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Assessment of protection and comparative advantage in rice processing in Nigeria
Abstract
This study was carried out to determine the contributors to value-addition in the processing of paddy rice into basic milled rice and value-added rice as well as analyze the comparative advantage and competitiveness of rice processing in Nigeria. The extent of policy distortion and agricultural protection was also determined by the study. The data were collected from Ebonyi State, Nigeria, a major rice processing state with 850 registered small-scale processors. Data from other secondary sources were also
used. The main analytical framework used was the Policy Analysis Matrix (PAM). The policy distortions were measured through Nominal Protection Coefficient (NPC) and Effective Protection Coefficient (EPC). Private Profitability Coefficient (PPC) was used to measure the comparative advantage a processor has in producing value-added rice while the Domestic Resource Cost ratio (DRC) was selected as the measure of the
comparative advantage Nigeria has in producing the commodity. The results show that the total value addition in the processing of paddy rice into basic milled rice was N20,000 or 20% of the output value while the total value addition in the processing of basic milled rice into value-added rice was about N21,500 or 17% of the output. The margin derivable from the processing of paddy rice into basic milled rice was N1,660
per tonne of basic milled rice while further processing of basic milled rice into valueadded rice yielded N7,667 as the margin per metric tonne of value-added rice. Financing, milling and margin are major contributors to value-additions. PAM results show that the price of value-added rice has been kept higher than the world price through policy interventions as the NPC for output was 1.74. Government policy has, therefore, provided incentives to processors of paddy rice into value-added rice. Farmers producing paddy rice also benefited from Government protection as captured by NPC for tradable inputs, which was 1.27; paddy rice being the main tradable input into rice processing operations Though it was profitable for a producer to process paddy rice into value-added rice given the policy environment, Nigeria has no comparative advantage in processing paddy rice into value-added rice, as the DRC was 4.88.
used. The main analytical framework used was the Policy Analysis Matrix (PAM). The policy distortions were measured through Nominal Protection Coefficient (NPC) and Effective Protection Coefficient (EPC). Private Profitability Coefficient (PPC) was used to measure the comparative advantage a processor has in producing value-added rice while the Domestic Resource Cost ratio (DRC) was selected as the measure of the
comparative advantage Nigeria has in producing the commodity. The results show that the total value addition in the processing of paddy rice into basic milled rice was N20,000 or 20% of the output value while the total value addition in the processing of basic milled rice into value-added rice was about N21,500 or 17% of the output. The margin derivable from the processing of paddy rice into basic milled rice was N1,660
per tonne of basic milled rice while further processing of basic milled rice into valueadded rice yielded N7,667 as the margin per metric tonne of value-added rice. Financing, milling and margin are major contributors to value-additions. PAM results show that the price of value-added rice has been kept higher than the world price through policy interventions as the NPC for output was 1.74. Government policy has, therefore, provided incentives to processors of paddy rice into value-added rice. Farmers producing paddy rice also benefited from Government protection as captured by NPC for tradable inputs, which was 1.27; paddy rice being the main tradable input into rice processing operations Though it was profitable for a producer to process paddy rice into value-added rice given the policy environment, Nigeria has no comparative advantage in processing paddy rice into value-added rice, as the DRC was 4.88.
