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Nigeria's leading finance and market intelligence news report.

Raising local input sourcing in Nigeria’s dairy industry

Nigeria is undoubtedly blessed with favourable demography. With 198 million people, and a growth rate of 2.6 percent per annum, companies have the opportunity to tap the country’s demographic advantage to stay afloat.

The local dairy industry is boosted by the rising growth of a young population and an upwardly mobile workforce that spends much time outside their homes.

Like other sub-sectors, the local dairy industry is also benefitting from this demographic edge. Cheese posted value sales growth of seven percent in 2017, which was a significant improvement on the decline of 49 percent recorded the previous year, according to a research done by Euromonitor International. Yoghurt, drinking milk, sour milk and others also followed in the positive trajectory.

Statistics published by Dairy Chain in 2014 put the annual demand of milk in Nigeria at 1.1 billion litres,  with estimated annual production around 400 million litres. This, therefore, puts demand-supply gap at 700 million litres.

Official data from Nigeria’s Ministry of Agriculture show that the country imports dairy worth $1.3 billion annually. The dairy products come from different parts of the world, especially from the Netherlands, the UK, China, France and other countries.

Worse still, the industry utilises just about 10 percent of the local milk. The majority of raw materials are imported.

Key complaints of dairy firms  include: low quality of milk produced by Fulani farmers, poor quality of grass for cows, unsanitary handling of cow milk, and constant farmers-herders clashes, among others.

As much as these reasons are genuine, facts prove that local dairy makers have the capacity to turn the tables. Some local dairy firms have, at one point or the other, sourced milk locally. But this is not consistent and cannot significantly raise local input content.

In Nigeria today, only FrieslandCampina WAMCO has come up with a consistent and sustainable model that will see a significant rise in the local input sourcing in the shortest possible time. The firm started a programme called the Dairy Development Programme (DDP) in 2011, with a target to source more milk from Fulani farmers. The company brought Fulani herders together in five communities in Oyo State, supporting them with training, water, innovation and infrastructure to boost milk production from cows.   The company also provides a ready market for the Fulani farmers, buying as much milk that can be produced. One of the biggest advantages of this is that it prevents cows from roaming the farms, thereby curbing farmers-herders clashes and ensuring copious production of healthier milk. A cow that does not roam about produces much more milk than the other which moves from place to place, experts say.

This programme is already going on in Fasola, Maya, Saki, Iseyin and Akele, with a bulking centre ( a place the company pools all the milk into a truck and moves it to the factory).

So far, the DDP has supported over 3,500 local dairy farmers (including women) to expand their investment opportunities as the milk collected from the dairy farmers is used in the local manufacturing of Peak evaporated milk, according to Ben Langat, managing director of FrieslandCampina WAMCO.

“You can’t do anything with cows without a good supply of clean water. So far, we have sunk 45 solar-powered boreholes, which provide water not only for the cows but also for all the five communities where we are already succeeding with the DDP,” Langat told BusinessDay in an interview.

Many dairy makers in the country are weighing their options between investing hugely in local input sourcing and continuing in importation. One official of a dairy producing firm told BusinessDay that they were watching FrieslandCampina’s progress, saying that his firm could only risk its investments in local sourcing only when success was guaranteed.

According to Langat, companies shy away from investing in local input sourcing because it is costly and takes time to make money from it.

This means that a favourable investment climate should be provided for the industry  in terms of security, funding and infrastructure, experts say.

One big advantage of this model is that it ensures skills and technology transfer. For instance, Dutch dairy farmers were twice invited to Nigeria by FrieslandCampina. The Dutch farmers were able to school local Fulani farmers on cross-breeding, healthy farm practices as well as pasture and genetic management.

Nigeria has 131 million cattle, goats and sheep, according to the Federal Ministry of Agriculture (2011 figures).

Apart from private initiatives, Nigerian government has a role to play. First is in the area of adopting a strategy to reduce farmers-herders’ clashes. Whether it is ranching or anything else, the key point is that cows should no longer be allowed to roam about. Doing this reduces clashes and deaths and improves health of cows, which in turn leads to high milk productivity.

Second is the area of investments. Between 2016 and 2017, the government of Australia invested $25.8 million in research and development (R&D) of dairy. The country also pumped $900,000 as a business support for dairy farmers as well as $579 million as a support package to  assist farmers affected by the decisions of dairy firms such as Murray Goulburn, Fonterra and National Dairy Products to retrospectively reduce farmgate milk prices in 2015–16, according to Australia’s Department of Agriculture and Water Resources.

Nigeria needs to invest more in the industry, more so in improving cross breeding methods to improve yield. Some experts suggest that Nigeria may need to import high milk producing cows to replace or cross-breed with low-yielding local ones.

Findings show that Jordan once had low-yielding cows but now have stronger Holstein Friesian cows after importing high-yielding species. The effect of this is a significant rise in milk production. Analysts believe this can be repeated.

 ODINAKA ANUDU

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