That Nigeria is mulling a restriction on provision of foreign exchange for the importation of milk appears to be less important, in the views of industry experts and producers. Rather, the lack of tact and provision of an efficient process before curbing importation is what has puzzled many, BusinessDay findings show.
Godwin Emefiele, governor of the Central Bank of Nigeria (CBN), had ignited a flurry of public reactions when he said recently, “The era of forex restriction on milk importation is coming sooner than expected.”
With the CBN appearing to be on course in its plan to restrict forex access to milk importers on short notice (the actual takeoff is unclear), it has become essential for stakeholders in the local dairy industry and milk manufacturers to integrate various approaches that will boost the productivity of cows for local milk production.
Muda Yusuf, director general, Lagos Chamber of Commerce and Industry (LCCI), in addressing the decision by the CBN, said the policy would likely do more harm than good, both to investors and the citizens.
“It would trigger avoidable disruptions and dislocations in the investment environment and further undermine investor confidence. It would create huge supply gaps in the market with severe harmful consequences,” Yusuf said.
However, the Commercial Dairy Ranchers Association of Nigeria (CODARAN) has a different view. 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, in an interview with BusinessDay.
He explained there is a lack of collection system which requires special tanks for collection, preservation and transport because an unbroken cold chain is required to collect milk so that it doesn’t 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.
“Without backward integration, Nigeria is dead,” Daniyan said, questioning what happens if there was no forex to import in the first place. According to him, there are at least 6 million lactating cows in Nigeria, and even at one litre a day per cow, this will give 6 million litres of milk.
However, the Agriculture Promotion Policy document released by the Ministry of Agriculture in 2016 stated milk/dairy production in Nigeria is 0.6 million metric tonnes (MMT), whereas demand is 2 million MT, indicating a 1.4 million MT deficit.
While it is logical to encourage backward integration as well as the local production of milk, Nigeria in comparison with some other African countries, much less those outside the continent, is not currently structured to competitively run local milk 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 dairy manufacturer with an annual milk production of 5.2 million MT. This is 8.7 times Nigeria’s output. Kenya’s dairy 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 dairy 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 dairy sector, opening access to fund from financial institutions, developmental organisations and the government.
Despite the good intentions of the CBN in guaranteeing credit for players in the milk industry, the unintended effect might be a crowding-out of private investment, which is crucial for long-term sustainability.
India, which is the world’s second-largest milk producer, organised 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. However, findings by BusinessDay have shown that before announcement of any form of restriction, a buffer period should have preceded it in order for the policy to truly deliver intended results.
As recommended by Yusuf, the LCCI DG, enough time should be given to dairy companies for a sustainable transition from the current state to the desired level of backward integration in the dairy industry.
“There should be robust incentives to attract investors to the supply chain in the dairy industry in line with the backward integration aspiration,” he noted.
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).
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 five 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.
While Onwuka supports the restriction on milk imports “in the interest of local production”, he also agrees that a buffer period is necessary for the right things to be put in place.
CRV, the Arnhem-based Dutch breeding company, which is described as one of the leading herd improvement companies in the world, told BusinessDay in an email last year that it has some Nigerian customers for 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.
According to Sander de Roos, manager, Product Development Genetics at CRV, breeds like Gyr and Girolando (Brazil) that are more suitable for dairy production in hot and tropical climate can also be provided.
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, particularly for the local cows, will only keep their milk output perpetually limited.
CALEB OJEWALE, GBEMI FAMINU, SEGUN ADAMS
