PrOpCom. Interventions. Making Nigerian Agricultural Markets Work for the Poor. Rice: Kano Rice Parboiler

Transcription

1 PrOpCom Making Nigerian Agricultural Markets Work for the Poor Interventions Rice: Kano Rice Parboiler Funding for this programme is provided by the United Kingdom s Department for International Development (DFID) 40 Mississippi Street, Maitama, Abuja, Nigeria Tel: +(234) /2 Fax: +(234)

2 BACKGROUND TO THE MARKET Rice in Nigeria is primarily an urban middleclass product, but is also increasingly becoming a more widely consumed staple food. The total market is an estimated 5 million ton (2007), approximately two-third of which is urban and the rest rural. Estimated annual production is 3.4 million and rest is imported. Again approximately two-third of urban demand is met by imports. Rice in Nigeria is distributed through five channels - rural household consumptions (8%), small scale processing for rural and peri urban markets (33%), medium commercial processing for urban markets (16%) and large scale industrial processing (10%) and the fifth channel is the imported rice market (33%). Half of local rice is channeled through the small-scale processors and medium commercial processors, which have direct connection with poor parboilers and farmers. National rice production growth is 15% per annum (FAO Stat) and growth of national demand is 20% per annum. Imported rice sets the standard in the market in terms of price and quality (in terms of cleanliness, whiteness, consistency, breakage and being free of stones). In principle locally produced and processed rice can compete with imports at an estimated sales price of NGN 400/mudu (vs. NGN 450/mudu for imports) by improving the quality of local rice. To improve local quality, incentives for maintaining quality need to be passed on better through the value chain (instead of each player trying to corner the premium for better quality, passing little incentive on the next player upstream), processing equipment

3 requires upgrading and linkages between urban demand and rural production needs to be strengthened. Incentives to improve quality are better secured if processors (parboilers and millers) integrate more steps in their processing and own the rice they process (parboilers or millers controlling the entire processing steps from buying from farmers to selling to the traders). Changing the business model for the parboilers also implies that their social status is improved, better recognition is achieved (going out to buy paddy, collecting the loan amount, getting into trading, participating in the meetings and so on). Equipment to improve quality is partially available (such as small scale milling equipments), but millers and traders are by and large not aware of these. Market channels that can guarantee local rice of a good and consistent quality are virtually absent. The quality of local rice is also influenced by agricultural practices, seed varieties in particular. For last couple of years numbers of other projects are working in rice sector in northern Nigerian states, which have resulted in increased production and productivity. Kano being the hub of local rice processing and trading, this increased production becomes a good opportunity for increased income and employment. It is observed that paddy rice from different states are getting into Kano for processing and then being distributed all most all over the Nigeria, which means effectively working in Kano processing has an effect on entire North Nigerian rice sector. With this backdrop, it is imperative to channelize the additional volume of rice through processing. Due to the increase of production, quality and quantity of processing are the most crucial constraints for the

4 growth of the Kano rice sector. Thus, priority is given to the key constraints downstream: processing volume and marketing. BACKGROUND TO THE INTERVENTION In traditional drums (aluminum parboilers), without false bottom, rice is cooked unevenly if not properly stirred. Overcooked and unevenly dried, soggy grains get more easily damaged and broken in the milling process. Drying on the ground or roadside results in impurities and stones in the rice. These factors make local rice less competitive compared to imported rice. Improvement in processing technology through introducing new parboiling system by Tadco Ltd. can solve these problems. Also familiarizing the parboilers with different improved processing practices to keep the paddy clean and a series of steps to keep the rice clean can help them improve the quality of local rice. On the other hand, parboilers find it difficult to negotiate a better price for their better quality parboiling when doing contract parboiling (often the clients are their husbands or relatives from the same village). A financial support seems quite essential for the parboilers, which would enable them to get into trading and allow them to control their own business. This also allows them to sell the rice in the market to 'outside' traders and negotiate a better margin. Along with these activities, the social capital of the parboilers will be improved through training on record keeping and groups cohesion and support in accessing the bank loan, which will ensure their access to information, participation in the market, recognition and mobility. Finally, this set of activities enables the parboilers to process more local rice and increase their income.

5 Increased volume of processing of local rice by the parboilers will also create more demand for the paddy in the long run, meaning the farmers will sell more paddy and increase their income. PARTNERS FOR THE INTERVENTION Women Cooperatives of Kano-Kura corridor Nigerian Agricultural Cooperatives & Rural Development Bank Kano State Ministry of Cooperatives & Commerce TADCO Nigeria Ltd.

