Nigeria’s ban on buying dollars to import milk is prompting dairy companies to invest in cattle farms — some with exotic cows — in Africa’s biggest economy.
The Central Bank of Nigeria rations dollars and has barred importers of 45 products including milk from accessing foreign exchange from the authorized market, which it tightly controls.
Nigeria operates multiple exchange rates with an official rate that is 45% cheaper than the unofficial price and even manufacturers are reporting zero dollar sales to them this year.
According to Bloomberg, the difficulty in accessing dollars has raised the cost of doing business in Nigeria.
Denmark-based Arla Foods and French-owned Danone are investing in cattle farms to sustain their operations, even as the Manufacturers Association of Nigeria, with more than 3,000 members, listed difficulty in accessing dollars as the biggest challenge to production in the West African nation.
Arla is investing $10 million on a cattle farm in Nigerian northern Kaduna State, Jimmy Johnmark, general manager at the company said.
The company will be able to purchase foreign exchange to import 400 cows in August and increase the number to 1,150 over the next five years, Johnmark said.
It also plans to partner with the Kaduna administration to buy milk from 1,000 pastoralists in a state-built grazing reserve.
Roaming herders account for more than 90% of Nigeria’s domestic milk production.
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The government is encouraging ranching as a means to reduce herder-farmer clashes, which has become one of the biggest sources of insecurity in Africa’s most populous nation, home to the fifth-largest cattle herd on the continent.
Local milk production is estimated at 500,000 tonnes while demand is at 2.2 million tonnes as of 2020, according to the central bank, with the processing led mainly by multinationals, which import almost all their milk inputs due to the poor yields from locally bred cows.
The maker of Dano Milk plans to produce about 46,000 liters daily from its own farm in five years, which will reduce its milk imports by about 20%, according to Johnmark.
Danone is investing in a cattle farm in Nigeria’s southwest Ogun State and also partnering private investors including Obasanjo Farms, owned by Nigeria’s former president Olusegun Obasanjo to meet 2028 local input target of 65%, according to Ferdinand Mouko, managing director for Danone Nigeria.
While the private investors provide the cows and facilities at the farms, Danone gives technical assistance and and guarantees to buy the milk, he said.
Danone plans to increase its stock to 500 cows over five years with a capacity to produce 15 liters per cattle a day, compared with the daily average of 1.5 liters a day for local breeds.
