At last, Jonathan makes u-turn, Slashes rice levy to 20%

After series of condemnation by Nigerians, the Federal Government has finally approved plans to reverse its unpopular policy on rice importation.

The Federal Government had in January 2013 imposed 100 per cent levy on imported rice in addition to 10 per cent customs duty on the commodity. The policy, which was aimed at discouraging importation and encouraging local rice production, only served to promote smuggling of the commodity through the land borders.

But as part of the government’s effort to encourage investment in the rice value chain through backward integration and the quest to discourage smuggling of the commodity, President Goodluck Jonathan has approved  the  2014-2017 Fiscal Policy Measure on Rice with  effect from May 26, 2014.

The new fiscal policy significantly reduced the levy on husked brown and semi-milled or wholly milled rice to 20 per cent for investors with rice milling capacity from 100 per cent that obtained in the former fiscal policy. On the other hand, for pure traders, the government reduced the levy to only 60 per cent from 100 per cent.

Husked brown rice or paddy rice is rice in its natural, unprocessed state.

However, pending  the announcement of the new policy measure, the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, said  the Federal Government has given all importers of rice with shiploads waiting at various ports in the country as at Friday, June 13, 2014, the opportunity to clear them, upon the submission of a letter of indemnity to the Nigeria Customs Service. This indemnity would enable the importers to clear their consignments without paying additional demurrage.

Disclosing the approval of the review of the fiscal policy measure, a senior government official said Okonjo-Iweala is expected to convey the President’s approval to the Secretary to the Government of the Federation,  Anyim Pius Anyim; Minister of Agriculture, Akinwunmi Adesina; Minister of Industry, Trade and Investment, Olusegun Aganga; Comptroller-General, Nigeria Customs  Service, Abdullahi Inde Dikko; and the Acting Chairman, Federal Inland Revenue Service, Kabir Mashi, amongst others, to ensure strict compliance and other necessary actions.

According to the new policy “importation of Husked Brown rice (H.S. Code 1006.2000.00) and semi-milled or wholly milled rice, whether or not polished or glazed (H.S. Code 1006.2010.00) by investors with rice milling capacity  and verifiable backward integration programme shall attract 10 per cent  duty rate with a levy of 20 per cent and will be limited to the national supply gap to be determined by a committee (for a period of four years).

“Importation of Husked Brown rice (H.S. Code 1006.2000.00) and semi-milled or wholly milled rice, whether or not polished or glazed (H.S. Code 1006.2010.00) by pure rice traders shall attract an import duty rate of 10 per cent plus 60 per cent levy.”

With this new policy measure, all pure rice traders will now pay 10 per cent duty and 60 per cent  levy while investors with verified backward integration like rice farm and milling capacity will  now pay 10 per cent duty and 20 per cent. However, when compared with the neighbouring countries of Cameroun, Benin Republic that levy zero per cent on rice, this new rate, according to operators,  is still not favourable for investors engaging in backward integration.

While the operators advocate further reduction of levy for investors with verified backward integration capacity, they also called for increase in levy for pure traders to discourage smuggling  of rice through neighbouring countries and encourage local production.

Statistics show that currently, three million tonnes of rice are smuggled into Nigeria while it is noteworthy to state that Indonesia, which used to be largest importer of rice, has ended importation as the country has achieved three million tonnes of local production  per annum in  the last three years. In the same vein, China has hit 150 million per annum of local production because duties have been significantly brought down.

A circular dated June 16, 2014, containing the guarantee  for all importers of rice that have their shiploads at the ports, was signed by Okonjo-Iweala and sent to Secretary to the Government of the Federation, Minister of Agriculture, Minister of Industry, Trade and Investment, Comptroller-General, Nigeria Customs  Service, and the Acting Chairman, Federal Inland Revenue Service, amongst others to ensure strict compliance.

The circular reads: “This is to inform that pending when the next fiscal policy measures on rice are issued, all importers of rice with shiploads already awaiting clearance at Nigerian ports should be allowed to clear their consignments upon the submission of a letter of indemnity to the Nigeria Customs Service. The indemnity is to allow them clear their various consignments of rice without attracting further demurrage, pending when the next 2014 duty rates and levies are announced, at which point they will pay the new rates accordingly.

“This interim measure only applies to investors with rice milling capacity and pure rice traders, who already have rice laden ships awaiting clearance at the ports as at Friday the 13th of June 2014.

“Please ensure prompt and strict compliance.”