Nigeria’s efforts to boost milk production falter

In July 2019, the Central Bank of Nigeria (CBN) included milk and dairy products on its list of items not eligible for foreign exchange (FX), leading to the restriction of milk imports into the country.

The decision banned commercial banks and other authorised dealers from accepting Form M – a mandatory document to monitor goods that are imported into the country – for milk and dairy products. This meant that milk importers would be forced to resort to the more highly priced parallel market to obtain foreign exchange, making importation more expensive.

In a statement, the CBN’s director of communications, Isaac Okorafor, stressed that the bank was not banning milk importation but that the FX restrictions were necessary to encourage local production.

The CBN’s list of items not eligible for foreign exchange was introduced in 2015 in  support of Nigeria’s policy of “backward integration” – a form of import substitution aimed at conserving foreign exchange and creating jobs. Milk now joined commodities such as rice, tomatoes and starch on the list.

Okorafor said that Nigeria had been heavily dependent on milk imports for over 60 years and there was a need to channel energy and funds into improving and increasing local production. Nigeria spends between $1.2bn and $1.5bn a year on milk imports.

He stated that the bank had approached milk importers and asked them to take advantage of the CBN’s low-interest loans to begin local milk production, but that although there had been some successes the vast majority of importers had continued to treat this “national aspiration” with “imperial contempt”.

At the same time, he stressed that the bank was “ready and able to provide the needed finance to enable investors who genuinely want to engage in milk production”.

“That is a very high import product into the country, given that it is a product that we are convinced can be produced in Nigeria,” CBN governor Godwin Emiefele told journalists after the announcement of restrictions.

Prices spike at market

Yet the decision by the CBN led to shortfalls in milk production and an increase in the prices of dairy products across the country. Milk sellers at markets in Lagos complained of scarcity and an increase in prices.

“Milk became scarce and the prices went up,” says Chinwe Amadi, a milk wholesaler at the popular Balogun market in Lagos. “The Marvel milk we had, we used to sell between N11,000 [$29] to N13,000 for the small [wholesale] size. Then we started to sell N15,000 per carton. The big size of it, we used to sell N20,000 but we started selling N25,000 per carton.”

Despite the potential for producing milk in large quantities, Nigeria’s domestic production does not meet consumer demand. Nigeria’s annual milk production is estimated at 500,000 tonnes while the annual local demand for milk stands at an average of 1.7m tonnes, with the shortfall imported into the country.

Nigeria’s cattle rearing sector has met with numerous challenges including a lack of feed, water, and poor rearing techniques. Desertification in the north as a result of climate change has led to cattle and herders travelling far south for grazing and given rise to conflict with farmers. Meanwhile, outdated cattle rearing practices also lead to lower milk yields per cow, leading local manufacturers to resist sourcing raw milk locally.

While the CBN has been keen to reduce currency outflows through milk importation, it was clear that the local market did not yet have the industrial capability to produce the quality and quantity of milk required domestically. As a result, the CBN started giving loans to cattle farmers to boost production.

“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 to you,” Emiefele said on Twitter following the announcement of restrictions.

Sourcing locally

The CBN has also led efforts to encourage foreign milk manufacturers to source produce in Nigeria. Milk manufacturers including FrieslandCampina WAMCO Nigeria; Chi, and TG Arla Dairy Products have started to engage with state governments and local cattle farmers to partner with them to source milk locally for production.

In September 2019, the Kaduna state government signed a Memorandum of Understanding (MoU) with Arla Foods International, a Denmark-based milk production company, to source milk locally from its cattle farmers. Now operational, the aim of the project is to create 50,000 jobs. Governor Nasir el-Rufai of Kaduna said the investment in the livestock sector would help to increase production among nomadic herdsmen.

“Our hope is that what we started with Arla leads to the development of the grazing reserve in Kubau local government; and we want to develop jointly with them. [We] will show the itinerant nomadic herdsmen that it is possible to engage in modern livestock production without having to go up and down the country,” he said.

In November 2019, the Niger State government signed an MOU with FrieslandCampina WAMCO Nigeria to provide 10,000 hectares of land at the Bobi Grazing Reserve for milk production.

Policy failure?

Despite the deals, progress has been slow. The challenge of meeting targets by local farmers – who lack the equipment and expertise of industrial-scale foreign producers despite CBN support – and the unwillingness of milk manufacturers to source milk from local production led to the lifting of restrictions for some companies by the CBN in February 2020.

The CBN asked commercial banks to start accepting Form M again from Nestlé Nigeria, FrieslandCampina, HBC Chi, Promasidor Nigeria, TG Arla Dairy Products and Integrated Dairies Limited.

The bank stated that the decision to lift the ban was due to the failure of its efforts at stimulating the local production of milk. Despite the failure to reach its ambitious target, efforts continue. It said that the aim was to increase milk production in the country to 550,000 tonnes within the next 12 months.

Citizens have been left frustrated by the experiment with backward integration. Though there is again enough milk supply in the country, prices continue to rise, said Jane Frances Onuoha, a young Nigerian citizen.

“It is devastating that the price of milk in Nigeria is increasing on a daily basis,” she lamented. “Milk is one of the essential dairy products and it should not be expensive. We have a lot of cattle in Nigeria. So why should the price of milk always increase?”

– Kelechukwu Iruoma