Nigeria: As Debate Rages Over Planned FX Restriction for Milk

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29 July 2019

Obinna Chima writes on issues surrounding the move by the Central Bank of Nigeria to include importation of milk among items not eligible for foreign exchange

There is a raging debate over the plan by the Central Bank of Nigeria (CBN) to include milk importation among its lists of items not eligible for foreign exchange (FX).

CBN Governor, Mr. Godwin Emefiele, last week confirmed the move to restrict milk importation into the country.

According to the Bank, the country spends between $1.2 billion and $1.5 billion annually on milk importation, which it described as unacceptable.

Owing to this, Emefiele, said domestic production of milk had the potential to reduce recurrent farmer-herder clashes, which have stifled the growth of the agricultural sector.

He stated that despite the CBN's initial engagement with major players in the milk industry, there were attempts by some big players to frustrate the policy on local production of milk.

Emefiele explained: "We believe that milk is one of those products that can be produced in Nigeria. Milk importation has been going on in Nigeria for over 60 years. If you Google West African Milk or Friesland Campina today, they say that they have been importing milk and that they have been in Nigeria for over 60 years.

"Today, the import of milk annually stands at $1.2-$1.5 billion. That is a very high import product into the country. Given that it is a product that we are convinced that it is a product that can be produced in Nigeria.

"The reason some say that our cows are not producing much milk is that our cows roam around, they don't have water to drink.

"When the policy on the restriction of FX started, we considered including milk to the list. Then we thought that based on the sentiments that people would show, that we should be careful."

Furthermore, Emefiele disclosed that the bank held meetings with leading milk producers in the country to encourage them to begin the process of producing milk in 2016.

However, he, pointed out that there was no significant progress on the part of the companies.

"We are saying the amount we spend on milk in this country is too high, we need to reduce it.

"We are determined to make milk production in Nigeria a viable economic proposition. If you need a loan to acquire land, do artificial insemination, grow grass or even provide water, we will give you.

"We are getting to the end of the road of milk importation in Nigeria. The era of restriction of forex for the importation of milk is very close, sooner than they expect," he added.

The Debate

But the plan by the central bank has not gone down well with some Nigerians who have since advised the Bank not to implement the policy.

For instance, a former Minister of Education and Co-convener of the Bring Back Our Girls Campaign, Mrs. Oby Ezekwesili, argued that the policy, if implemented could expose Nigerians to adulterated products, even as she cited the effects that it might have on infants.

Ezekwesili, in series of tweets on her official twitter handle, said the CBN's plan as policies borne out of vindictiveness.

She said: "Nothing more perverse of political leaders and policy makers as policies borne out of vindictiveness. It appears from what the CBN said on the #MilkBanPolicy that it is a case of: "You folks rejected RUGA, here is your punishment." What a big shame that would be."

"The bane of our failure to achieve sustained economic growth that reduced poverty in other countries is actually bad... ..dangerous policies/Laws."

"Milk consumption by Nigerians is 1.7 million, milk production in Nigeria is 600,000 tonnes. When #MilkBanPolicy happens, to avoid scarcity which prices milk up and out of the reach of the poor, Nigeria needs to immediately triple current production of milk.The CBN #MilkBanPolicy is dangerous... dangerous for the poor."

Some other commentators argued that local manufacturers were yet to develop capacity for producing quality diary products.

But Dr Rafiq Raji, who is the Managing Director & Chief Economist at Macroafricaintel Investment LLC, welcomed the plan by the central bank, saying the reaction it generated was to show that the CBN was on the right track.

"The old methods are not working anymore. Don't let anyone bamboozle you with their textbook thinking. if you think your idea makes sense, implement it. If it doesn't, try another one. The CBN is doing its part. Let the others do their own. There are structural issues? Propose a solution. Harass the government on solutions," he stated on his Twitter handle.

CBN Clarifies Motive

But clarifying the move by the CBN, its Director, Corporate Communications, CBN, Mr. Isaac Okorafor, stressed that Nigeria and the welfare of all Nigerians come first in all its policy considerations over the years.

According to Okorafor, the critics were attempting to mislead the general public by misrepresenting the ordinarily unassailable case for investments in local milk production and the medium to long-term benefits of the planned policy.