6 ACTIVITIES OF PROPCOM Group formation of women groups & selection of leadership Training of women groups Training of women leaders on NAEC Formalisation of groups by registration of groups with Ministry of cooperatives Introduction of cooperatives to NACRDB Introduction of TADCO to NACRDB Support with loan applications Monitoring of loan progress, use of parboilers and repayments Social Network Analysis PROGRESS TO DATE 1156 parboilers were organized together in 46 groups and they got training on groups' dynamics, record keeping of their own account and monitoring their activities and got support in applying for bank loan. After signing the memorandum of understanding with NACRDB in August 2008, 533 parboilers from 44 groups in six clusters - Tudunwada, Chiromawa, Tumburawa, Kura, Karfi, and Garko - had the loan in two phases. In the first phase from November 2008 to March 2009 total 387 parboilers have got bank loan where buying the tadco parboilers was mandatory. In the mean time, 25 more parboilers from Kura, Karfi and Chiromawa got tadco parboilers as interest free loan from ministry of commerce after the mediation from Governors ' wife's office.

7 Tadco Ltd. also organized 10 demonstrations of the process in six clusters where 927 parboilers were present. However, the first batch reported that the tadco system was not producing as good result as it was expected due to some operational problem and they returned to their earlier practice. This development was communicated with the bank, they agreed to exclude the tadco system from the mandatory condition for loan, and 146 parboilers got loan as working capital in the second phase under this new arrangement from April 2009 to June All the parboilers who got loan so far have invested the money in rice trading where they went for buying their own paddy, processed them and sold them to the local traders or in the market. The capacity building of the female in the group had a great influence in this development and as a result, parboilers' social capital was improved. This access to finance and improved process knowledge enabled the parboilers to improve the quality of local rice and process more than before, whereas only access to finance for the second phase of parboilers enabled them to process more volume of local rice. The parboilers started to get at least NGN 8 more per kg of improved quality local rice whereas getting into trading stretched their range of profitability. The parboilers got on an average NGN of profit per month from the trading compared to only NGN 3000 per month from contract parboiling. ` NACRDB disbursed total NGN 45,670,000 as loan to 533 parboilers which means average NGN loan for each of the parboilers. The parboilers managed this loaned

8 working capital really well and proved the concept, that they are not bankable, wrong. They invested in trading, increased the volume of processing by 1 bag then before, sold the rice and successfully repaid the amount to the bank within 18 months through regular installments. Meanwhile, it was observed in the market that these parboilers' stepping in to trading did not affect the rice traders in terms of their volume of business. rather it made the traders to go to other parboilers to get their paddy parboiled and it also made them to pay an increased fees (by NGN 50 per bag) for improvement in the process of parboiling and high demand of contract parboilers' service. Thus, it implied that the quantity of paddy the parboilers are processing now as own was the additional volume supplied in the market. This additional demand for paddy pulled up the volume of paddy bought from the farmers. This also encouraged the farmers to cultivate more rice thereby created opportunities for additional employment in cultivation. Study report and field survey says that there are three types of parboilers among all the 927 parboilers who participated in tadco demonstrations - 1) those who got loan, bought tadco, 2) invested in trading; those who got loan but did not buy tadco system and invested in trading and 3) rest who did not take loan but improved the processing practices more or less and continuing contract parboiling. The first group (387 parboilers) processed and supplied 23,220MT of additional volume of improved quality local rice to the market,

9 the second group (146 parboilers) processed and supplied 8,760MT of local rice and the 3rd group rendered their service to improve the quality of 7,605MT local rice. However, field observation says that not all the six clusters performed equally well due to differences in market dynamics, opportunity for the parboilers to participate in the market, proximity from the market, presence of local traders and their influence over the parboilers and social restrictions for the parboilers. From the very beginning, Garko developed and secured a kind of brand name for the rice processed in the area and they enjoyed the advantage of these interventions well enough. Tudunwada followed the footprints of Garko quite well and successfully secured a better acceptance for the rice processed in the area. Chiromawa experienced some sort of challenge due to the greater influence of the local traders over the parboilers. Karfi is doing good as the market is very close to the village where the parboilers live and operate their business. Tumburawa did ok in terms of getting better price for the improved quality rice processed there. The worst case is observed in Kura and that is due to the variety of paddy they process as well as the extent of social restrictions imposed on the parboilers. These implies that there should be some customized steps or activities focused on the constraints faced by a particular cluster. Finally, according to the field information more parboilers are becoming interested to get bank loan and step in to trading. A number of parboilers have already formed groups, got it registered hereby fulfilled the condition to apply for loan.