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Welfare Effects of Shifting from Tariff to Ban on Rice Import Policies in Nigeria

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Abstract:

Since 1970s, Nigeria’s policy on rice importation which inconsistently alternated between ban and tariff has adversely affected the growth of the domestic rice industry. In 2006, government proposed to shift from current tariff policy to total ban rice importation arguing that it offers more protection capable of stimulating growth of domestic rice industry. This study analyzes the protective and welfare effects of ban and tariff policies on rice importation in Nigeria for the periods of 1987-2005 using the partial equilibrium model. Policy shift does not really matter in terms of having substantial trickle-down effect as marketing middlemen are more likely to benefit from the imposition of trade barriers. However, tariff appeared to be more effective in raising domestic prices than discouraging importation because of the price capping effect of imported rice brands. Although, ban provided higher but insignificant amount of protection than tariff, its inefficiency costs on rice production and consumption were significantly higher. These inefficiency costs coupled with loss in revenue resulted to a higher and significant loss in social welfare.

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