How India’s Export Restrictions on Rice Affected Nigeria and Global Markets

 

The export restriction by India – the world’s second-largest producer on its rice has significantly affected the global market, and Nigeria is one of the countries bearing the brunt most.

Today, our focus shifts to the latest release of the Food Security report by the World Bank. In comparison to the previous edition, the agricultural price index remained steady month-over-month (m/m), while the export price index showed a positive increase of +5% m/m. Conversely, cereal prices experienced a decline of -5% m/m. As in past reports, the Bank underscored the prevalence of rising domestic food inflation across low, middle, and high-income countries.

The surge in the export price index was primarily driven by growth in cocoa and cotton prices, which rose by +11% m/m and +4% m/m, respectively. Conversely, maize, wheat, and rice prices witnessed declines of -9% m/m, -5% m/m, and -1% m/m, respectively, compared to the previous report.

Of particular note, the report highlighted the continuing impact of India's ban on rice exports on global rice markets. Since July 2023, when India implemented the ban on non-basmati white rice exports, the benchmark price of Thai white rice has risen by +22%. Importing countries in South and South-East Asia, as well as Sub-Saharan Africa, have felt the disruption in global supplies caused by India’s export restrictions. Additionally, rice production losses due to EL-Nino in other key rice exporting countries like Thailand and Vietnam have further exacerbated the situation, leading affected importing countries to seek
alternative rice supplies.

Specifically focusing on the Sub-Saharan region, the Bank noted challenges in rice supply due to India’s export ban. Consequently, countries such as Kenya, Madagascar, and Senegal have experienced a significant reduction in rice imports from India, prompting them to turn to other suppliers such as Brazil, Pakistan, and Thailand.

While the Bank acknowledged that the reduced impact of El-Nino may improve rice production conditions, the duration of India’s export restrictions remains uncertain. The Bank cautioned that if these restrictions extend beyond India’s upcoming elections, they could intensify pressure on global rice markets, potentially leading to higher prices and increased food insecurity in importing countries.

The report also emphasized the profound global impact of disasters on agrifood and agricultural systems, resulting in significant loss and destruction. These disruptions, including pest outbreaks, armed conflicts, and extreme weather events such as floods and wildfires, have diverse adverse effects, posing threats to the sustainability of the agricultural industry and global food supply.

India’s Export Restrictions on Rice Explained
Six months after India implemented export restrictions on rice to stabilize domestic prices, the global rice markets continue to grapple with the repercussions. Worldwide rice production has remained relatively stagnant, partly due to the adverse effects of El Niño on key Asian producers. The latest estimates from the U.S. Department of Agriculture project a modest increase of approximately 583,000 metric tons (MT) in global rice production for the 2023/2024 marketing year, representing a mere 0.1% rise from the previous year.

Despite this slight uptick, rice exports have declined by 3.8 million MT, marking a 5% decrease compared to the previous year. While countries like Pakistan, the United States, and Myanmar have seen increased exports totaling about 2 million MT, major exporters such as India, Vietnam, and Thailand have experienced a collective decline of 5.5 million MT.

Notably, India’s rice exports plummeted by 4.2 million MT in 2023/24, reflecting a significant 21% decrease. Among the top six exporters, Pakistan has witnessed a notable increase in production levels by an estimated 3.5 million MT (up 64% from last year), while the United States and Myanmar have also seen rises of 1.9 million MT (up 32%) and 150,000 MT (up 1.3%), respectively. However, these gains have been partially offset by El Niño-related production losses in India (down 3.8 million MT or -2.8%) and Thailand (down 900,000 MT or -4.3%).

Looking ahead, there are positive indications for global production, with crop conditions in South and Southeast Asia showing general improvement. However, the lingering effects of El Niño could still impact the February-April season in Southeast Asia, although it is anticipated to weaken significantly in the coming months.

In addition to existing supply uncertainties, India’s export restrictions have introduced further strain to the market. India initiated a series of escalating export restrictions starting in August 2022, including bans on broken rice exports and additional duties on non-basmati white rice. Subsequent measures in July 2023 further curtailed exports of non-basmati rice, followed by restrictions on basmati rice and parboiled rice in August.

As a result, Indian rice exports saw a sharp decline, particularly in broken rice exports, which dropped by 95% between August and November 2023 compared to the previous year. Non-basmati white rice exports also plummeted by 93% during the same period. Despite this, parboiled rice exports initially surged in August as exporters pivoted to alternative products, but subsequently dropped by 69% in September following the imposition of a 20% supplemental duty.

Overall, Indian rice exports totaled 3.7 million MT between August and November 2023, marking a significant 46% decrease from the previous year. Notably, while basmati rice exports experienced a modest 12% increase during this period, exports to major markets, particularly in sub-Saharan Africa, witnessed sharp declines of 50% or more compared to the previous year.

How the Restriction on Rice Has Affected Nigeria
Nigeria is forecasted to import 2.1 million metric tons of rice in 2024, potentially making it the world’s leading rice importer. This projection comes from the latest Rice Outlook report released by the Economic Research Service of the U.S. Department of Agriculture (USDA).

According to the report, global rice trade is expected to reach approximately 52.85 million tons (milled basis) by 2024, with increased exports anticipated from Brazil and South Korea, and heightened imports expected from Burkina Faso, Indonesia, and Nigeria.

Recent findings from a Cadre Harmonise assessment reveal concerning trends, indicating that around 31.5 million Nigerians could face food insecurity between June and August of 2024. Among them, 83,846 are internally displaced people (IDPs). The northeastern states are particularly vulnerable, with an estimated 2.1 million individuals in Borno, 1.5 million in Yobe State, and 1.1 million in Adamawa State at risk. This region is categorized as experiencing the third phase of food and nutrition insecurity, signaling heightened
vulnerability.

Despite government initiatives, food inflation in Nigeria continues to climb, rising by 148 basis points in January to reach 35.41%, up from 33.93% in December 2023. Given the current landscape, experts anticipate this upward trend to persist in the near term.

In light of these challenges, proactive measures are essential, particularly in strengthening the country’s security infrastructure. Creating a safer environment for farmers will not only enhance food production but also mitigate the risk of a potential food crisis, which could have severe consequences for public health and exacerbate existing economic challenges.