by Winifred Adeosun

Policy & Governance Area: Economic Growth and Human Development

The Lagos Chamber of Commerce and Industry (LCCI) has reacted to the Central Bank of Nigeria (CBN)’s policy on milk importation; the LCCI revealed that the policy will do more harm than good to investors and the citizenry in general as it is bound to trigger disruptions in the business environment. The Director General of the LCCI, Mr. Muda Yusuf via a statement, stated that the policy is tantamount to a ban on importation of milk seeing that most banks would be reluctant to processing Form M for any product on the CBN forex exclusion list.

Comments

During the last Monetary Policy Committee (PMC) meeting which held on the 23rd of July, 2019 in Abuja, the Central Bank of Nigeria (CBN) Governor – Godwin Emefiele announced the apex bank’s plan to put forex restriction on milk[ii]. The decision of the CBN has prompted mixed reactions from different stake holders and interest groups as some groups have applauded the initiative while others have frowned at the proposed plan. For instance, some economic experts have lauded the bank’s idea to put forex restriction on imported dairy products[iii], while the Lagos Chamber of Commerce and Industry (LCCI) have kicked against the proposed policy as it stated that the local dairy cows may not be able to sustain the economy[iv].

In trying to figure out which interest group is right in its reaction; their differing positions and reactions have sprung up various questions and concerns which are in need of answers. For instance, what is the rate of milk consumption in Nigeria? What percentage of this consumption does the local market cater for? Can the local production and supply of milk meet the current demand? Will there be supply gaps? Will the prices of milk increase? Will the policy boost the economy? Does the policy favour the suppliers, investors or consumers of milk? What exactly is the aim and implication of this policy on the Nigerian economy?

Nigeria consumes an estimated 1.7 million tonnes of milk yearly, but unfortunately produces only 34 per cent to meet demand as over 1 million tonnes deficit is imported, and this costs $480.3 million (N173.3 billion)[v]. According to PricewaterhouseCoopers (PwC) Nigeria, Nigeria’s output of milk per cow per day is about 1 litre, compared to other African countries like Kenya and Uganda with between 30 to 40 litres of milk per cow per day[vi]. Also, Nigeria’s 0.6 million tonnes of milk production is the lowest in the world as compared to Africa and Asia’s average of 0.9 million tonnes and 6.6 million tonnes, respectively[vii]. The implication of this, is that, the market for production of milk and local production of dairy presently cannot meet the demand for milk in Nigeria. This means that, if there is a forex ban for dairy, there might be increase in price of the commodity considering the fact that demand will be higher than supply. Also, if importers decide to source for forex themselves in order to import dairy, the cost of the product will most likely be high and the effect and cost of same would be borne by the consumer. Meaning that either way the consumer bears the brunt of the policy.

The policy is aimed at promoting local production of milk in the country by utilizing backward integration[viii], as the Director, Corporate Communications, CBN, Isaac Okorafor stated that the decision of the apex bank will encourage investment in local milk production, create jobs and grow the economy[ix]. At first glance, the implications of the policy seem like what the country presently needs, a policy that will increase creation of jobs and boost economic development, however, after a deep thought one may be tempted to come to a conclusion that it may not be as easy as it has been said. This is because, no current plan has been made to cater for the gap in supply that will occur as soon as the policy is enforced, so jobs may not be created and the economy may not grow. However the CBN has promised to support investors who are willing to invest in local production of milk by providing the needed finance to enable investors who genuinely want to engage in milk production[x]. The apex bank also promised to make loans available at low interest rates, to those who needed to secure loan for the purpose of investing in local production of milk[xi].

The proposed policy is one that would promote local production, increase in employment and consumption of locally produced goods, this means that the GDP of the country would most likely increase if the policy is successful. Also, it would reduce the amount the country spends on importing items as presently the country spends about N173.3 billion, annually on importation of milk[xii].

Conclusively, the proposed policy seems like one that would grow the economy, however CBN needs to avert its mind to certain things and provide answers to certain questions: The nature of rearing cows in Nigeria is somewhat archaic and has sprung up series of conflict in different parts of the country, this is as a result of the conflict that usually occurs between herds men and the owners of farm lands. Hence can CBN ensure that rearing more cattle would not amount to more bloodshed? Would there be need for the government to implement the RUGA bill? What are the possibilities of RUGA being accepted? Can modern ranches be created? Could the possibility of cross breeding cattle be looked into in order for more milk to be produced? What would be the interim plan to meet the gap between the demand for milk and local production?

 

[i] This article was taken from Thisday Newspaper (online). Available at: https://www.thisdaylive.com/index.php/2019/07/29/lcci-faults-cbn-policy-on-milk-importation/ . Date accessed: 30/07/19.

[ii] Experts commend CBN’s policy on forex restriction for milk importation, 28/07/2019. Premium Times Newspaper (online). Available at: https://www.premiumtimesng.com/news/more-news/343501-experts-commend-cbns-policy-on-forex-restriction-for-milk-importation.html . Date accessed: 30/07/19.

[iii] Ibid.

[iv] Dairy Cows Cannot Sustain the Economy – LCCI Against CBN Policy on Milk Import, Doris Ukaonu, 29/07/19. Folio (online). Available at: https://folio.ng/dairy-cows-cannot-sustain-economy-lcci-against-cbn-policy-on-milk-import/ . Date accessed: 30/07/19.

[v] How dairy industry can thrive, Chikodi Okereocha, 09/04/18. The Nation Newspaper (online). Available at https://thenationonlineng.net/dairy-industry-can-thrive/ . Date accessed: 30/07/19.

[vi] Ibid.

[vii] How dairy industry can thrive, Chikodi Okereocha, 09/04/18. The Nation Newspaper (online). Available at https://thenationonlineng.net/dairy-industry-can-thrive/ . Date accessed: 30/07/19.

[viii] Nigeria: Emefiele and the Bold Step Against Milk Importation, Ummi Kabir, 29/07/19. All Africa (online). Available at: https://allafrica.com/stories/201907290429.html . Date accessed: 30/07/19.

[ix] Local production of milk’ll grow economy – CBN, Nike Popoola, 27/07/19. The Punch Newspaper (online). Available at: https://punchng.com/local-production-of-milkll-grow-economy-cbn/ . Date accessed: 30/07/19.

[x] CBN denies banning milk importation, insists on Forex restriction, Bassey Udo, 26/0719. Premium Times (online). Available at: https://www.premiumtimesng.com/news/top-news/343278-cbn-denies-banning-milk-importation-insists-on-forex-restriction.html . Date accessed: 30/07/19.

[xi] Ibid.

[xii] How dairy industry can thrive, Chikodi Okereocha, 09/04/18. The Nation Newspaper (online). Available at https://thenationonlineng.net/dairy-industry-can-thrive/ . Date accessed: 30/07/19.