At a milk collection centre in Fasola, a tiny community in Oyo State, Sadihu Bello hands over a keg of raw milk to FrieslandCampina WAMCO staff who then subjects it to scientific examination to ensure there are no sediments and debris.
This has been the practice since 2012 when WAMCO began to look inwards to hedge against exchange rate risks arising from importing milk used as input.
Today, activities like WAMCO’s and many other manufacturers have pushed the local input sourcing for major manufacturing firms to 60.3 percent in 2018. It has stayed above 60 percent mark since the foreign exchange crisis of 2015/2016.
The data from the Manufacturers Association of Nigeria (MAN), comprising about 2,500 members, show that local input sourcing rose from 47 percent to 52 percent between 2014 and 2015, and then 60.4 percent to 63.2 percent between 2016 and 2017, and stood at 60.3 percent in 2018.
“Our business has consistently sourced all its core ingredients such as sorghum and malt extract locally through the various local raw material chains,” Baker Magunda, managing director/chief executive officer, Guinness Nigeria, said in January, at a partnership meeting between the brewer, CBN and Stanbic IBTC Bank Plc.
“Currently, our local content sourcing is 75 per cent, and we plan to increase this significantly within the next couple of years,” he added.
Manufacturers scrambled for dollars in 2016 when the country fell into an avoidable recession resulting from what analysts say was policy inactions and lack of economic direction of the federal government.
About 64 small-scale manufacturers shut down in eight months to end of 2016 as they could not produce or stay afloat. At least 222 small-scale businesses closed shops, leading to 180,000 job losses, according to a report by NOI Polls.
The trend has forced manufacturers to begin to pump billions into local inputs to beat future dollar crunch.
Nigerian Breweries is the biggest buyer of cassava starch from Psaltery International Limited, followed by Nestle Nigeria Plc and Yale Foods, Ibadan.
Jordi Borrut Bel, managing director of NB, plans to raise NB’s local input preference from 50 to 60 percent. Cassava starch is used by manufacturing companies as binder and to produce maltose (a form of sugar).
“We have two lines producing 20-30 metric tons per day, which is a total of two trailer loads every day. The annual capacity is 10,000 metric tons but we are doing 6,000 metric tons now,” Oluyemisi Iranloye, MD/CEO of Psaltery International, said at a factory tour.
Nestlé Nigeria, a food manufacturing giant, sources 80 percent of its maize, sorghum, millet, soya, cassava starch, cocoa powder, and palm olein from more than 41, 600 local farmers and processors scattered across the country. These crops serve as inputs for the Fast-Moving Consumer Goods (FMCGs) giant.
Nestlé Cereals Plan project has over 30,000 farmers who supply 100 percent of the grain requirement for Golden Morn Maize. Through its Sorghum and Millet in the Sahel (SMS) project, now called Nestlé Nigeria & IFDC / 2Scale Project Sorghum & Millet, the food and beverage giant has engaged up to 10,671 farmers.
“The Industry has huge needs and we must help farmers improve their yields to meet them. To achieve real success with connecting farmers to industry, a 360 degree approach which will include the aggregators, processors, and logistics suppliers must be considered within this value chain,” says Mauricio Alarcon, CEO of Nestlé Nigeria Plc.
PZ Wilmar’s investments has continued to plant oil palm to serve as input for its vegetable oil and other products.
Santosh Pillai, managing director of PZ Wilmar, told BusinessDay that his firm has pumped approximately $150 million into oil palm plantations.
Banks are also seeing the impact of rising local input sourcing.
“Local corporates are supporting out-grower schemes to support farmers for their inputs. In paper and packaging, operators are recycling used cartons as against importing tons of craf paper from across the globe,” Bolatiti Ajibode, head, conglomerates and industrials, Stanbic IBTC Bank PLC, told BusinessDay.
To help shore up local production and input sourcing and also cut imports, the CBN restricted 41 items from palm oil to margarine, from accessing the FX market. This pushed up local sourcing and raised production.
Remi Emeh, CEO of Remi Emeh Enterprises, said he and other palm oil millers could not even meet demand from manufacturers of food and beverages in 2016.
“But the trend is changing with smuggling of Malaysian palm oil through Kano,” he said.
“This is hurting large corporates like Okomu, Presco and PZ Wilmar, including small-scale millers like us,” he added.
ODINAKA ANUDU& LOLADE AKINMURELE
