In a recent circular signed by the Director, Trade and Exchange, Dr Ozoemena Nnnaji, the CBN restricted the number of companies involved in the importation of milk, its derivatives and dairy products to six. The companies include FrieslandCampina WAMCO Nigeria, Chi Limited, TG Arla Dairy Products Limited, Promasidor Nigeria Limited, Nestle Nigeria plc and Integrated Dairies limited.
This circular is sequel to a prior one released in July 2019 which banned commercial banks and other authorized dealers from accepting Form M for the importation of milk and other dairy products. The CBN noted that the decision was a fallout of its efforts at stimulating local production of milk, revealing that the aforementioned companies showed willingness and had keyed into the apex bank’s backward integration programme to enhance their capacity and improve local production.
Nigeria’s dairy industry is cultivated on a subsistent basis and characterised by low productivity. Despite the abundance of natural resources required for milk production, Nigeria’s milk production estimated at 600,000 MT accounts for only 13% of West African production. Currently, domestic production dwarfs local demand (estimated at 1.3MMT), leading to a shortfall that has often been met by imports. According to the CBN Governor, importation of milk gulps about US$1.2 billion-US$1.5 billion annually.
Asides low level of production, the productivity of cattle breeds has been hampered by long distances covered for grazing, inadequate supply of feed and water, alongside poor rearing practices by dairy farmers. This has resulted in lower milk yields, making local milk manufacturers shun sourcing of raw milk locally and ultimately reducing the commercial viability of local cattle rearing.
In recent years, episodes of conflict between herders and farmers over encroachment on land used for crop farming has deterred local producers from pursuing backward integration.
The recent measure permitting six companies to import milk will ease the upward pressure on prices of domestic dairy products in our view. We, however, believe the federal government needs to compliment the efforts of CBN by improving critical infrastructure (feeder roads and water resources) that encourage investment and more importantly, establish a framework to resolve the long-standing herder-farmer conflict so that local producers will be encouraged to embark on backward integration.
We believe sourcing milk locally will reduce the cost of production for domestic players and in turn lower prices for milk, making it more affordable to Nigerians.