Ripples over Nigeria’s milk import ban
Amidst the controversy generated by Federal Government’s proposed forex restriction on milk importation to Nigeria, experts in the integrated marketing communications sector have also weighed in the matter with a view to assessing the possible impact of the ban on their industry.
While the Federal Government has argued that the move was a necessary step to save the economy’s capital flight and also protect the local dairy industry from losing businesses to their foreign counterparts, industry players are of different view. According to the Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, between $1.2 billion and $1.5 billion are spent yearly to import milk into the country.
“We can no longer continue to spend close to $1.2 billion to $1.5 billion, importing milk into the country, a product we can produce. To some extent, they (milk importers) should help us also to reduce the rate of herders’/farmers’ conflict,” he said.
While the reason put forward by the CBN Governor makes some economic sense based on logic, some experts have insisted that the approach is hasty and could have such negative effect on the local economy that could be even more pronounced than the positives of the ban.
One of the sectors that have closely monitored the debate has been the integrated marketing communications sector. The interest of the IMC players in the issue is understandable because the dairy industry is responsible for billions of marketing and advertising spend on an annual basis.
Their fears are not unfounded because Friesland Campina WAMCO, a top dairy manufacturer in Nigeria is reported to budget over three-billion-naira for media advertising purpose alone. Ditto for Promasidor Nigeria renowned for its aggressive merchandising — Cowbell Milk remains a trailblazer in the bottom-of-the-pyramid milk revolution in Nigeria. Other big spenders in the diary sector are Arla Foods, maker of Arla Milk and Chi Limited and makers of Hollandia milk.
Speaking on the issue, CEO of TownCriers, Kayode Olagesin said the ban, though, desirable will have an adverse effect on both the consumers and the local economy if steamrollered. According to him, the CBN ought to work closely with local consumers to first scale up production before embarking on the ban.
“As desirable as sufficiency in milk production is, we cannot achieve it in one fell swoop. We need to scale up production by encouraging investments in local production and discouraging importation through tariffs as some have suggested.
“What the CBN has done has the potential to drive prices up and make milk unavailable to the sections of the population that needs it most. We know how milk as a delicious staple on table menu had been out of reach until companies like Promasidor with Cowbell made milk in sachets affordable and available for all. We should stop putting the cart before the horse. This is another well intentioned policy that has not been thought through in execution. It is not too late to amend,” he said.
He added: “Working with producers to scale up production through incentives as we impose graduated tariffs on importation. That way we won’t create scarcity and drive prices up taking milk out of the reach of already malnourished Nigerian children.”
Commenting on the topic, however, Ganiu Olowu, a brand expert noted that the CBN was not entirely out of line as the proposed forex restriction was a necessary step to encourage more constructive engagement between the Federal Government and the manufacturers. He noted that past attempts by the CBN to constructively engage the industry has failed due to lack of commitment by the manufacturers.
“We need to consider the fact that the process of engagement started 3 years ago. In spite of CBN’s offer of support, its consultation with milk importers was met with indignation. What I see in the move is to stimulate a progressive engagement. Milk importers and CBN may now work with acceptable time table like that of cement,” Mr. Olowu said.
But officials of the Lagos Chamber of Commerce and Industry (LCCI) and the Manufacturers Association of Nigeria (MAN) have come out to deny that they were consulted by the CBN.
This is contrary to the claim by the CBN governor that the apex bank held several meetings with some milk importing companies, particularly representatives of Friesland Campina WAMCO Nigeria PLC, one of Nigeria’s oldest importers of milk, on the issue.
Also, the Director-General of MAN, Segun Ajayi-Kadir, said the decision might lead to the downsizing of their staff.
He said the proposed policy will also cut down on the contribution of the manufacturing sector of the economy to the country’s gross domestic product.
Mr Ajayi-Kadir described the CBN’s decision as unilaterally taken “without due consultation with the operators in the dairy industry”.
“It is a fact that backward integration is the way to grow an economy, but there is a need to be strategic and deliberate about the way to implement the measure,” the MAN DG reportedly said.
Perhaps in an attempt not to be caught napping in case the Federal Government goes ahead with its new import ban on milk, Promasidor Nigeria has recently signed an agreement with Ekiti State government; a development aimed at creating local source of raw materials for its dairy products through the state owned Ikun Dairy Farm. But the project is still at an agreement level for now.
In all, many industry analysts hold that the CBN is for the umpteenth time trying to use monetary policy to solve fiscal problems when it has not strengthened the local capacity.
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