• Latest News

    Monday, August 5, 2019

    Bold Move to Stimulate Growth in Local Milk Production by CBN, Should Be Commended

    Following the recent move by the Central Bank of Nigeria to end milk importation in the country, Adedayo Adejobi writes on the likely benefits of the policy on the forex reserves as well as the dairy market

    Milk is a dairy product rich with protein, iodine, calcium, and several vitamins, and loved by many Nigerians. In the United Kingdom, the leading milk brands available at supermarkets are Tesco and Sainsbury’s milk. In France, most consumers buy Délisse and Carrefour milk. In the Netherlands, Campina is a well-known milk brand. The Theo Müller Group, which owns the milk brands Müller and Weihenstephan, is the market leader in dairy manufacturing in Germany. The Europe-wide operating dairy company Arla Foods is based in Denmark. TINE is the largest dairy cooperative in Norway and produced milk with a volume of 377 million litres in 2016.

    In Nigeria, the popular leading milk brands are Peak, Dano, Three Crowns, Loya, Nuna, and Nunu. There is hardly any of these brands that are fully locally produced in Nigeria.

    Asides milk, huge prospects lie in yoghurt and sour milk drinks. The category also has much scope to expand from popular unbranded, cottage products to branded products.

    In the market, drinking yoghurt, a by-product of milk presently drives the overall category and is expected to continue to grow. This is the kind of product traditionally favoured in Nigeria through local products such as “Kunnu”, and is being branded and sold in both traditional and modern retail outlets; it is experiencing fast growth.

    Nigeria is a potential market for 1.3 million tonnes of milk valued at about N450 billion annually.

    The importation of milk powder and other processed dairy products were estimated at $275 million in 2006. Industry sources also estimate Nigeria’s national herd at 14 million heads (including approximately 900,000 milking cows). The average yield from this traditional system is 0.7 –1.5 litres of fluid milk per day.

    Currently, most of Nigeria’s dairy processors import milk powder and reconstitute it into liquid milk and other dairy products such as yoghurt, ice cream, and confectioneries. Others repackage imported powdered milk into small affordable sachets. The imported dairy products (mostly milk powder) come from New Zealand, Australia, South America, the EU, India, Ukraine, Poland, and other smaller suppliers. Multinational firms including Friesland foods (Netherlands), Glanbia (Ireland), Cussons-PZ (UK), Promasidor, etc., have either partnered or acquired some Nigerian dairy firms for re-constituting and packaging imported milk powder.

    In the light of CBN’s drive, THISDAY took a cursory look at the Dutch dairy industry, which is a leading economic sector in the milk business. Between 2013 and 2017, milk consumption in the Netherlands continuously decreased.

    In 2010, the Dutch on average drank just over 50 litres of milk per person. Seven years later, the per capita consumption of milk was just over 41 litres on average. In 2013, approximately 810 million litres of milk were consumed in the Netherlands. By 2017, this had decreased to roughly 747 million litres. Milk, however, was not the only category experiencing hard times. Meanwhile, as milk consumption decreased in the Netherlands, Nigeria experienced has seen a spike in the consumption volume of milk, dairy drinks, and products, which rose by roughly eight percent in the same period. As expected, this increase in the total milk consumption also resulted in a rise of the per capita consumption of milk in Nigeria.

    Supplying dairy to the world, in 2017, dairy exports from the Netherlands amounted to just over 7.8 billion euros. The majority of the Dutch dairy exported was destined for other European countries. After Europe, the most important export markets were Asia and Africa. As the Netherlands exports far more dairy products than it imports, the country had a positive trade balance of 4.2 billion euros that year.

    Upon THISDAY checks, a large share of the concentrated milk produced in the Netherlands is exported to other countries, including Nigeria.

    In the last decade, concentrated milk exports grew considerably, reaching a value of just over 475 million euros in 2017. That year, the import value of concentrated milk and cream was just a fraction of the export value, at roughly 126 million euros. By comparison, the export value of non-concentrated milk in the same period was nearly 841 million euros.

    CBN’s Justification
    According to the Central Bank of Nigeria’s recent report, the increasing consumption trend cost the government a substantial amount of foreign exchange to import dairy products into Nigeria to the tune of $1.5 billion.

    CBN Governor, Mr. Godwin Emefiele, last week confirmed the move to restrict milk importation into the country.

    According to the bank, the country spends between $1.2 billion and $1.5 billion annually on milk importation, which it described as unacceptable.

    Owing to this, Emefiele said domestic production of milk had the potential to reduce recurrent farmer-herder clashes, which have stifled the growth of the agricultural sector.

