ANALYSIS OF SUPPLY RESPONSE AND DEMAND FOR LOCAL RICE(ORYZASATIVAL.)IN NIGER AND BENUE STATES, NIGERIA (1980-2016)

ABSTRACT

Local This research was conducted to analyze supply response and demand for local rice (Oryza sativa L.) in Niger and Benue States. The Objectives of the study were to describe the socio-economic characteristics of local Rice consumers, analyze the trends of local Rice supply, and determine the responsiveness of local Rice to changes in price and non-price factors. The research further assessed the effect of Local Rice characteristics on its price and examine the factors inhibiting the purchase of locally produced Rice in Niger and Benue States. A multi-stage sampling technique was employed to obtain 281 producers and consumers of local Rice. Primary data was used to  describe  the  socio-economic  characteristics  of  the  respondents.  An  exponential growth model was used to estimate the production growth of Niger and Benue States using secondary data (from 1980 to 2016). The Vector Autoregressive model (VAR) was used to estimate Local Rice production variables that Granger cause local Rice supply while an ARDL model was used to estimate structural breaks. The LA/Almost Ideal Demand System (LA/AIDS) was used to estimate the expenditure share, respondent’s price elasticity, cross elasticity and income elasticity of both short local Rice  and  long  local  Rice  grains.  Hedonic  model  and  Kendall’s  coefficient  of concordance were used to determine the effect of local Rice characteristics on its price and examined the factors inhibiting the consumption of local Rice respectively. The result indicated mean age of 45, 47 and 46 for the respondents Niger, Benue States and pooled. The mean annual incomes were N414,489 and N452, 000 for Niger and Benue States respectively, from 1980-2016, there were 1.90 and 1.36 percent local Rice production growth in Niger and Benue States. The Granger caused production of local Rice in Niger and Benue States. The result of OLS also confirmed that 96% of local rice production were due to variables like area, yield, price, fertilizer and rainfall. The result of LA/Almost Ideal Demand System reveals that local Rice is a normal good and is expenditure inelastic. It also shows that long local Rice and short local Rice grains were substitutes.It is noteworthy that the coefficient of the price of short grain Rice was significantly  negative  and  that  of  the  substitute  long  grain  Rice  was  significantly positive in influencing the share of the expenditure on short grain Rice. This implies that an increase in the prices of short grain local Rice will reduce households’ expenditure share of short grain local Rice while increase in the price of the substitute, long grain local Rice will lead to Increase in the households’ expenditure share of short grain local Rice ceteris paribus, Similarly, coefficient of the price of long grain local Rice was significantly negative and that of the substitute short grain local Rice was significantly positive in influencing the share of the expenditure on long grain local Rice. The result of Hedonic model reveals that stone free, whiteness, aroma, cohesion and taste were all significant. This means that all these attributes have great effect on price  of  local  Rice.  When  these  characteristics  are  not  there,  the  local  Rice  will command  low  price  in  market.  The  result  of  Kendal’s  coefficient  of  concordance reveals 62 percent agreement of respondents on inhibiting factors of Local Rice. These respondents ranked the inhibiting factors as presence of foreign materials in that order.

CHAPTER ONE

1.0 INTRODUCTION

1.1 Background to the Study

Local Rice (Oryza sativa L.) is an annual cereal considered as the most important crop and primary source of food for up to 40% of the world’s population (Isaac and Irene, 2014). It is also a fast-growing staple food source in most African countries, providing the bulk of dietary energy for the growing population (Isaac and Irene, 2014). Local Rice accounts for 715 kcal, 27% of nutritional supply of energy, 20% of nutritional protein and 3% of nutritional fat in most countries of Africa (Kassali et al., 2010). Local Rice is the fifth most prominent source of energy in diet for human race, responsible for about 9% of caloric intake (Food and Agriculture Organization, 2012). It is also a source  of  raw  materials  for  industries  and  provides  employment  for  the  teeming Nigerian population from the point of production, processing, wholesales and retails (Marlia et al., 2011). It is a favourite food consume during ceremonies and festivals.

