• Friday, March 29, 2024
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Local dairy production: Is the nation ready?

Local dairy production

As a nation, the solutions to our prevailing economic problems depend on how far we plan our tomorrow today and how best we evolve and practice the right policies. Most policymakers are aware that no policy can succeed in a vacuum. For any policy to succeed, it must take into consideration the medium through which it is operating. The medium in this case is the business environment. For any policy to work, the business environment must enhance production and productivity.

In Nigeria, one major factor which all our policies must seek to neutralize is the so-called “Nigerian factor.” Besides being devoid of verbosity, any policy designed to achieve specific objectives must be well articulated and effectively implemented within an enabling business environment engendered by the government maintaining law and order and ensuring security of lives and properties. But when a policy is formulated only to strengthen the “Nigerian factor,” it hardly works. The “Nigerian factor” is an inelegant or improper way of getting things done.

When a policy is formulated only to “create jobs for the boys,” it is unlikely to work. The policy in question is about Nigeria’s dairy production. There are reports that the Central Bank of Nigeria (CBN) wants to promote local dairy projects. So the CBN Governor Godwin Emefiele, announced the restriction of foreign exchange to milk importers in what some analysts refer to as a “speculatively ambitious” bid to boost the country’s dairy production. This, in addition to the items banned form forex, according to CBN, is to benefit local manufacturers. But industry experts are advising the CBN not to restrict forex to imported milk.

While manufacturers and other stakeholders are awaiting the fiscal policy on local dairy production from the federal government, the CBN Governor in his monetary policy statement was quoted as saying that “We are determined to make milk production in Nigeria a viable economic proposition. If you need a loan to acquire land, do artificial insemination, grow grass, or even provide water, we will give it to you. We are getting to the end of the road of milk production in Nigeria.”

The understanding of this policy statement is that the CBN wants to support key players in the milk industry by assisting them to invest massively in backward integration. Good ambition but will the yet-to-be constituted Federal Executive Council endorse this policy?

Before fiscal policy decisions are set by the FEC on local dairy production, we need to get a clearer monetary policy direction from the CBN. Is the CBN banning milk importation and/or restricting accessibility to forex supply? Which one out of the two is of importance to the CBN? It seems that under the new monetary policy, importers will not be allowed to get forex from both official and parallel markets to bring in milk into the country. As being speculated, milk importers are likely to be forced into ranching as the FG seeks ways to end herders-farmers conflict in some parts of the country.

Although Nigeria is rich in both agricultural, forest and mineral resources, these resources have not been sufficiently processed as significant sources of raw materials for industrial enterprises. That is why till this day, manufacturers still depend on imports to a disturbing extent for their raw materials. You cannot blame manufacturers because survival is at the heart of their mission in business. In order to avoid interruption in the supply of raw materials and intermediate goods after the CBN restricted 41 items from forex, some manufacturers in the past 4 years invested more capital into large stocks of these items; an expensive burden.

Gone are the days when manufacturing firms will have their equipment in good working order, have available workers drawing their pay, have sufficient demand for the products and yet, stop production because of lack raw materials. Now the story is different as the demand for locally produced commodities have reduced because imported goods are cheaper in the market.

Besides, consumers’ purchasing power is low, electricity supply is insufficient, and unemployment rate is high with a double-digit inflation. All these are reasons why many firms in the manufacturing sector close their factories.

There is no doubt that excessive reliance on importation of raw materials in Nigeria has been a major problem facing the industry for decades following a decline in foreign exchange earnings from the sale of petroleum. As you read this article, the price of crude oil has dropped below the 2019 budget benchmark. So there is going to be more pressure on the country’s forex reserve.

In seeking other alternatives to meet domestic dairy production, we must not forget that the Raw Materials Research and Development Council (RMRDC) was established in 1987 to formulate and implement progressive policies on the local sourcing of raw materials.

With the establishment of RMRDC, no raw material that could be obtained locally was to be allowed to be imported beyond a grace period. But the research and development (R&D) capability needed for the government import substitution policy to succeed in the area of raw materials research and processing has been lacking. Why? Paucity of research fellows as a result of brain drain, duplication of research efforts, and lack of patronage of locally made goods because they are expensive when compared with imported goods. These and many more are some of the reasons why every time Nigeria tries an import substitution policy, it has recorded little success.

With respect to dairy production in Nigeria, experts say that our local cows are not good enough for milk production. If the policy is to take effect immediately, industry experts are of the view that massive investment would have to be made for the importation of dairy cows for milk production. The implication is that the country will import cows good for milk production. Who provides the forex, the CBN or the manufacturer?

In the light of these gaps, one wonders how far the local milk production policy can achieve its objective. Will the CBN be able to ensure that smugglers do not have a field day smuggling assorted milk into the country with attendant loss of revenue to the FG, capacity underutilization of manufacturers and massive loss of jobs coupled with its social consequences.

In order to make local milk production a viable business in the midst of poor business environment, the government must be open to suggestions of industry experts on how to chart permanent path to progress. The fact that the nation’s resources are meagre must be put into consideration in all we plan to do. This calls for creative, innovative, inventive and highly resourceful ways of solving our problems. Thank you!