Investing in Rice Milling
By Roland Oroh
Rice is undoubtedly the fastest growing and widely consumed staple food in Nigeria today with consumption cutting across all socio-economic classes. The ease of cooking is a major attraction for many urban dwellers. Consequently rice has become an important part of the food security objective of the federal government of Nigeria.
According to some statistics, household demand for rice is estimated at 5 million tones annually, while industrial demand, according to the Raw Materials Research and Development Council (RMRDC) is estimated at 15 million tonnes annually. Consequently, Nigeria's estimated requirement now stands at 20 million tones. Given this demand requirement, the supply of rice has been grossly inadequate with 3.2 million tones produced annually; while about 1.5 million tones are imported at a colossal amount of between $600,000 and $800,000 annually. The FAO projects growth in consumption to remain high at 4.5% per annum in the coming years.
Accordingly, government's decision to stem rice imports in the face of scare foreign exchange cannot be faulted given the need to balance rice consumption with the opportunity to create jobs through domestic production. Recent federal government policy decisions have strongly favored domestic production against importation of milled rice. For instance, in April 2002, a 100% tariff was imposed on imported milled rice; and in November 2002, the federal executive council approved a 10 % levy on the CIF value of all imported rice backdated to April 1, 2002. More recently, new customs requirements have almost completely wiped out the sustainability and profitability of milled rice importation. This trend may likely continue until government achieves its goal of 100 % local production of milled rice consumed in the country.
This project profile looks at starting a small or medium scale rice milling operation in view of the prevailing scenario. Dynamic individual and corporate investors may consider this project for the following reasons:
Firstly, there is a presidential directive to attain self-sufficiency in domestic rice production by year 2005. Consequently, the rice-operating environment would continue to receive government attention and sympathy thus making investments sustainable and rewarding. It is important to note that the vegetable oil industry recently witnessed government polity support and this has led to improved operating margins there. Secondly, rice farmers are being organized by their apex associations with support of NGOs and donor agencies to produce similar grain type paddy varieties, a requirement for producing high quality milled rice comparable to imported brands. This has been a problem for local millers- dearth of similar grain varieties, available throughout the year. Thirdly, there is coming a program by the federal government as part of measures to support domestic production to embark on the following activities: rehabilitation of abandoned rice irrigation schemes; supply of improved seedlings (NERICA varieties) and fertilizers to farmers; deliberate increase of yield and area under cultivation in the upland and lowland rain fed ecologies. These are all part of the recommendations of the Presidential Committee on Rice Production and Export. These activities will increase the availability of paddies and therefore make rice processing a more sustainable venture.
Fourthly, project-financing opportunities abound under the Small and Medium Industries Equity Investment Scheme (SMIEIS) where potential investors could raise needed long term - funds to start this project or expand existing operations.
Rice milling begins with pre-cleaning and washing of paddies to remove dust and dirt. This is followed by parboiling- steeping in boiling water, washing and steaming for about 4 hours to break the husk thereby increasing the volume of paddy. The moisture content of parboiled paddy is reduced to almost 14% through drying with help of hot air at a temperature of 80 - 100 degrees centigrade. Actual milling involves milling, polishing, de-stoning, removal of husk and bran layers; sorting/grading into long or short grains ; and finally, packing.
Local fabricated as well as imported equipments are used in processing rice in the country. Abakaliki, capital of Ebonyi state, has the highest concentration of rice mills in Nigeria with an installed capacity of over 3,200 MT per day (4 hour milling time). Most mills there are of the old small - scale "conodisc" technology, hence the low quality of milled rice. Local fabricated parboiling and drying equipments sells for about N450,000 and N400,000 respectively. A complete tiny modern rubber roller mill of Indian origin with a capacity to process 500kg/hr of raw paddies, landed in Lagos goes for N1.6million. While a 2 ton per hour capacity plant landed in Lagos goes for N3.4million. The plant owner may decide to mill for others at a fee; rice milling alone on a fee basis is proven to be a profitable business. Profit in the rice industry is bound to go up further as governments (both federal and state) puts in place additional measures aimed at promoting local production.
Prospective investors interested in this project will need a detailed feasibility study and advice in selecting equipments for processing. They would also be given information on where to procure same - variety rice paddies for smooth processing operation.
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