From farm to factory: The local input revolution

Fatima Abu counts her money and finds that she has made N4, 000. It is 12.35 pm, so she will keep N2, 000 in a local bank and reserve the remaining for domestic use. She has supplied 40 litres of raw milk to FrieslandCampina WAMCO, a Dutch dairy maker in Nigeria, for use as input. In return, the company has paid her N100 for each litre (keg).

Her husband owns 40 cows. So, she wakes as early as 4am to milk them. By 5.30am, 40 kegs will have been ready. She is not the only person in the business. There are more than 3, 500 other farmers, mostly women, who wake earlier than her to milk cows. The higher the number of kegs they produce, the more the money they make.

Before now, Abu and other Fulani women would produce raw milk and sell it as Nunu (sour milk), Kindirmo(sour yogurt) or Wara (Yoruba cheese). And they earned less than N30 from a keg. But the story has changed.

Abu, who hails from Fashola community in Oyo State, often takes the keg to a FrieslandCampina collection manager, who examines the milk to ensure it meets stipulated standards.

The rules are clear to all Fulani milk suppliers: No sediments, no bacteria, no debris.

The dairy company does not take milk brought to it without subjecting it to thorough scientific examination.

Adekunle Olayiwola John is in charge of this process at Fashola.  He first runs a coagulation test to determine the amount of bacteria in it and whether or not the milk is still fresh.

After coagulation test, he proceeds with Resazurin test to ascertain the milk’s quality. In fact, his biggest job is to check for wholesomeness as well as for bacteriological and chemical quality of milk.

“The point is that they already know whether the milk will pass the tests or not,” John says.

“Milk rejections have fallen flat now because we train them on what we require,” he adds.

Abu and other Fulani women in the business already understand that milk must be hygienically handled. They are constantly being trained by FriedslandCampina WAMCO’s partners from the Netherlands, who take them through the nitty-gritty of cow milking. The partners are mostly dairy farmers who are doing the same business in a more advanced and integrated way in Europe.

The dairy company is not doing this programme, which it calls Dairy Development Programme (DDP), in Fashola alone. It has extended tentacles to other four communities in Oyo State: Maya, Iseyin, Akele and Saki. After running this programme for eight years, the company has achieved about 10 per cent local input content in its milk.

Due to this trend, many professionals now combine dairy farming with their jobs.

One of these professionals is Funke Majaro, a teacher in a secondary school in Oyo State. Majaro runs F&F Farms and rears cattle. Like Abu, she is a small-scale milk supplier, but the difference is that she understands farming better than Abu. She has 30 cows, but they are more productive as a result of cross-breeding. Through the assistance of FrieslandCampina WAWCO, she crossbreeds her cows with Sokoto or Asha species and produces 1.5 litres or 2 litres a day from one cow, rather than 1 litre.

By definition, cross-breeding is a method of producing an animal or plant by mating or two different species or breeds. Experts say the major advantage of crossbred cattle is that they exhibit the strengths of all breeds from which they descend.

“When I was introduced to rearing cows, I didn’t have the intention of collecting milk until I came in contact with FrieslandCampina. They organised artificial insemination and allowed me to cross-breed my cattle.

“I didn’t know a farmer can make money from milk,” she says.

While sourcing its raw milk, FrieslandCampina has built a model that guarantees peace in the communities in which it has collection centres.  Naturally, the Fulani, who are mainly nomadic herdsmen, move around the North-East and North-West part of Nigeria with their cows. But a combination of climate change and gradual dry-up of Lake Chad are pushing them southward.

This, however, is not without consequences, as these movements often lead to destruction of farmlands and consumption of farm produce by cows.

Nigeria has 36 states and the Federal Capital Territory. More than 15 states have experienced killings and destruction by herdsmen.

Findings show that these herdsmen are angry that their cows are not allowed to graze in the southern and the central part of the country. In revenge, they move their cows into farms. The cows graze on crops planted by farmers. Any protest by farmers is usually met with force and violence, findings show. This is happening in states such as Benue, Delta, Enugu, Nasarawa, and Kogi, among others.

About 230 Tiv people have so far been killed in Doma, Keana, Awe, Obi and Lafia local government areas of Nasarawa State, a North-Central state in Nigeria, said Thomas  Gaar, interim President of Mdzough Tiv, a social-cultural organisation, Nasarawa State chapter.

 In January this year, 73 people were killed by marauding herdsmen in Benue. The killings are still on-going in many communities today.

FrieslandCampina WAMCO’s model is helping to prevent this ugly situation in Oyo State. It keeps communities together in Oyo State by putting herdsmen and their cows in a particular settlement. The Fulani herdsmen speak the local Yoruba language, eat the local food and are now part of the communities.  The cows too are healthier as experts say that movement of cows from place to place reduces their productivity levels.

