How to save Nigeria’s dairy sector – L&Z Yoghurt boss

Alhaji Muhammadu Damakka Abubakar is the Executive Director of L&Z Integrated Farms Ltd, producer of L&Z Yoghurt. In this interview, Alhaji Muhammadu, who is also the National President of Commercial Dairy Ranchers Association of Nigeria (CODARAN), speaks on how the nation’s dairy sector can be put in proper shape amid threat by activities of multinational companies.

You have been playing crucial roles in the dairy sector. What would you say are the main challenges facing quality delivery in the sector?

The dairy sector has many challenges, but the main challenge has to do with issues at the downstream sector of the value chain, which is the market. We are operating in a market where multinationals largely dominate; they import milk from climes where whatever is a challenge to us here, is taken for granted by the farmers in those societies or environments.

These multinationals enjoy some incentives because they are exporting to us and when they come to our borders, they enjoy very low tariffs. So their product, in the end, is cheaper in our own markets than even the cost of producing it locally.

So, your inability to compete with super imports is a major challenge but if that is fixed, every other thing will fall in place.

To me, unless there is a structural realignment and a drastic and aggressive policy realignment that will favour local producers and other local players in the downstream sector, every other thing is a joke.

The Central Bank of Nigeria recently came up with an initiative aimed at resuscitating the diary value-chain and your company is one of the key players. What is the initiative all about?

Actually, the Central Bank of Nigeria has recognised that there is a gap in the dairy space and I think it keyed into it by trying to intervene through monetary policy but as I mentioned, this is only an intervention. It is not a key component of a sustainable dairy development programme; it is just an intervention, which is always in short term and most often not sustainable. What we need is a comprehensive and robust import substitution programme.

However, the good thing about the intervention is that it is directed at backward integration and this is what we have been clamouring for. I don’t have the complete details of the intervention policy but I think from the small write-ups we did and some of what we heard when we attended meetings, the CBN wants to reduce the foreign exchange allocation to importers of dairy products and it now zeroes it to only six all of which, except one, are also multinationals – the largest volume of players in the industry.

What the CBN in its wisdom and to my own understanding is doing is to now say okay, you are a major importer, you spend a lot of foreign exchange to get or to import dairy products to Nigeria. So now we want you to get involved in the backward integration, so that over time as we are reducing import, we are increasing local production.

But as I told you, as local players, anybody that hinges on backward integration gets away with it. So, the entire concept is to encourage backward integration and CBN, being a monetary policy institution, has no other tool to use than that and it is now using it as an intervention tool to cow all these multinationals into backward integration. So, we should be happy with it.

But what we are saying is that there should be some adjustments and some realignment in the integration policy, so that we the local producers can benefit and we should be encouraged and supported to be the key players in the backward integration programme because we have no other place, but Nigeria and I think we should be more patriotic than the multinationals.

We are not sad that the CBN is using the multinationals for the backward integration strategy but local producers as Nigerians who have been involved in the local production since time immemorial, should be encouraged and made the key drivers, rather than the multinationals.

Multinationals should plan on our successes rather than we trying to plan on their successes because at the end of the day, the success of the multinationals, in whatever way we look at it, is the success of their own local farmers in their countries, which ultimately might be to the detriment of our local producers.

How can the local farmers benefit from this CBN initiative?

As I said, once it is backward integration, then it means that the multinationals who are major users of milk will now source their milk from the local producers. So, they provide the market for the local producers. By the time the multinationals get involved in the backward integration, the assumption is that the local producers will be able to get access to market as they will provide market to the local producers and bring technology and investment into the space and by extension, local producers will benefit. This is the beautiful scenario envisaged.

But as I said, it is only an assumption. It will be more assured if the local producers are the drivers. But as it is now, the multinationals are the drivers and the assumption is that they are going to drive the backward integration and local dairy development in our country, which has always been a mirage.

Maybe the concern of some stakeholders is that the local producers may not have the capacity to actually drive this value-chain… cut in.

You see, I have said this several times to media organisations. It doesn’t need any research. It takes common sense. In the 1999 livestock census, we have about 20 million cows in the country. And if you take half of those to be producing, even if it is one litre, you are talking about 10 million litres a day and the consumption of milk a day in Nigeria is five million litres. So, what do we need again? This is to tell you that we have enough. What is lacking is the linkage between the production and the markets, which is being controlled by the multinationals.

This linkage is also not a mirage. This is not something that is not visible.  It is simply the development of the mainstream sector, which is the development of infrastructures that we collectively need for these resources – such as the development of milk collection centres and then milk evacuation tanks which you will see moving from one milk collection centre to the other.

This you see in all other countries in the world. If this is not available, then whatever the multinationals are trying to portray is a sham.

So, that’s why we are happy with the CBN intervention, but it must be visible. I know a multinational that now goes and organises some pockets of characters around to sign MoU, and then rush to the CBN claiming that they have written a Memorandum of Understanding (MoU). We don’t need Memorandum of Understanding with any group. What we need is visible and physical movement of equipment and the establishment of infrastructures by these multinationals to show and demonstrate that there is real backward integration.

You made mention of number of litres per cow when you talked about rough estimate of the number of cows in the country. The main problem so far in the Nigerian dairy sector is the quantity of milk some of our animals produce which is said to be low compared to what is obtainable in some countries. What do you think is responsible and how can we overcome this challenge?

That is what I call mental enslavement. That is the story that has been fed to us since time immemorial, but mercifully, countries like India, Kenya, Uganda, Indonesia, Malaysia have proved that, that is not true. Because they are also not in the 30 litres cow producing environments. They are in the one litre, two litres milk producing environments. I keep saying it, it is not the volume of milk that a cow produces but the amount aggregated.

We are talking of our need for about five million litres and I’ve told you here that we have 10 million litres, then, what is your problem with who produces that 10 million litres? Why would you now be caged in your brain that you are looking up to 30 litres per cow. The best thing is for you to go to Alaska where you have the best environment to produce such. What I know is that no matter what you think, you are not likely to have a 40 litre-producing cow in a tropical environment.

Unfortunately, this thought is what has kept us back; as instead of going to the real problem of market, we are always going back to research and developing cows that produce 30 litres. This has been the problem for over 60 years.

If we put infrastructure in place to meet the real problem, we will have a decent diary sector. Once a farmer realises or gets value from one litre, you don’t need to organise conference for him; he will go back on his own to develop his cow because it makes economic sense to get more litres.

Then, the private sector will start patronising the research institutes because they are now getting value for their diary. By the time they start patronising, the institutes will be challenged to start doing or continue developing animals that will give more milk because they know the market and the demand is there.

It doesn’t matter if you have a cow that produces 30 litres when there is no ready market for what you are producing.

Let’s talk briefly about the National Livestock Development Plan. What do you think of this plan?

I have heard about it. I’m not privileged to be part of any of its programmes and as an association, we have not engaged them yet. So, until we do that, I will not be able to tell you what it is that they are doing.