A good moo from the Central Bank

As sound bites go, part of the speech of the Governor of Central Bank of Nigeria (CBN) which he made after the meeting of the July 2019 edition of the Monetary Policy Committee (MPC) held in Abuja, took many stakeholders in the dairy industry by surprise. So to speak, it was a good moo from the Central Bank, as the speech among other measures also set out the government’s resolve to implement forex restrictions on milk importation.

That morning I was among a huddle of stake holders of the Nigerian Dairy Industry attending a workshop at the splendid Fraser Suites, located in the central area, Abuja. As the speech of the CBN Governor wafted through the social media in the afternoon the meeting room went abuzz with excitement. You could hear the animated discussions in hushed, low tones across the tables.

It was a coincidence of sorts. The workshop was holding under the auspices of Sahel Consulting who called stakeholders in the industry to appraise their involvement in in the National Dairy Development Program which they partnered with some leading dairy processors as well as some development agencies and federal and states governments of the federation. Sahel Consult had a successful two and a half-year outing in both Kaduna and Kano States where they were closely involved in the L&Z Farms in Kano and Milcopal in Kaduna.

Their involvement with the herding communities had seen a significant step up in the improvement of livelihood, productivity, nutrition, and empowerment of small holder dairy farmers and the communities in which they live. I had at one time or the other made a tour of those herding clusters in Kano and Kaduna states and I guess it was the success of those enterprises that is now emboldening Sahel to want to do more in those areas and also go into a multiple of more states in the coming few months.

It was therefore a welcome coincidence that this pronouncement came at a time a workshop of this nature was taking place where the wellbeing of the dairy industry was a focal point. The CBN Governor was said to be briefing journalists after the MPC meeting to the effect that the restrictions on forex would be a boost to backward integration in the milk production chain thereby having mitigating effect on the annual import bill for milk now running at between a whopping $1.2bn and $1.5bn.

Besides giving the importers of milk access to forex the CBN had also offered the milk production companies low interest loans to bolster their local production. The offer according to the CBN Governor was treated with ‘imperial contempt’. Since milk is a product that could be produced within the country there would be no need to continue to import it.

The CBN Governor was quoted to be asking rhetorically: ‘What does it take to produce milk? Get a cow, give it lots of water and food, position the cow in a place without it roaming around, and milk it. The reason our cows can’t produce enough milk is that they roam around. They don’t have enough water to drink, and consume whatever they find. As they roam from one place to another, they destroy farms and farm produce and this leads to clashes.’

The CBN governor told the journalists that when the forex restrictions started some years ago they considered including milk in the list of items to be banned but had to postpone till WAMCO (the producers of Peak milk brand) the oldest milk importer was properly briefed to backward integrate and begin serious local production. He explained that this could be done in either way. The milk importers can acquire land, can ranch their cows and the farm could also be complemented by the pastoralists’ smallholder arrangements for a source of additional milk. Another way could see the big milk companies in Nigeria directly supporting the pastoralists, get them concentrated in one place, rather than roam around, provide them facilities, water, hospitals, schools, sell them grass, and they can get milk from them to recoup their investment.

I recall that the Vice-President had made a similar plea in September last year when he received the Global CEO of Friesland Campina (owners of WAMCO) Hein Schumacher along with Robert Petri, the Netherlands Ambassador to Nigeria. He pointedly told them to do more about backward integration by raising local content of the raw material they use from a mere 10% to 70% in the next six years. He said: ‘My view is that if we go at the current rate it will be extremely difficult for the local producers to move up.’

Admittedly, government had considered the effort to raise local content to be rather slow and had to, as a last resort, prompt the CBN to begin to withdraw the carrots. It is apparent that the foreign dairy companies operating in Nigeria have all had good track record of organizing herders into cooperatives for successful milk production. After all they came from European countries where such had been the practice for years. No doubt WAMCO has done a lot of pioneering work in Oyo State where they had a successful Dairy Development Program of a cluster of herding communities around a milk collection centre and they are now poised to be moving up to the northern states. ARLA (makers of Dano milk) another giant in the industry has had successful engagements with clusters of herders around big ranches in the north, Kaduna and Kano states in particular. However, this is still scratching the surface in the larger industry because the overwhelming majority of the cows are with the pastoralists roaming about. In all considered views there should be a sustained plan with a proper timeline to settle them where water and forage would be available all the year round. This should go in tandem with the encouragement of investors to build ranches.

Nevertheless, stakeholders still see the CBN’s plan to restrict forex for the importation of milk as a laudable whistle-blowing start. Many with whom we chatted, over lunch, expressed delight that at last awareness of the promise of the dairy industry is sinking in and see this measure by the government as one step further to attain success. But they also think that restricting forex might not be the be-all and end-all, as determined importers would only switch gear to obtain their forex from autonomous sources which would defeat the laudable intentions of the government.

What is needed from the government would probably be a cocktail of measures from the regulatory authorities. Many see the imposition of tariffs on the importation of all milk products as one way out of this logjam. A key stake holder, M D Abubakar of L&Z farms, Kano, suggests that the tariff regime should be reviewed from the present 5% to 10% upwards to a base of 25%, as a means of effectively discouraging importers. This regime then can be graduated to move upwards as local production picks up. He said from his close association with the industry world-wide he found that it was these tariff measures that took countries such as India and Kenya to positions of local self-sufficiency and even exporting dairy products to other countries. After all it is the same kinds of tariffs that were extended to the production of cement, rice, poultry and the like to boost their local production.

In addition to raising the tariff regime, other stakeholders believe that a review of the duty imposed on importation of dairy equipment down to zero would be a booster to the local production.

It is not uhuru, but the moo from the CBN is surely a good sign.