Opportunity to invest in milk value chain as import restriction takes off

In July 2019, Godwin Emefiele, governor of the Central Bank of Nigeria (CBN) said “The era of forex restriction on milk importation is coming sooner than expected”. This month, the end of that area was set in motion when the apex bank wielded its big stick on milk importers with the announcement that only six milk makers in the country can process form ‘M’ to access foreign exchange to import the dairy product.

As reported seven months ago when the news first filtered out, while there is a dearth of capacity to fill the country’s 1.4 million metric tonne deficit, it also presents an opportunity for individuals to take up this challenge and contribute to a new market opportunity. To achieve this, however, Nigeria and those intending to take up this opportunity would have to learn from countries that have made successes out of milk production.

Two main factors limit milk production in Nigeria; very low output from cows and a poor collection system. If these two are fixed, adding to this, an increase in the population of dairy cows, the country might stand a chance of achieving sufficiency.

For the Commercial Dairy Ranchers Association of Nigeria (CODARAN), the body claims there is adequate production of milk by cows in Nigeria, but the problem has been collection.

“There is a lot of available (milk) output but nobody is investing in collecting it. Collection is the problem,” said Abimbola Daniyan, General Secretary of CODARAN when interviewed last year. He explained there is a lack of collection system, which includes special tanks for collection, preservation and transport because an unbroken cold chain is required to collect milk so that it does not go bad.

Soji Apampa, CEO, the Convention on Business Integrity, an organisation that has been involved in the dairy value chain, emphasised milk production in Nigeria is constrained by various factors which include lack of machinery for milk collection and milk preservation, lack of adequate transport systems for large volumes of milk, lack of innovative technological innovations, and structural value chain problems.

As backward integration is now being aggressively pushed it has been observed that Nigeria is not currently structured to competitively run local milk production in comparison with some other African countries, much less those outside the continent. These disadvantages could now be fixed and turned into a revenue stream by those desirous of dairy production

A research by Lagos-based Sahel Consulting Agriculture and Nutrition Limited, showed Nigeria can borrow a leaf from India and Kenya in laying a solid foundation to ensure a successful take-off of backward integration in the milk industry.

Kenya is Africa’s leading diary manufacturer with an annual milk production of 5.2 million MT. This is 8.7 times Nigeria’s output. Kenya’s diary sector boasts of 1.8 million smallholder dairy farmers, 600 million litres of formally marketed milk per year, and 1.2 million jobs created directly and indirectly.

The establishment of a diary board, the Kenya Diary Board (KDB) in 1958 paved the way for a public-private partnership, which allowed for a synergy between private capital and conducive government policies. The partnership increased the attractiveness of the East African nation’s diary sector, opening access to fund from financial institutions, developmental organizations and the government.

India, which is the world’s second largest milk producer, organized its dairy farmers into more than 130,000 cooperative societies at the rural level. These cooperatives aggregate the milk and sell to district cooperative unions who in turn sell to state-level milk-marketing federations.

This process of coordinating the market is currently lacking in Nigeria, giving some credence to the position of dairy ranchers, that lack of a structured system for milk collection is the problem.

Nevertheless, the quantity of milk produced by cows remains very important. Even though Daniyan, CODARAN’s General Secretary insists the total consumption in Nigeria can be met by the 6 million cows producing an average of one litre of milk per day, other experts think Nigeria should be concerned about improving productivity if local production is to be sustained in the long term.

“There is no single breed of cow in Nigeria that compares with the production levels of exotic species,” said Chryss Onwuka, a professor of Ruminant Animal Nutrition at the Federal University of Agriculture, Abeokuta (FUNAAB) when interviewed last year. For Nigeria to go into the right production of milk, there is a need for cross breeding with the species that deliver high output. According to him, breeding is a long-term project that takes between 5 and 10 years or more to get an appropriate, competent breed. This however does not rule out conventional cross breeding (such as through mating) in the interim.

CRV, the Arnhem based Dutch breeding company, which is described as one of the leading herd improvement companies in the world, in an emailed response to some questions by BusinessDay, stated it has some Nigerian customers who have already used semen of some of its hybrid cattle such as the Fleckvieh breed and the Holstein breed. It would not disclose the exact identities of these customers, but BusinessDay findings indicated one of those customers is based in the country’s northern region, and is known for Yoghurt production. Cows owned by this Nigerian company are said to produce up to 20 litres of milk per cow every day, whereas the average cows produce barely 2 litres.

In the end, investment in technology remains key, as for instance, there is a need for “milking parlours” for the extraction of milk from cows. Squeezing by hand as currently done particular for the local cows, will only keep their milk output perpetually limited.