Governor of the Central Bank of Nigeria Godwin Emefiele on Tuesday, at the July Monetary Policy Committee meeting, said the apex bank was adding milk to the list of 43 items restricted from the FX market.
The decision, he said, was based on high cost of importing milk which stands between $1.2 billion to $1.5 billion.
“The era of forex restriction on milk importation is coming sooner than expected,” he said.
The bank said it was ready to lend to players in the milk industry to commence the production of the diary product locally.
In the light of the impending restriction, the major question is, should Nigeria restrict milk from the FX market?
First consider the numbers. Nigeria produces 700,000 metric tons (MT) of dairy products annually but demand stands at 1.3 million MT, according to the Federal Ministry of Agriculture.
This means there is a shortfall of 600,000 MT.
Secondly, average yield per cow in Nigeria is one litre per day, which is among the lowest in the world.
Other countries have done much better. The average milk yield per day from exotic/crossbred cows in India, United States, the Netherlands, Turkey, China and India is between 30 litres and 90 litres per cow per day, statistics shows.
“You have to do a lot of cross-breeding and artificial insemination to get a lot of milk, and this takes a lot of investments,” an experienced dairy farmer said.
More so, all over the world, dairy farmers build their factories close to sites where they do backward integration. The reason is that raw milk from cows can go sour if located far away from milk collection and processing sites.
“You milk goes sour or perishes after two hours,” an expert in milk processing, who does not want his name on print, said.
“If you have to do backward integration in Jos, your milk processing and collection centres must be in Jos, otherwise you lose everything,” the expert said. In Nigeria, Friesland Campina Wamco is the only milk maker with active backward integration projects.
They have such projects in Fasola, Maya, Saki, Iseyin and Akele, all in Oyo State. Despite this, the company gets far less than 10 percent of their milk needs from hundreds of cows they have owing to issues around low yield, and huge financial requirements.
Bismarck Rewane, CEO Financial Derivatives, however, said the process of backward integration requires time and planning to effectively implement.
He noted that the cost of a lactating cow is quite significant and so is the infrastructure to do so and that process of lactation would create a whole new business for milk producers who would have to find use for the by-products from milk.
“Should the importer stay 60 years without doing anything? No. The incentives and packaging should have been done early,” Rewane said. “You have got to give the incentives and time to backward integrate.”
On Tuesday, Emefiele said producing milk is not rocket science.
“Milk production is simply about getting a cow, giving it water and pasture and position the cow in a particular place,” he said, adding that a failed attempt at backward integration in the milk industry has contributed to the herdsmen crisis.
He said the bank met with Wamco, the oldest milk manufacturer in Nigeria and appealed to them to get involved in backward integration and begin the process of milk production in Nigeria.
Expectations of the apex bank was that milk producers would explore options of acquiring land and grazing their own cows, or being complimented with pastoralists who own farms making arrangement to get land from them.
Alternatively, milk producer could mull supporting the pastoralists by keeping them in a place and providing basic necessities for them to survive and in return they get milk for production.
“This is what we expect these companies to do but they have not complied even after three years,” Emefiele said.
However, checks show WAMCO, through its Dairy Development Programme (DDP) started since 2010, empowers about 4,000 farmers.
Analysts believe restricting milk from the FX market may lead to some exits to other African countries in the wake of African Continental Free Trade Area (AfCFTA), job losses, and increased milk smuggling.
They add that the approach of the Central Bank at influencing the country’s real sector might be counterproductive.
“The broader issue is about the shock of policy on investment,” said Muda Yusuf, director general of the Lagos Chamber of Commerce and Industry (LCCI).
“In my view, the cost of policy most of the times outweighs the benefits. It (CBN regulation) happened in palm oil industry, textile industry and now we are coming to milk. Who knows where next?” he said.
According to Yusuf, even though backward integration is good for the economy, Nigeria currently lacks the policies and investments to realise such an objective.
“I don’t think it fair to expect those in the business of producing milk to take on the responsibility of rearing cows, growing grasses and caring for herdsmen,” Yusuf noted.
GBEMI FAMINU & SEGUN ADAMS
