Basmati Rice Ban: India’s decision to trigger price increase in Nigeria

India announced on July 20th that it would limit exports of non-basmati rice in a bid to calm domestic rice prices, which have risen by more than 30% since October 2022.

The ban is likely to impact the price of rice in Nigeria, especially among consumers of foreign imported rice popular with the middle and upper class.

Impact of ban

The government has announced that the ban will stop the sale of grains abroad with “immediate effect” and is estimated to cover about 75% to 80% of India’s rice exports.

The ban is the latest blow to the global rice market, which has fallen off after a period of relative stability earlier this year, although prices for other grains have surged in line with the situation in the Russia and Ukraine war has risen 15-20% since September 2022

Over the past 15 years, India has emerged as the world’s largest rice exporter, accounting for 40% of global rice exports in 2022/23.

More insights

Rice is one of the most consumed grains in the world and accounts for most of the caloric consumption in many countries, especially Nigeria.

Nigeria is the continent’s leading rice producer, producing over 46% of West Africa’s crop.

The Federal Government announced that it would be self-sufficient in rice production by 2018, but the goal was not met.

Due to the high price and operating costs of coarse paddy rice, consistent large-scale rice mills cannot produce at competitive prices.

The country is also a large consumer country. Nigeria is one of the world’s largest parboiled rice markets, consuming an average of US$4 billion annually.

In 2022, Nigeria will produce 5.4 million tons and consume about 7 million tons, so it had to import the shortfall.

Imports continue to meet about half of the domestic rice demand. Imported rice enters the market informally across Nigeria’s porous border.

Cargo is usually destined for ports in neighbouring countries and transported to Nigerian markets via land border routes.

In a new Jolloff Index report by SBM Intelligence, a pot of Jollof rice for a Nigerian family of five costs 34.2% more than it did a year ago.

A 50kg bag of foreign rice (long grain rice) that used to sell for about N35,000 is now selling for N42,000 and a 50kg bag of short grain foreign rice that used to sell for N23,000 is now selling for N35,000.

What you should know

Consequently, the Food and Agriculture Organization estimates that about 25 million Nigerians are affected by the epidemic of hunger. The ongoing conflict in northeastern Nigeria, combined with a rapidly growing population, is exceeding the capacity for food production and economic development. Nigeria’s agricultural sector has been hit by several shocks.

Periodic flooding, desertification of crops and pastures, militant rebellions, conflicts between pastoralists and local farmers. The food processing industry continues to suffer from a lack of funding and infrastructure. These challenges exacerbate food inflation. Rising fuel prices and uncertainty also contribute to higher food prices as transportation costs rise.

The food security and nutrition situation across Nigeria is of deep concern,” said Nigeria’s Resident Humanitarian Coordinator Matthias Sumer.

Children are most affected by food insecurity. About six of the 17 million Nigerians currently food insecure are children under the age of five in the states of Borno, Adamawa, Yobe, Sokoto, Katsina, and Zamfara. Children associated with acute malnutrition are at significant risk of death.

The International Monetary Fund (IMF) has encouraged India to lift export restrictions on non-basmati rice. IMF chief economist Pierre-Olivier Grinchat told a press conference that restrictions of this kind are likely to exacerbate food price volatility in other parts of the world.