Dynamics of Disruption Risk Management in Grain Chain in Nigeria: A Simulation Study

Abstract

The study focussed on disruption risks in grain chain in Nigeria. The chain consists of different stages. It includes production, processing, storage and consumption. Rice grain is an important dietary food in Nigeria, in which its sufficiency cannot be over emphasised and this is mainly consumed by households. Currently, the supply of rice is below thresholds and consumption level. Farmers, processors, wholesalers and retailers are major actors in the rice grain chain. Also governments are a vital organ in this chain in the area of policy decisions. Nigeria is currently under-supplied in rice and over the years the supply of rice by Nigerians chain actors have been fluctuating due to some prominent disruption factors associated with the chain. These factors were identified to be weather failure, natural disaster, pests and disease, political instability and infrastructural risk. This has further reduced, and caused uncertainties, in the volume supplied at different points of chain stages. This study was mainly aimed to examine the effect of disruption risks in the grain chain in Nigeria. Specifically, the research explored the actual volume currently supply from different points in the rice grain chain. The research examines the volatility that exists at different points of the chain. The average volume supplied. The results show that at production level, the output shortage is on average 6.94 mt per year. Whilst, the output shortage at processing level will on average 3.75 mt per year. There is a 90% probability that the output shortage will be greater than 5.98 mt of paddy rice and, 3.04 mt of milled rice at 5% percentile, but less than 7.82 mt of paddy rice and, 4.45 mt of milled rice at 95% percentile, in a year. These shortages fluctuate with 0.56 standard deviation at production point and 0.42 standard deviation at processing. The cost to finance the default was also simulated along with the output volume based on two strategic approaches; an increase in paddy rice production, and an increase in the import of milled rice. The average cost for the shortfalls are expected to be €3.34 billion for paddy rice production and €1.95 billion for import of milled rice in a year.

Keywords: Disruption, risk management, simulation model, grain chain, Nigeria