Economics of Rice Parboiling in Northern Nigeria
Impact Study. Deep Dive.
Good, better, Parboiling?!
Given the important role parboiling training plays in the Competitive African Rice Initiative (CARI), CARI commissioned an impact study on the economics of rice parboiling in the following Nigerian states: Jigawa, Kano and Kebbi as well as the Federal Capital Territory (FCT).
While the main objective of the study was to assess if and how these reached parboilers economically benefit from the trainings, initial attempts are also made at understanding the degree to which these women are empowered beyond mere economic benefits.
Infobox: Amongst the different types of rice that is consumed, parboiled rice is particularly popular in Nigeria. Rice parboiling itself refers to the partial boiling of paddy before it is milled in order to increase its nutritional value, change the texture of cooked rice, and reduce the breakage in milling. Parboiled rice takes less time to cook and is firmer and less sticky when cooked. It can be produced either through an integrated parboiling unit that are usually attached to medium to large-scale mills, or through parboiling groups that parboil the paddy and then have the final product off-taken by smaller artisanal mills (so-called “cottage mills”).
CARI reached over 40.000 parboilers, where 99% are women, through technical and business training interventions.
The study has interviewed a total 401 parboilers, mostly women, whereby the average age of parboiling women is 40 years and 38% of them are between the ages 18 and 35 and can thus be classified as youth.
Overall, the training was well received by an overwhelming majority of 94% of study participants who indicated that they were either satisfied or very satisfied. The self-reported adoption rates for the practices are overall good with an average adoption rate of 71%. The practices with the highest adoption rates are soaking, winnowing, washing, and post-drying, while the practices with the lowest adoption rate are the choosing of good quality paddy, general sorting, and visual sorting. The adoption rate for capital-intensive practices (i.e. equipment) is higher, while adoption of more labor-intensive practices such as sorting and choosing high quality paddy are rather low.
In Nigeria, there are two different parboiling models applied for parboiling:
Business Model 1 includes the parboiling of paddy and subsequently milling, before then selling the parboiled (and milled) rice onward. Business Model 2 includes the parboiling of paddy and then selling it directly onward to a processor for further milling (i.e. the parboilers do not mill the paddy themselves).
The study shows that about 96% of the parboilers adopted Business Model 1 while only 4% adopted Business Model 2.
Yet, what is the profitability of parboiling? The data revealed an immense variance in gross margins across the surveyed parboilers, ranging from - 49% to + 96%. The majority (56%) of parboilers have positive gross margins, while 44% have a negative one. Looking across all states, the average gross margin is 2.4%. This average margin of 2.4% is equivalent to an average profit per parboiling cycle of ₦ 2,489 (approx. USD 6.53). On average, the sampled parboilers conducted 52 parboiling cycles in 2020, which then translates to an average profit per year of ₦ 129,428 (approx. USD 339). While parboiling may not generate much income, it nonetheless can contribute to household income and increase its resilience.
At the state level, the analysis revealed that the average gross margins for Kano and Jigawa states are positive (2.7% and 2.8% respectively) while for Kebbi state and the FCT average gross margins are negative (-1.2% and -1.0% respectively).
In Nigeria, the living income of a household is $ 4,365 per year. The parboiling study shows that rice parboiling can contribute up to seven percent ($288) to the living household income:
In addition to revenues, the study also analyzed expenses: On average the cost of paddy is the highest cost component in the parboiling business. The next highest component is the cost of labor, followed closely by milling, packing, and energy. Water represents the lowest cost to the parboilers.
Besides the bottlenecks of negative gross margin, the study states further challenges for parboilers:
In addition to the question of economic efficiency, the study has also analyzed the question of women’s empowerment. By following the Theory of change, parboiling may be considered as a step towards women’s empowerment.
It follows the assumption that the training interventions (activity level) for rice parboiling lead to an adoption of innovative and better technologies, good parboiling practices and good business practices (output level). Thus, high adoption rates lead to improved quality and quantity of rice/parboiled paddy, better access to off-taking markets and financial services as well as new employment opportunities and increased quality of work (intermediate outcome level). This in turn triggers improvements in incomes for parboiling women (outcome level) with an overall positive effect on livelihoods for parboilers who are almost exclusively women (impact level).
A strong majority of 83% of respondents reported that they are the ones making decisions about their parboiling business. Nevertheless, in 15% of the cases it is in fact the respondent’s husband who makes the business decisions. The majority also indicated that they reinvest at least some of the money to buy paddy for further processing, thus keeping the business running. 55% of respondents save a portion of their profits, and 36% of respondents save specifically to replace parboiling equipment in the future. Approximately 62% of respondents use profits to pay for food while 51% use profits on health care for their family members.
To conclude, the results of the study show that the CARI parboiling training had an overall positive impact in terms of adoption rates of better parboiling techniques. It must be taken into account that a third of all parboilers have a negative or almost neutral gross margin and can thus be classified as “survivor entrepreneurs”, meaning they just barely stay afloat and survive instead of scaling their business. These gross margins vary substantially across states and individuals. Nevertheless, above all, 99% of the interviewed parboilers indicated that they are proud to be a parboiling woman and see parboiling as an entrepreneurial activity in the future. Parboiling can contribute complementarily to living household incomes, since a majority of the parboilers show positive gross margins. Parboiling women serve a growing consumer market and can set a benchmark for women empowerment within the rice value chain.
A follow up validation workshop was organized to drill deeping into specific questions of access to finance, high quality input and why some recommended practices were poorly adopted. Going forward, CARI will incorporate the specific feedback into its training approach and also engage in pilot activities to improve the access to financial services for the parboilers.