Nigeria is not sufficient for all rice mills. So you maximize all opportunity available to mop up large quantities that will make you be in business.
The key elements that must be addressed thoroughly when structuring an out-grower system are:
These things should not be taken for granted from the beginning of the process of structuring. Both parties should be fully aware of the process and the consequences for any breach in contract.
2. OPEN MARKET: Going to the open market to buy paddy just like every other buyer is also another way rice Mills can purchase paddy. This could be achieved through the use of contract staff (from such location), company’s permanent staff and/or trusted paddy agents. In this channel, the rice mill has less influence on paddy price and quality.
3. FARM LEADERS: Rice Mills could approach various leaders of the farmers to help them purchase paddy from their villages at an agreed price. These leaders are traditional leaders, opinion leaders and/or cooperative groups’ leaders.
The rice mill will thereby have to give the Leaders commission either on per bag basis or whatever arrangement preferred. However it will be good if the Rice Mill have an aggregation centre close to the villages.
Aggregators could be paid salaries or commission. This is based on what works best for the rice mill.
The advantage of having paddy suppliers is that they can muscle very large quantities of paddy at a short time because the already have established working paddy network. However, the disadvantage of this arrangement is that the cost might be slightly expensive based on the fact that they will add their profit and running expenses on the price they will be offering to supply to the rice mill.
It is therefore pertinent for all rice millers (existing and prospective) to critically assess the paddy market and choose whatever means that suit the organization. However, the understanding of the dynamic nature of the industry will help rice mills plan better as it relates to the business of rice milling. Also, the cost of paddy is 50% - 65% of the total cost of production, which means that paddy operations largely determine the survival of any mill.