Dairy makers look inwards for raw milk to beat FX crunch

Given the foreign exchange crunch and annual milk import bill of $1.3 billion, dairy makers in Nigeria are looking increasingly inwards for raw milk from local cow breeds.

Through its Dairy Development Programme (DDP), FrieslandCampina WAMCO now sources some quantity of raw milk from Fulani herdsmen, Real Sector Watch has found.

The firm currently has four locations in Oyo State where it houses and supports local herdsmen who provide milk from local cows. FrieslandCampina’s model has reduced clashes between herdsmen and farmers in Oyo State to almost zero, while guaranteeing ready market for them.

“Sourcing raw milk from local communities is a good initiative,” said Imke de Boer, professor of animal science, Wageningen University, the Netherlands, who spoke with Real Sector Watch after a  tour of FrieslandCampina WAMCO’s  facility in Oyo State recently.

“This is a model every other dairy company in Nigeria should emulate. I am impressed with the level of FrieslandCampina’s investment here and how they work with local farmers. What we will do is to share knowledge with local farmers, but we don’t need to transfer knowledge which works in other countries straight to this place. We want home-grown solutions,” Imke de Boer said.

Nigeria’s dairy industry encompasses milk, cheese, yoghurt and sour milk. According to Euromonitor International, the growth of cheese will likely remain steady at two percent in volume. Promasidor Nigeria Limited led sales in cheese in both 2014 and 2015, with a 30 percent retail value share. CHI Limited led sales of yoghurt and sour milk products both in 2014 and 2015 in Nigeria with a 34 percent value share, said Euromonitor International.

In condensed and evaporated milk category, FrieslandCampina Wamco led the category with a 75 percent value share both in 2014 and 2015, as Its Peak brand remains the most popular condensed/evaporated milk brand in Nigeria, targeting consumers across income groups.

“I think the FX situation has provided an opportunity for diary firms to look inwards,” Tunde Oyelola, vice president of PZ Cussons Nigeria Plc, told Real Sector Watch.

“What we do as a company is to buy milk from local herdsmen in Minna (Niger State) and Ilorin (Kwara State) and test it in our laboratory to check if it meets standards. We basically help local farmers to produce more. But I think the industry needs to do more,” Oyelola, who is in charge of the project for PZ Cussons, said.

A 2015 Sahel Capital report on Nigeria’s dairy industry entitled ‘How Fresh Is Our Milk’ says local milk production is being hampered by low milk yields of domestic cattle, low levels of cattle nutrition, animal health challenges, poor management and husbandry practices, and low utilisation of improved livestock technologies. Sahel Capital claims that in 2013, Nigeria produced only 591,470 metric tonnes (MT) of milk from 2.3 million cows. The country’s average daily yield per cow is 0.5 to 2 litres from indigenous breeds, which is very low in comparison to 35-40 litres in South Africa, 50 litres in New Zealand, and 70 litres in the U.S, according to Sahel Capital.

Nigeria is currently in short of FX on the back of oil price crash and poor diversification of its revenue sources. Oil and minerals provide 75 percent of Nigeria’s FX and 90 percent of its revenue. Manufacturers are the worst hit, now struggling to get FX to import their inputs. According to Matthew Ibeabuchi, CEO of MD Services Limited, the dairy industry’s local input content is still low at below 10 percent, urging other firms to go local to create jobs and reduce pressure on the exchange market.

Frank Udemba Jacobs, president, Manufacturers Association of Nigeria (MAN), told Real Sector Watch that manufacturers have now been forced to develop local inputs to reduce the pressure of searching for FX which is currently in short supply.

 

ODINAKA ANUDU

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