Local Rice account for about 75% of food consume during festivals and ceremonies like Idil kabir, charismas and marriage of different kinds in Niger and Benue States (Ajijiola et al., 2012) Local Rice is  the non-refined and non-polished Rice grain that is produced after removing the whole husk from Rice. Several efforts have been made by successive   governments   in   Nigeria,   development   partners   and   other   relevant stakeholders  to  increase  the  production  of  local  Rice  in  Nigeria.  These  include Abakaliki Rice, Ofada Rice, Gboko Rice, Mokwa Rice and Gwakuti Rice. (Anyanwu et al., 2017). The grain retains the nutrient from the bran of local Rice after per-boiling making it dull white in appearance (Tonifelix, 2017). The natural consumer preferences for local Rice include; natural nutrient retains on the outer layer of the grain, regular supply, price, dull-brightness and non-foreign materials found in the local Rice (Samuel. 2016). Due to increasing contribution of local Rice to per capita caloric consumption of Nigerians,  its  demand  has  been  increasing  at  a  much  faster  rate  than  domestic production ( Diako et al., 2010).

This position was also corroborated by the United States Department of Agriculture (USDA, 2012) and the Federal Ministry of Agriculture and Rural Development; (FMARD, 2016). USDA, (2012) also noted that milled local Rice utilization increased over the years, from 240 metric tonnes 1960 to 4,970 metric tonnes in 2011. Similarly, total demand for local Rice and allied products is projected to rise to 7.2 million tonnes by  2018  and  production  will  be  3.7  million  tonnes  (Samuel.  2016).  According  to Oyinbo et al. (2014) local Rice deficit has been a recurring issue in Nigeria and will only be redressed by harnessing the country’s natural resources, namely; land, water bodies, climate and human resources.   Bamba et al. (2010) noted that Nigeria spends about ₦365 billion annually on Rice importation. In a related development, Ayanwale and Amusan (2012) revealed that the cost of Rice importation has been loss of earnings to the country that could be used in terms of job creation and supporting local Rice production. Numerous factors led to Rice deficit over the years, including increasing population, income growth, staple nature of local Rice and microeconomic conditions (Godwin, 2012).

Thus, local Rice supply response to demand and the changed demand preference of consumers, arising from the need for value for money have been of  critical concern to policy makers and other key stakeholders within the Federal and State Ministries of Agriculture in Nigeria (Uchenna and Lioyd. 2018). Local Rice supply response is the reaction of local Rice producers to changes in price and non-price factors, while local Rice demand preference relates to the systematic ordering of alternatives based on their relative utility (Uchenna and Lioyd, 2018). Generally, the challenge of local Rice has been that of high input cost, low quality and weak competitiveness of local production and policy instability, which makes decision-making and planning uncertain and put investments at high risk (Tomlins et al., 2005). These factors combined with discriminatory policies against agriculture to make the local Rice production less interested to farmers (Tomlins et al., 2005). Although with the introduction of Agricultural Transformation Agenda (ATA) and ban on importation of Rice the production has appreciated (Qisthy et al., 2018).

In response to Local Rice supply deficit and need to enhance the quality and competitiveness of local Rice in Nigeria, government intervened in the local Rice sector by   increasing   tariffs   so   that   local   producers   could   be   motivated.   There   was establishment of the Federal Rice Research Station (FRRS) at Badeggi in 1970 and National Cereals Research Institute (NCRI) in 1974. This was expected to increase the home market for the nation’s local Rice, giving the farmers more income, while creating more employment opportunity.  The government  implementation of the Commercial Agricultural Credit Scheme (CACS) provided cheap intervention funds that boosted private sector morale to participate in development of the Local Rice sector. A report by Coalition for African Rice Development (CARD) (2015),   indicates that about USD 1.67 billion has been invested in the establishment of medium to large scale integrated Local Rice processing mills. Recently, specific supports for local Rice value chain are being undertaken by the development partners. These included the International Fund for Agricultural Development funded Value Chain Development Programme (VCDP), Africa Development Bank Assisted Agricultural Transformation Agenda Support Programme Phase – 1, on-going in Niger and Benue States, and the World Bank Additional Financing Support to Fadama-III project (Uchenna and Lioyed, 2018).The most current interventions are the on-going Central Bank of Nigeria’s Local Rice Farmers’ Loan Scheme (Anchor Borrowers Programme for Local Rice farmers), operational in almost all States of the Federation including Niger and Benue and the Growth and Employment in States (GEMS), established 2016 by the United Kingdom Sponsored Programme Partners to boost Local Rice production through linkage with Local Rice mills. The target was to produce 50,000 metric tonnes of local Rice and create livelihood for 25,000 Local Rice farmers. In spite of these interventions, the situation on ground does not reflect the magnitude of stakeholders’ commitments to the Local Rice sector, because Qisthy et al. (2018) observed that Local Rice production has increase from 5.5 million tonnes in 2015 to 5.8 million tonnes per annum and current Local Rice consumption is 7.9 million metric tonnes per annum. This study therefore attempts to analyse the local Rice supply response and demand pattern in Niger and Benue States, Nigeria.

