Report: High Energy Cost Reducing Nigeria’s Rice Milling Operations

Dike Onwuamaeze

Even though Africa has been projected to expand its production of rice, the outlook in Nigeria is dampened as escalating energy costs and difficulties in marketing produce are reducing milling operations in the country.

This is contained in the Food and Agricultural Organisation of the United Nations’ report titled, “Food Outlook: Biannual Report on Global Food Markets,” which was released this month.

The report stated that Africa appeared to be headed towards its third successive production expansion, with 28.4 million tonnes forecast to be gathered across the continent in 2024/25, up 4.0 per cent year-on-year and a record high.

But in the case of Nigeria, the production outlook is dampened by hikes in input costs and difficulties marketing produce following reductions in milling operations caused by hikes in energy costs,” the report said.

However, in Western Africa, Benin, Burkina Faso, Guinea, Mali, Senegal, Sierra Leone, and Togo could also harvest more, a reflection of the high prices prevailing in many of these countries, expectations of broadly positive rainfall performance, and sustained government support to the sector.  

According to the report, supplies of most of the world’s major food commodities are expected to be adequate in 2024/25, although extreme weather, rising geopolitical tensions, sudden policy changes and other factors could all potentially tip the delicate global demand-supply balances and impact prices and global food security.   

The FOA Food Outlook stated that the, “World outputs of rice and oilseeds are expected to be at record levels, while those of wheat and maize will likely decline modestly.”

The report further projected that world rice trade would fall to a four-year low in 2024 from an estimated 52.9 million tonnes in 2023 to 51.4 million tonnes this year.

It stated that this would represent a four-year trade low and, from a regional perspective, would be largely imputable to expected import cuts in Africa. The contraction would be consistent with the positive harvest results attained on the continent.

It added that, “persistent cost pressures stemming from weak local currencies, elevated international prices and, in some cases, also higher transport and insurance costs, Nigeria, as well as Egypt, Ethiopia, Ghana, Madagascar and Sierra Leone, could also slash purchases or keep them at comparatively reduced levels.”  

The FAO’s report forecasted that world sugar production in 2023/24 (October/September) is pegged at 179.4 million tonnes, marking a slight uptick of 0.5 million tonnes, or 0.3 percent, from the previous season’s output.  

It added, “global sugar consumption will continue increasing in 2023/24, up 2.5 million tonnes, or 1.4 percent, from the previous season. Africa and Asia are expected to account for this growth, along with an anticipated rebound in Europe from the previous season’s downturn.” 

In 2023/24, the forecast for the world sugar trade stands at 63.3 million tonnes, which corresponds to a 1.0 percent increase from the estimated volume for 2022/23.

On the import side, larger purchases by Asia and Africa are forecast to outweigh a likely sharp decline in Europe.  

International sugar prices generally declined since reaching their 12-year highs in September 2023, and in May 2024, they dropped to their lowest value since January 2023. The price declines were mostly related to improved global supply prospects.   

In addition, global sugar consumption is forecasted to increase in 2023/24 to reach 177.4 million tonnes, up 2.5 million tonnes, or 1.4 per cent, from 2022/23.  

Imports by African countries are also expected to increase in 2023/24. This increase mainly reflects higher demand from Nigeria; after the government-stopped imports of refined sugar in 2021 as part of its plan to boost the domestic industry, the country mainly imports raw sugar.  

The report also said that in 2024, global wheat markets are expected to contract in 2024/25 as global wheat production, utilisation, trade and stocks are all forecast to decline from their respective 2023/24 levels. Nonetheless, ample supplies and lower demand for feed and other uses globally are likely to maintain a soft tone in wheat markets.