Opinion

The Nigeria Rice bubble

 

By ’Tope Fasua

The bubble was created by the people, amplified and accelerated by the
government, and profited by hardboiled bloodsucking politicians and
many more predators who enjoy things like this.
I have never gotten involved in the rice debate. I usually try not to
move with the motley crowd and I believe this pays off for me, as it
is the way I am wired. Contrarian. Trying to see issues from neglected
angles. There are usually neglected angles in Nigeria. That is the
reason we have many issues. Paul Krugman once wrote that developing
countries often have a problem called ‘adverse selection’, meaning
that they often choose the wrong policies when given a choice between
good and bad. Even when faced with two or more bad options, developing
countries like Nigeria are wont to select the very worst.
This is usually because of the inability to project long term, the
interference of politics in economic decisions, self-serving external
influence, the dominance of cultural practices that are not in tandem
with efficiency and modernity, and the almighty corruption, which is a
massive problem here. There is corruption elsewhere too, but those
countries have been able to dominate the world and at least secure
some concession from their elites to guarantee an averagely livable
life for their masses. This issue of adverse selection is the reason
why we are not tapping into the energy of our youth in order to build
our future, but have chosen instead to collect loans and mortgage
their future instead. African leaders are in Russia with begging bowls
as I type this. It is the reason we have chosen to give cash handouts
to many poor citizens, rather than get them to do a bit of work for
the money. It is the reason we are maintaining a luxury-loving
government across the board, rather than cutting down the cost of
governance drastically. It is the reason we are in what I call the
Rice Bubble.
Some economists study bubbles and busts. Some are skilled at
anticipating it. It is usually not a big issue though; when too much
money is chasing a particular product or market, a bubble ensues. We
have our property bubble in Nigeria as defined by hundreds of
thousands of empty luxury houses (we could have chosen better by
providing mass housing for our people first, thereby reorganising
society – but another adverse selection took control). We have had a
bubble in the oil sector and that is why a sugnificant chunk of the
over N5 trillion sitting at Asset Management Corporation of Nigeria
(AMCON) are loans to that sector, after the international oil
companies sold off onshore assets and marginal fields to enthusiastic
local players who probably didn’t see what the oil companies had seen.
Today, I have a strong feeling, having maintained an unbiased stance
so far in the entire rice melee, that too much money is going after
rice in Nigeria. Like I said earlier, the people caused it, and they
have allowed the government to unleash much inefficient money in that
direction. We will pay for this at some point in the future. The
people caused it by always comparing everything with a bag of rice.
When you compare minimum wage with a bag of rice, for example, you
make it sound like a worker buys, and his household finishes, a bag of
rice every blessed month. This will be a rarity, except you are that
irresponsible Kaduna father who said he sent four of his boys to live
in that hopeless ‘rehab centre’ because he has 40 children and a bag
of rice finishes in his house under three days! What needs to be fixed
in that man’s life is not the price of a bag of rice but his brains
and mentality. The unfairness of it all to the rest of us taxpayers
does not even occur to such people.
For an average family, a bag of rice can last for between three to 12
months. But our misguided comparisons have led government to create a
whole bubble around rice. Many people have become illegal billionaires
today as a result of rice loans. Was the rice dominance of Asian
countries, such as Thailand, India and so on, borne out of loan
disbursements? How much of the loans we are giving out is channeled at
research, seed improvement, higher productivity per hectare? At the
end of the day, will this investment in rice be worth it or would we
have greatly lost money? Are we displacing other needed farm products,
as many farmers rush into rice production? These are some of the
questions that come to mind. There could be more concerns. What I know
is that Nigeria has no credit culture. Most people even see bank loans
as manna from heaven. Where such loans have anything to do with
government, they see such as their own portion of the famous national
cake. If our authorities will be honest and transparent, we may find
out that a large chunk of the loans to rice in particular, is already
lost, or jeopardised. The calibre of some of the beneficiaries is also
a pointer. Our politicians swooped on those loans. It became a
constituency issue. The rest is history.
On the other side of the bubble is the spike in rice prices in our
markets. We hear now that the local ones sell for about N19,000 per
bag, while the foreign ones – which still make it in by the way –
sells for N25,000, with prospects for increase as December draws
close. More money is being taken from the pockets of people but no
additional value offered to them. The bubble and frenzy is as a result
of the narratives about rice, rice, rice, that we put in the public
space. Today, both the government and the people are sending too much
money after rice, a singular product. Today, we have seen a smuggling
frenzy through our porous ‘borders’, using all sorts of nasty devices,
just to bring rice into the country.
The only bright side is that by the time the bubble is over, we should
have at least created substantial self-reliance in that product and
demystified rice as a staple food item. Hopefully by then, even our
children should be tired of the cereal. For now, let’s ride the
bubble. And let us hope it doesn’t contribute too significantly to our
fiscal cliff, even as another global financial crisis builds up.
I think there’s too much government money going after rice and many
stragglers have latched on to skim cheap money. Perhaps the investment
and attention on rice could be better diverted to technology for
innovation or something more ground-breaking or life-changing for
Nigerian. The focus on rice speaks to our under-achievements. Given
that we must feed ourselves, I believe the hoopla around rice should
be more muted such as not to further inflate the current bubble. The
conversations about what we need to be doing right now in order to
catch up with humanity should be elevated. Government is right to seek
a blockage to a source or foreign exchange attrition by using import
substitution, but we cannot afford to dwell too much on this. Now is
time to move on and intellectuals must seize the gauntlet. We cannot
build this economy on rice. We are going to need a lot more, so that
even if Nigeria is incredibly successful with the rice strategy
tomorrow, to the extent that we become a major exporter, the economy
may develop malnutrition. I reckon that the outcome should be worse.
For now, I will advise as is usually done for bubbles in financial
markets – any household which can avoid buying rice for now should do
so. Ignore rice and let’s see what happens.
*Fasua, an economist, author, blogger, entrepreneur, and recent
presidential candidate of the Abundant Nigeria Renewal Party (ANRP),
can be reached through [email protected].

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