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Foreign Exchange Restriction on Dairy Importation – Matters Arising

In March 2021, news headlines dominated the Nigerian media space on the revelation by the Director General of the World Trade Organisation (WTO), Dr. Ngozi Okonjo-Iweala that the European Union (EU) has filed a complaint against Nigeria over restrictions placed by the Central Bank of Nigeria (CBN) on access to foreign exchange for the importation of milk and dairy products.

According to Dr. Okonjo-Iweala, who held a meeting with the CBN Governor, Godwin Emefiele, during her working visit to Nigeria: “I have to raise issues about the BoP (Balance of Payment). We have a complaint against us (Nigeria) about the use of devaluation of the balance of payments’ agreement with respect to trying to protect the dairy industry. And they feel that this is not the right instrument. So as the DG of the WTO, I have to make this known.”

It could be recalled that over a year ago, the CBN issued a circular that restricts companies seeking foreign exchange through the official window to import milk and dairy products. Only six companies were granted waivers to continue obtaining foreign exchange through the official window to import dairy products. The reason advocated for the waiver was the organisations’ commitment to backward integration to enhance their capacity and improve local milk sourcing. The move was primarily to ensure “forex savings, job creation and investment in the local production of milk.”

Therefore, in responding to Dr. Okonjo-Iweala’s revelation, Mr. Emefiele said: “We called a meeting about six years ago when I resumed. I said look, Nigeria has dairy potential by the cattle and the rest of them; let’s see what can be done. Nothing was done. Two years ago, we started again, we said listen, we are going to place FX restrictions on those who want to import dairy into Nigeria…. At that meeting, we took a decision that those not embracing our own backward integration programme in the
dairy industry should be restricted. Does that mean Nigeria does not have the potential?

The answer is no. So that’s why we in the monetary and fiscal authority must put everybody’s feet on fire so that the right things are done for the good of Nigeria and Nigerians.”

Read Also: Increasing remittances and tackling FX shortage in Nigeria – The CBN conundrum

Nigeria Has the Potential
The CBN Governor is right, and we agree with the position of the CBN – Nigeria truly has the potential to sustainably meet its dairy requirement. If just twenty percent (over four million) of the over 20 million heads of cattle currently used as Nigeria’s estimated cattle population were producing one litre of milk per cow daily, two-third of a year (discounting for seasonal and other dynamics), then there would be 900 million to 1 billion litres of milk available for collection across the country in a year. The milk available for collection and processing may not be anywhere near this figure at the moment, but this hypothesis only points by way of common sense to the fact that the potential is there in the Country.

“Putting Everybody’s Feet on Fire”
Using the aphorism of lighting fire under the feet to quicken steps, thus hasten movement, Godwin Emefiele uncompromisingly expresses the urgency that is required to develop the local dairy sector. Most of the backward integration initiatives embarked on by organisations in the sector at the moment only amount to scratching the surface. So much more need to be done. Stakeholders in the sector (“everybody” according to the CBN Governor) need to step up efforts to make the dairy sector realise its high potential. It is said that drastic challenges require drastic solutions; the threats to the survival of the Nigerian dairy sector are enormous and should not be handled with kid gloves. There is a glaring need for urgent actions.

Conserving Foreign Exchange and Creating Jobs
According to a recent report by the CBN, Nigeria spends about 1.5 billion dollars importing dairy products annually. As demand for dairy products increase, that figure will likely increase in tandem. For a country depending on one major source of foreign exchange and facing huge negative economic effects of a declining local currency, Nigeria does not have the luxury of spending billions of dollars to import milk any longer. The dairy sector holds so much potential in job creation for the vulnerable
population of Nigerians. A sector that churns out over one billion litres of milk would put so much money in the pockets of Nigerian investors and create many jobs across the value chain. This is why we agree with the CBN Governor that doing the right things in the sector would amount to “the good of Nigeria and Nigerians.”

The Need for Urgent Ecosystem Solutions
To achieve sustainable development for the Nigerian dairy sector, there is a need for urgent and holistic solutions that span across the entire dairy ecosystem. The identified weaknesses of the sector are enormous. Ranging from poor productivity of local cattle breeds, poor cattle nutrition, poor animal disease management systems, lack of organised milk collection processes, limited access to finance, insecurity, poor infrastructure, insufficient extension services, inadequate processing and storage
facilities, low investment in research and development and minimal adoption of modern technology, among others.

An ecosystem-focused development programme identifies challenges across the value chain and makes targeted investments to solve them. An example of such is the Advancing Local Dairy Development in Nigeria (ALDDN) programme currently running in four states of Adamawa, Kaduna, Kano, and Plateau. Funded by the Bill and Melinda Gates Foundation (BMGF) and implemented by Sahel Consulting Agriculture and Nutrition Limited, the programme is anchored on six focus areas, namely: farmers’ organisation, infrastructure development, productivity improvement, financial inclusion and income support, training and extension and policy advocacy. The programme is firmly supported by the Commercial Dairy Ranchers Association of Nigeria (CODARAN). There is an urgent need for more stakeholders to emulate such projects to steadily develop the dairy sector to realise its potential, save foreign exchange and create jobs.

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