    He stated that despite the CBN’s initial engagement with major players in the milk industry, there were attempts by some big players to frustrate the policy on local production of milk.

    Emefiele explained: “We believe that milk is one of those products that can be produced in Nigeria. Milk importation has been going on in Nigeria for over 60 years. If you Google West African Milk or Friesland Campina today, they say that they have been importing milk and that they have been in Nigeria for over 60 years.

    “Today, the import of milk annually stands at $1.2-$1.5 billion. That is a very high import product into the country. Given that it is a product that we are convinced that it is a product that can be produced in Nigeria.

    “The reason some say that our cows are not producing much milk is that our cows roam around, they don’t have water to drink.

    “When the policy on the restriction of FX started, we considered including milk to the list. Then we thought that based on the sentiments that people would show, that we should be careful.”

    Furthermore, Emefiele disclosed that the bank held meetings with leading milk producers in the country to encourage them to begin the process of producing milk in 2016.

    However, he pointed out that there was no significant progress on the part of the companies.

    “We are saying the amount we spend on milk in this country is too high, we need to reduce it. 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 you.

    “We are getting to the end of the road of milk importation in Nigeria. The era of restriction of forex for the importation of milk is very close, sooner than they expect,” he added.

    Also responding to critics of the intended policy, the Director, Corporate Communications, CBN, Mr. Isaac Okorafor, stressed that Nigeria and the welfare of all Nigerians come first in all its policy considerations over the years.

    According to Okorafor, the critics were attempting to mislead the general public by misrepresenting the ordinarily unassailable case for investments in local milk production and the medium to long-term benefits of the planned policy.

    “While we are aware that some of our policies may hurt some business interests, we are thankful to Nigerians for the buy-in and intense interest in the policies of the CBN.

    “As a people-oriented institution, however, we shall remain focused on the overarching and ultimate welfare of the Nigerian masses.

    “We, therefore, wish to, once again, reiterate our policy case as it relates to the planned restriction of access to Nigeria’s foreign exchange market by importers of milk: Nigeria and the welfare of all Nigerians come first in all our policy considerations. Being an apolitical organisation, we do not wish to be dragged into politics. Our focus remains to ensure forex savings, job creation and investments in the local production of milk.

    “For over 60 years, Nigerian children and indeed adults have been made to be heavily dependent on milk imports. The national food security implications of this can easily be imagined, particularly, when it is technically and commercially possible to breed the cows that produce milk in Nigeria,” the CBN director insisted.

    Okorafor pointed out that about three years ago, the CBN started a policy to encourage backward integration to conserve foreign exchange and create jobs for the people.

    Included in this policy package, according to him, was the introduction of the highly successful policy, which restricted the sale of forex from the Nigerian foreign exchange market for the importation of some 43 items goods that could be produced in Nigeria.

    Nigeria’s heavy import dependence is majorly responsible for the high forex outflow and the perennial weakness suffered by the naira.

    The central bank had explained that the selective protection policy on FX restriction to some imports was carefully crafted with a view to reversing the multiple challenges of dwindling foreign reserves, contracting Gross Domestic Product (GDP) -recession and what he described as an embarrassing rise in the level of unemployment that confronted the Nigeria economy at the time. According to the CBN, the policy was aimed at stimulating the domestic economy in order to enhance domestic production and protect local industries from undue foreign competition and take-over.

    Therefore, the director of corporate communications noted that arising from the success of the restriction policy, the bank approached some milk importers, like it did for rice, tomato, and starch and asked them to take advantage of CBN’s low-interest loans to begin local milk production instead of relying endlessly on milk imports.

    “Today, although there have been some successful attempts at producing milk locally, the vast majority of the importers still treat this national aspiration with imperial contempt.

    “For the avoidance of doubt, milk importation is not banned. Indeed, the CBN has no such power. All we will do is to restrict the 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 production.

    “The on-going resort to blackmail and undue politicisation through the use of social media attacks can only serve to strengthen our resolve to wean our country from the clutches of powerful and highly influential traders and dealers, who have kept the masses of our people hostage to foreign consumption and condemned our youths to perpetual unemployment.

    “We call on Nigerians to enlist in this vanguard to take our economy back from vested interests, make our country a productive economy and create jobs for our teeming youths,” he said.

    The central bank strongly believes that the success it achieved with rice production and some other commodities under its Anchor Borrowers’ Programme (ABP) can also be extended to the dairy sub-sector.

