CBN announce FX restriction on Milk, barely months after Dangote’s dairy investment plan
Early in May, Dangote Group announced its strategic decision to delve into dairy farming as it had become a necessary route because of several issues involved in places where the country’s biggest investment holdings had acquired land in order to investment in rice and sugarcane. Months later, the Apex bank put foreign exchange restrictions on importers of milk.
Under the new policy, importers will not be allowed to get forex from both official and parallel markets to bring in milk. They are likely to be forced to invest in ranching as Abuja continues to seek new ways to tackle the farmers-herders conflict in central and southern parts of the country.
Following the uproar caused by CBN decision, the Apex bank quickly sought to clarify that it hadn’t banned milk importation, just access to forex. “For the avoidance of doubt, milk importation is not banned,” read the official statement to clarify the matter. “Indeed, the CBN has no such power. All we will do is to restrict sale of forex for the importation of milk from the Nigerian foreign exchange market. We wish to reiterate that we remain ready and able to provide the needed finance to enable investors who genuinely want to engage in milk.”
Well for Dangote Group, the new CBN policy is in line with the strategic foresight of the company. Earlier in May, speaking at the African Development Bank (AfDB) Investment Forum for the New Special Agro-Processing Zones in Abuja, the Group Executive Director, Engr. Ahmed explained that “We (Dangote Group) are planning to go into dairy farming. We (Nigerians) are spending huge sums of money importing powdered milk annually, this is simply unacceptable. We are going into large-scale dairy farming,”
NBS Data shows that between $1.2 billion and $1.5 billion are spent yearly to import milk into the country. The total amount of imports into Nigeria for 2018 was $36.5 billion and therefore the potential reduction of imports on the back of a cost hike for importers of milk is around 4.10 percent of total imports.
In order to take advantage of this decision by CBN and venture into domestic production of the restricted item, investors need to have the foresight of Dangote Group or better still, enough influence to direct government policies. The first mover advantage sets Dangote Group up for monopolistic powers and sets Aliko Dangote to profit from the $3 billion market.
In the last MPC meeting, CBN governor Godwin Emefiele said: “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.”