Pour the grated coconut in a small non-stick pan and place it over medium-low heat. Gently toast it for 2 minutes until golden. Stir the coconut constantly, don't burn it.
Transfer the toasted coconut immediately to a cold plate and put it aside to cool until later. Pour a little vegetable oil in a large non-stick pan (one that has a lid) and place it over medium-high heat until hot. Then add the bay leaves, dried chili and chopped garlic.
Stir fry the rice for about 2 minutes. Then add the coconut milk and water (or vegetable stock).
Stir well and bring the rice to a rolling boil. Then turn the heat very low and cover the pan. Let the rice simmer for about 15 to 20 minutes. Check the tenderness regularly. Take the lid off the pan once the rice is tender and add the lemon juice and toasted coconut (keep a pinch aside for garnish if you like).
Stir well. Check the seasoning and add extra salt to taste. Then add the cashew nuts.
Take the pan off the heat and scoop the coconut rice into bowls. Sprinkle with extra toasted coconut and serve hot.