    Analysts’ Endorsement

    Endorsing the apex bank’s move, Executive Director, DataPro Limited, Mr. Ayodele Adeoye, said: “It is common sense to restrict spending to what you have. It is common sense to prioritize your needs in the face of scare resources. It is a known fact that forex is scarce in Nigeria. Why is it scarce? Nigeria as a country does not produce and export enough to earn it.

    “This is against the fact that we are not producing what we eat and not eating what we produce. Consequently, by our conduct, we restrict the supply of forex into the economy and expand the demand for it.

    “The resultant effect of this is an unfavorable exchange rate regime. It is in this light that the current forex policy plan of CBN regarding milk importation should be endorsed. Any policy that cuts down forex demand and creates jobs for youth that are now becoming very restless should be supported by well-meaning Nigerians.’’

    Also, from a legal perspective, Mr. Chuks Nwana of Chuks Nwana & Co, however, said: “On the face of it, any well-articulated policy on backward integration will enjoy public support, but the real challenge is in the implementation of such policies.

    “There have been many such policies in the past which was hijacked by local merchants and the consequence was high prices and the creation of multi-billionaires on account of a slight change in monetary policy.

    “A lot of stakeholders would have been happier if a transition agenda was created for about a year with massive publicity.

    “In the short-term, it will be nice to request a bi-annual review of the policy to assure ourselves that it is not doing more harm than good.’’

    Giving credence to the CBN’s position, an investment analyst and Partner, at Stransact Partners, Mr. Yomi Salau, said, “Nigerians have depended on importation of dairy products for some decades despite the abundance of cows in the country. At the moment, most Nigerians are actually proud of purchasing imported dairy products.

    “Market survey has revealed that imported dairy products move faster than those produced locally. According to the Food and Agricultural Organisation of the United Nations (FAO), 2015, Nigeria is ranked 14th country in the world with a number of cows reaching about 20 million, yet it is pathetic to note that livestock production has only contributed about 12.7 percent to the nation’s agricultural Gross Domestic Product (GDP).

    “This fact poses threats to the economy. It is in this light that the CBN deemed it necessary to commence a backward integration policy to conserve foreign exchange and create more jobs to the growing populace.

    “The CBN policy should not be mistaken for an outright ban on the importation of milk into the country, but rather to encourage local milk production. Simply put, the policy is aimed at reminding importers of milk about the need to re-jig their entrepreneurial skills and loyalty to the motherland.

    “To justify its restriction of the sale of forex policy, the CBN is currently giving low-interest loans to local producers of Milk. I want to believe that an entrepreneur who is genuinely interested in the economic growth of Nigeria will rather apply for the loan than invest his/her time on destructive criticism of the CBN policy.

    “It is imperative to note that most of the multinational dairy product companies in Nigeria have over time turned themselves into marketing agents for their foreign parent plants instead of operating as manufacturers of dairy products in Nigeria.

    “This development is partly attributable to the high cost of production and the poor state of infrastructural development in the country.

    “Primarily, the policy, if implemented will promote and accelerate local production of milk in the country which will ultimately lead to conserving about $1.5 billion being spent annually on the importation of milk and dairy products.

    “If the government is sincerely interested in enforcing this policy, I want to believe that after a few months, the foreign manufacturers of dairy products will be forced to start establishing new dairy plants in Nigeria.

    “To tackle this challenge, the Nigeria Customs Service must be up and doing. That said, the government (both at Federal and State levels) must also lead by example, by going into the partnership and or investing hugely in the development of local dairy plants.

    “Otherwise, the Nigerian government may end up spending huge sums on the treatment of diseases caused by malnourishment of citizens especially children,’’ he said.

    Advising the government Salau said, ‘‘The government can actually encourage the establishment of dairy farms and processing plants by introducing mouth-watering incentives in addition to the current CBN’s low-interest loans. Examples of the incentives include tax holidays, dairy products free trade zones, etc.

    “As a person, I will suggest that the CBN draw up a fresh timeline for the implementation of the restriction policy such that the existing dairy companies and importers of milk are given sufficient notice period on implementation of the policy.

    “This will also give stakeholders in the dairy products sector, the opportunity to map out sustainable dairy plant investment plans.’’

    The CBN’s move to cut down forex demand and create jobs for youth should be supported by well-meaning Nigerians. To enjoy public support, there is, however, the challenge of properly articulating the good intentions – how, what, when, why and where this policy would be implemented, else the policy may face some challenges.
    • Blogger Comments
    • Facebook Comments


    Item Reviewed: Bold Move to Stimulate Growth in Local Milk Production by CBN, Should Be Commended Rating: 5 Reviewed By: BrandIconImage
    Scroll to Top