"While we are aware that some of our policies may hurt some business interests, we are thankful to Nigerians for the buy-in and intense interest in the policies of the CBN.

"As a people-oriented institution, however, we shall remain focused on the overarching and ultimate welfare of the Nigerian masses.

"We therefore wish to, once again, reiterate our policy case as it relates to the planned restriction of access to the Nigerian Foreign Exchange market by importers of milk:

"Nigeria and the welfare of all Nigerians come first in all our policy considerations. Being an apolitical organisation, we do not wish to be dragged into politics. Our focus remains ensuring forex savings, job creation and investments in the local production of milk.

"For over 60 years, Nigerian children and indeed adults have been made to be heavily dependent on milk imports. The national food security implications of this can easily be imagined, particularly, when it is technically and commercially possible to breed the cows that produce milk in Nigeria," the CBN Director insisted.

Okorafor, pointed out that about three years ago, the CBN started a policy to encourage backward integration to conserve foreign exchange and create jobs for our people.

Included in this policy package, according to him, was the introduction of the highly successful policy which restricted sale of forex from the Nigerian foreign exchange market for the importation of some 43 items goods that could be produced in Nigeria.

Nigeria's heavy import dependence is majorly responsible for the high forex outflow and the perennial weakness suffered by the naira.

The central bank had explained that the selective protection policy on FX restriction to some imports was carefully crafted with a view to reversing the multiple challenges of dwindling foreign reserves, contracting Gross Domestic Product (GDP) -recession and what he described as an embarrassing rise in the level of unemployment that confronted the Nigeria economy at the time. According to the CBN, the policy was aimed at stimulating the domestic economy in order to enhance domestic production and protect local industries from undue foreign competition and take-over.

Therefore, the Director, Corporate Communications noted that arising from the success of the restriction policy, the Bank approached some milk importers, like it did for rice, tomato and starch and asked them to take advantage of CBN's low-interest loans to begin local milk production instead of relying endlessly on milk imports.

"Today, although there have been some successful attempts at producing milk locally, the vast majority of the importers still treat this national aspiration with imperial contempt.

"For the avoidance of doubt, milk importation is not banned. Indeed, the CBN has no such power. All we will do is to restrict sale of forex for the importation of milk from the Nigerian foreign exchange market.

"We wish to reiterate that we remain ready and able to provide the needed finance to enable investors who genuinely want to engage in milk production.

"The ongoing resort to blackmail and undue politicisation through the use of social media attacks can only serve to strengthen our resolve to wean our country from the clutches of powerful and highly influential traders and dealers who have kept the masses of our people hostage to foreign consumption and condemned our youths to perpetual unemployment.

"We call on Nigerians to enlist in this vanguard to take our economy back from vested interests, make our country a productive economy and create jobs for our teeming youths," he said.

The central bank strongly believes that the success it achieved with rice production and some other commodities under its Anchor Borrowers' Programme (ABP) can also be extended to the diary sub-sector.

Currently, 18 states are reputed as reliable rice producers in the country.

They include Kebbi, Benue, Ebonyi, Ekiti, the Federal Capital Territory, Jigawa, Kaduna, Kano and Katsina.

Others are: Lagos, Nasarawa, Taraba, Kogi, Zamfara, Ogun, Niger, Kwara and Sokoto.

Also, the CBN through its Commercial Agriculture Credit Scheme (CACS) has continued to support genuine local rice manufacturers, in line with its development finance function.

The ABP programme was designed to assist small scale farmers to increase the production and supply of feedstock to agro-processors.

As at October 2018, a total number of 862,069 farmers cultivating about 835,239 hectares, across 16 different commodities, had benefited from the Anchor Borrowers programme, which had generated 2,502,675 jobs across the country.

Emefiele, had assured that the ABP would be used for the production of other farm produce within the country, including palm oil, fisheries, among others.

"We spend huge amount to import items which could be produced locally, thereby exporting jobs to other countries at the detriment of our local industries.

"The Anchor Borrowers' Programme is one of the CBN's policy initiatives to pursue the creation of jobs, reduction in food imports, and diversification of our economy.

While the central bank strongly believes that economic diversification is the only way to drive prosperity in the country, it must ensure that it gets the buy-in of stakeholders, like other policies it had initiated in the past.

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