In the latest turn of events in the Nigerian milk industry, the Central Bank of Nigeria (CBN) has lifted the ban against milk importation, but restricted the right to six dairy companies only.
In a circular published by the Apex bank on Tuesday, the new authorization was granted only to companies that keyed into the integration initiative of the Bank.
“As part of efforts to increase local production of milk, its derivatives and dairy products, the Central Bank of Nigeria has engaged with some companies in the industry who have keyed into the bank’s backward integration program to enhance their capacity and improve local milk production.
“Accordingly, all authorized dealers are to note that all Forms ‘M’ for the importation of milk and its derivatives shall only be allowed for the following: FrieslandCampina WAMCO Nigeria, Chi Limited, TG Arla Dairy products Limited, Promisador Nigeria Limited, Nestle Nigeria Plc (MSK only) and integrated Dairies Limited.
“For the avoidance of doubt, all established Forms ‘M’ for the importation of milk and its derivatives for companies other than the above for which shipment has not taken place should be cancelled immediately,” the statement from CBN said.
In July last year, CBN added milk to the items restricted from forex access; it was in a bid to boost local production of dairy products. Therefore, the Apex bank urged stakeholders to embrace backward integration to cut the $1.2 billion being spent on milk importation annually. Many were thrown out of business since they couldn’t keep up with the new rules, a few others remained.
It has been about six months since the trial of the backward integration started, and the attempt appears to have failed to live up to its aim. Currently, Nigeria’s milk production stands at about 500,000 metric tonnes per year, which leaves a demand gap of 1.7 million tonnes.
The director, Corporate Communications Department at the CBN, Isaac Okoroafor, said the Apex bank engaged the six companies because they showed interest in the backward integration initiative of the Bank, and have shown their willingness to support it. He said the aim of the Central Bank is to increase milk production to 550,000 at the end of the year.
As the CBN continues to push to curtail the amount of forex going into importation of goods that can be produced in Nigeria, there is a chance that it could be attained. But it will happen at the detriment of the sufficiency of goods and services.
For instance, given the existing demand gap in milk, the possibility of the six selected companies meeting the demand is not guaranteed, and that means paying more for the products due to its scarcity.
Attaining sufficiency in milk production following the 550,000 tonnes per annum projected by CBN will take 34 years. If the exploding population is considered, it may never be attained.
This decision has been criticized by experts who believe it’s more political than economic. In 2019, Dr. Kunle Hamilton, the Chief Executive Officer of Virgin Consulting UK and a Consultant to a dairy multinational said the CBN is using politics to make economic decisions.
“We need to consider that the manufacturers have always supported the decision to backwardly integrate, and that is why our members are exploring local sourcing of raw materials. However, stakeholders have to agree on the right step to take. The effects of such a decision need to be considered to ensure that artificial scarcity does not occur due to the inability to meet local demands.
“There should be the right mix of measures and the right timing. There should be fair hearing from the stakeholders. The CBN should not carry out the action without adequately carrying manufacturers along,” he said.
Stakeholders complain that the deficiencies in dairy productions have more to do with infrastructural decays in the country than it has to do with forex. Unfortunately, the infrastructural challenges that have been obstructing production seem not to be part of the issues the CBN’s backward integration aims to address.
In the end of milk importation ban trial, the whole idea failed to boost local production or to create any opportunity for existing companies to thrive. It glaringly pointed to where the problem lies. So narrowing access to Form “M” to six companies only is believed to be another experiment that its outcome will not be different from the first.