1.2 Statement of the Research Problem

Nigeria is the number one producer of Local Rice in West Africa, and the second largest Rice importer in the world (FAO. 2013).This is because the demand for local Rice outstrips the supply in Nigeria. According to Bamidele et al. (2010), Nigeria imports 1.4 million tonnes of Rice, equivalent to 4.8% of global imports and became the largest Rice importer in the year 2007. Similarly, Nigeria spends US$1.3 billion yearly to import 2.2 billion kilogramme of Rice to satisfy home needs (Ayanwale et al., 2011). In a related development, Nigeria spent over ₦1billion per day on Rice import to meet the domestic need (Chukwuka, 2016). Importation of Rice is a major drains on the foreign exchange from the country’s foreign reserve and is an indication that the increase in population is not matched by increased in local Rice production and therefore, Nigeria has to import Rice to close the demand and supply gap (Ogazi, 2009).

Given the quality and value of the importation of Rice there is a lot of policy interest in bringing down Rice import by encouraging local Rice production (Ayanwale et al., 2011).The supply response of Local Rice in Nigeria and the study areas, may be low due to low producer’s price, since consumers prefer imported Rice to local Rice with price difference of ₦75.00 to ₦120.00 per kg ( Uchenna and Lioyd. 2018). Therefore, this research provided answers to the following research questions;

i.        What are the socioeconomic characteristics of local Rice consumers in Niger and Benue States in North Central Nigeria

ii.      What is the trend in local Rice supply in Niger and Benue States?

iii.     How responsive is local Rice supply to changes in price and non-price factors in Niger and Benue States

iv.    What is the effect of price on quantity of local Rice demanded and consumers Preference for local Rice in Niger and Benue states

v.       What are the consumers’ preferences for local Rice and how do local Rice Characteristic affect its price

vi.     What are the factors inhibiting the consumption of locally produced Rice in Niger and Benue States in North Central Nigeria

1.3 Aim and Objectives of the Study

The aim of the study is to analyse the supply response and demand for local Rice in Niger and Benue States of North Central Nigeria.

The objectives are to;

i.         describe the socio-economic characteristics of local Rice consumers in Niger and       Benue States, in North Central Nigeria,

ii.   analyse the trends in local Rice supply in Niger and Benue States,

iii.  determine the responsiveness of local Rice supply to changes in price and non-price factors, in Niger and Benue States,

iv. assess the effect of local Rice price on quantity demanded and consumers’

preference for local Rice in Niger and Benue States,

v.  determine the effect of local Rice characteristics on its price, and

vi. identify the factors inhibiting the consumption of locally produced Rice in   Niger and Benue States.

1.4 Statement of Hypotheses

Hypotheses tested in the null forms were,

i.       local Rice supply in Niger and Benue States does not vary with price,

ii.     local Rice supply in Niger and Benue States does not vary with time,

iii.    price has no significant relationship on quantity of local Rice demanded, and

iv      local Rice characteristics have no significant effect on price of Local Rice

1.5       Justification for the Study

Information on Rice supply response is important in motivating food security because it shows the gap between farmer’s supply and consumer demand. Supply response is needed for formulation of different policies; to support the local industry such as the policy to encourage the production of local Rice, bordering on increase access to credit facilities, ban on Rice importation and provision of higher yielding varieties ( Ajijola et al., 2012). Supply response of local Rice and demand  preference,  when  estimated, should help to identify possibilities for increasing output. Consumer demand preference when properly determined will help identify the characteristics of local Rice needed by the consumers so that producers and processors may maintain these characteristics. National data on food analysis lacks information on food supply and demand preference of local Rice consumers and the structure of food demand at both local and state levels (Rahji et al., 2008). Relevant statistic on supply response and demand preference of local Rice, especially in north central Nigeria, particularly in Niger and Benue States are scanty. This study will furnish policy makers with relevant information on the response of Local  Rice supply  to  price  and  non-price  factors.  The study will  further  reveal information on consumer behaviour bordering on local Rice demand. In addition, information on consumer preference is vital to processors of local Rice in Nigeria and in particular, the North Central region.  Furthermore, federal government research institute and stakeholders would be fully informed about the local Rice characteristics that are prefer by the consumers. Study will provide relevant evidence for Rice improvement programs in Nigeria.

The results of this research will be useful to social scientists in the aspect of research initiatives, government in public policy formulation in local Rice production in Nigeria, Africa and other parts of the world. It will also be of help in technology advancement. Rice breeders may also benefit by breeding the varieties that possess those qualities that consumers want.

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