NB is in too

FrieslandCampina WAMCO is not the only company sourcing local raw materials from farmers.  Nigerian Breweries (NB), the country’s biggest brewer, is also in it. Naira is getting weaker against the dollar, so  rather than keep importing barley, an essential raw material for making beer and malt drinks, the company is partnering local players for regular supply of sorghum, which is a viable substitute. The brewer also needs processed cassava (starch), having entered into an arrangement with local farmers for constant supply of it.   One of such partners is Psaltry International Limited, based in Alayide village, Ado Awaiye near Iseyin, Oyo State.

The cassava processing firm has today become the biggest revelation coming out of the backward integration story. Oluyemisi Iranloye, MD/CEO of the firm, says the firm has created a supply chain of up to 5,000 farm families, including more than 2,000 registered and unregistered out grower farm families, marketers, transporters and retail input suppliers.

“We have two lines producing 20-30 metric tons per day, which is a total of two trailer loads every day. The annual capacity is 10,000 metric tons but we are doing 6,000 metric tons now,” she says.

Nigerian Breweries is the biggest buyer of her cassava starch, followed by Nestle Nigeria Plc and Yale Foods, Ibadan.

Jordi Borrut Bel, managing director of NB, plans to raise NB’s local input preference from 50 to 60 percent. Cassava starch is used by manufacturing companies as binder and to produce maltose (a form of sugar).

Psaltry International Limited is also impacting socio-economic development of the farming communities. Busari Amusa, Baale of Alayide, the host community, believes that the company is making positive impact on the people.

“It is a dream come true. We have electricity, boreholes and the roads are also opening up for accessibility between our farms and the factory. My story has changed. Today, and less than two years of this cassava business, I have a new house, a car and four of my children are in higher institutions of learning. This is unbelievable,” he says in an interview.

 Nestlé is involved too

“We are happy that Nestlé is changing our story,” says Hamzat Abdulraman, one of the maize farmers in northern Nigeria, where Nestlé gets some of its inputs.

Nestlé Nigeria, a food manufacturing giant, sources 80 percent of its maize, sorghum, millet, soya, cassava starch, cocoa powder, and palm olein from more than 41, 600 local farmers and processors scattered across the country. These crops serve as inputs for the Fast-Moving Consumer Goods (FMCGs) giant.

Nestlé Cereals Plan project has over 30,000 farmers who supply 100 percent of the grain requirement for Golden Morn Maize. Through its Sorghum and Millet in the Sahel (SMS) project, now called Nestlé Nigeria & IFDC / 2Scale Project Sorghum & Millet, the food and beverage giant has engaged up to 10,671 farmers.

“The Industry has huge needs and we must help farmers improve their yields to meet them. To achieve real success with connecting farmers to industry, a 360 degree approach which will include the aggregators, processors, and logistics suppliers must be considered within this value chain,” says Mauricio Alarcon, CEO of Nestlé Nigeria Plc.

 The Flour Mills’ formula

Nigeria’s biggest flour miller Flour Mills of Nigeria Plc has its own farms and engages local farmers to work as partners.  It, therefore, sources local raw materials from its own farms.

Its subsidiary Agri Palm Limited located at Iguiye and Ugbogui near Benin City (with 4.500 hectares of oil palm plantation)  supplies palm oil, olein and other by-products of palm oil to the group.

Another subsidiary— Agro-allied Syrups Limited—which has cultivated 800 hectares of cassava in Shao, Kwara State, in the last 16 months, supplies starch to the group. However, some of its wheat flour is sourced from northern Nigeria.

Dufil is also part of the game

Any time you eat Indomie noodles, you are eating over 90 per cent of local vegetable oil and flour. De-United Foods (Dufil) is noted for sourcing local maize from farmers. The firm started oil palm plantations in 2013 as part of its backward integration.

Unilever is also in the game

Unilever, a FMCG firm, sources palm oil for its BlueBand and soaps. The company is also getting local herbs and spices for its seasoning cubes. Currently, it is investing in backward integration in this area.

Under its ‘Partner to Win’ initiative, it  partners local farmers and intermediary companies to source inputs.

“Already, we have achieved over 90 per cent in local sourcing of packaging materials. The aim is to achieve 100 per cent by the end of 2019 and overcome the current challenges of local vendor’s capacity to meet up with global standards. In agro-allied sector, Unilever is partnering with intermediary companies, for the supply of cassava and starch,” Thomas Mwanza,  procurement director for  Unilever West Africa, says.

Promasidor too

Promasidor Nigeria Limited, makers of Cowbell Milk, Loya Milk, Miksi Milk, Onga seasoning, and Top Tea are also sourcing some of its inputs locally. It recently unveiled Nigeria’s first zip-lock packaged ready-to-go cereal.

Anders Einarsson, managing director of Promasidor Nigeria, says 75 per cent of the product’s inputs are sourced locally, adding that the decision to look inward for raw materials is informed by the company’s desire to contribute to the growth of agricultural value chain.

“The raw materials of SunVita are about 75 per cent sourced locally. This demonstrates our commitment to backward integration and local capacity utilisation in line with the economic need of the country.”

Technology is also involved

Amaete Umanah returned from the United States in 2014. He has set up several companies since then, including Inseckp. This firm has developed a solution for poultry farmers by using insects to produce animal feeds.

The cost of a bag of feed for layers is over N3,500 in major markets, but this solution costs half this price.

“The birds are also bigger than those fed with feeds in the market,” Umanah  tells me.

Numbers do not lie

Local input content, which measures the rate at which manufacturing companies in Nigeria source local raw materials, rose to 60.72 per cent in the first half of 2017 from 46.3 per cent recorded in the corresponding half of 2016, data from the Manufacturers Association of Nigeria (MAN) say.  It further rose to 63.2 per cent in the second half of 2017 as against 51.1 per cent in the same period of 2016. There was a slight reduction in the first half of 2018 as utilisation of local raw-materials by manufacturers stood at  56.6 per cent.

Why local sourcing is gaining traction

Before 2015, manufacturers had been looking more outwardly for inputs. However, crude oil price dropped from $100 per barrel to less than $50 in 2016 and part of 2017, resulting in low dollar inflows into the Nigerian economy. Nigeria depends on crude oil for 90 per cent of its foreign exchange and 75 per cent of its revenue. So, drop in crude oil price meant low dollar inflows for local manufacturers seeking to buy raw materials from abroad.  Given the situation, manufacturers began to seek local alternatives to save costs and reduce pressure on the Naira.

Frank Udemba Jacobs, former president of MAN, told BusinessDay in 2016 that manufacturers were changing their machines to suit local inputs.

“We are increasingly looking inwards, embracing resource-based and import-substitution industrialisation. While we keep exploring local inputs, we know this could need retooling and adjusting of machinery. We encourage those with the capacity to go into backward integration due to foreign exchange challenges,” Jacobs, who is the chairman of Jacobs Wines, had said.

Not just in Nigeria

In Mozambique today, SABMiller produces beer known as Impala from cassava sourced mainly from local farmers.

Also, Kenya Breweries Limited (KBL) sources its sorghum locally. It has acquired 30,000 acres of farming land, providing farmers with 80 tonnes of seeds and advisory support to achieve 100 per cent local input content.

Similarly, Africa Improved Foods (AIF), which is behind the Nootri range of fortified foods for infants and breast feeding mothers gets  5,000 tonnes of maize and 500 tonnes of soya beans from local farmers and cooperatives in Eastern and Southern African countries.

“Therefore, the more we source locally, the better for the company as it reduces the cost of doing business,” Prosper Ndayiragije, the company’s country manager for Rwanda, says.

Economy is better for it

African countries are well-known for export of raw materials.

These raw materials are sold at very low prices to Europeans, Americans and Asians, who in turn convert them into finished goods.

“The prices of these finished goods are often five to ten times the raw materials’,” says Attah Anzaku, an exporter.

In 2013, the Netherlands bought sheep, goat skins and leather worth $622,407 from Nigeria. Italy, known widely as producer of quality shoes and leather products, spent $355.63 million buying these commodities from Nigeria, according to Nigeria’s non-oil export data.

Also, Spain bought the commodities worth $51.67 million, while India spent $24 million buying them from Africa’s largest economy. In a similar fashion, China bought Nigeria’s leather worth $93.8 million. Incidentally, this was the only major non-oil product bought by China from Nigeria, according to the data.

Shoe makers in Nigeria accuse traders of selling animal skins, their main input, to the highest bidder, pushing them to seek inferior ones from China.

“Once the tanneries are through with production, they export the entire thing to the detriment of local leather works manufacturers. This is affecting the finished leather sector in Lagos, Onitsha and especially the Aba cluster,” Ken Anyanwu, national secretary, Association of Leather and Allied Industrialists of Nigeria (ALAIN) tells BusinessDay.

Experts say increased raw materials sourcing by manufacturers, when done sustainably, will not only create a number of value chains and jobs, but will also bring huge foreign exchange and development.

  “We need to ensure that we have the capacity to support effective value- addition to enhance our revenues position on the international market. This calls for policy harmonisation, coordination, and effective collaboration between the public and private sectors to drive effective and time tested industrial framework to fully utilise our natural resource to the best of international expectations,” Yaw Osafo-Maafo, senior minister in Ghana said, while addressing Nigerian manufacturers.



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