According to an interview published in Nigeria’s Guardian, Bob Steetskamp, CEO of FrieslandCampina WAMCO Nigeria (a subsidiary of the Dutch dairy company which is the fifth largest in the world) argued that if an appropriate policy framework were established, “Nigeria could become one of the world leaders in the production of dairy products in few years”. In the interview, Mr Steetskamp noted that this required not only a professional approach from milk producers, but also “substantial investments in livestock and equipment” and government support, including strengthening the transport system between milk producing areas and milk processing facilities. This implicitly called for a form of public–private partnership, with the Ministry of Agriculture focusing on developing milk production and the private sector focusing on connecting farmers to markets.
FrieslandCampina WAMCO supplies the leading milk brand in Nigeria (Peak), using raw materials imported from the Netherlands to produce end products such as evaporated milk and convenient packages of milk powder. According to the parent company, affordability issues are critical in Nigeria, with only a small number of Nigerians able to buy dairy products on a regular basis. Packaging of small volumes of high-quality, high-nutrition products is seen as critical to exploiting this market, and the company notes on its website that it is has a second brand, Three Crowns, aimed at lower-income consumers in the country.
Mr Steetskamp explained that as early as 2008, FrieslandCampina WAMCO began investigating prospects for local milk sourcing, with initial investments being made in local milk procurement in association with a local milk producing company, Shonga Dairies. The first local milk collection operations were then initiated in August 2010. According to Mr Steetskamp, “WAMCO became the first dairy company in Nigeria to use raw milk material from Nigeria to manufacture evaporated milk.”
In 2011, FrieslandCampina WAMCO “signed a memorandum of understanding with the Federal Ministry of Agriculture and went in to set up a pilot Milk Collection Centre (MCC)”. Mr Steetkamp reported that the process involved:
- close collaboration with the local community;
- the training of extension workers in visits to sister companies in Vietnam;
- the distribution of raw milk containers to all farmers for the transport of fresh milk to the MCC;
- veterinary support; and
- close monitoring of quality and hygiene standards.
On the basis of the pilot project experience, FrieslandCampina WAMCO then made a commitment to establish other MCCs.
Mr Steetskamp set out a short-term target of 10% for local procurement, within a vision of 50% for local milk procurement within 10 years. This would be achieved through developing “small scale farming, in dedicated farming families with a few cows”, organised into cooperatives. However, it was acknowledged that currently it was cheaper to import raw materials than to purchase raw milk locally (landed costs between N70 to 80 a litre, compared to local procurement costs of N90 per litre – 100 Naira is currently worth €0.49). He noted that the company was “happy to subsidise it just to get the system started, but eventually, it would go down”.
The question arises of what would be an appropriate policy framework for the stimulation of local milk production and commercial procurement in Nigeria.
Clearly, government support in getting to grips with production and infrastructure constraints along the dairy supply chain would help, as would policy initiatives to encourage private sector investment in strengthening the physical infrastructure and logistical capacity for milk collection. This is likely to require close coordination of government and private sector initiatives.
However, a nuanced policy on the licensing of duty-free imports of milk powder could also play a role, particularly if it provided the resources necessary for the subsidisation required to stimulate initial milk supplies from cooperative organisations of producers. This may require the review of current licensing arrangements for dairy products.
In the sugar sector, the Nigerian government is already seeking to link import licences for raw sugar to investment in domestic sugar cane production. A similar approach may be appropriate in the dairy sector, based on realistic time frames for quality improvements, production expansion and improving the efficiency of milk supply arrangements. This suggests a need for close consultation with industry stakeholders. The Namibian experience in the horticulture sector could potentially hold important lessons in this regard (see Agritrade article ‘ Horticulture development programmes under way’, 28 August 2009).
The key policy challenge is to ensure that the current willingness to expand local milk procurement is turned into a realistic and commercially viable expansion of local milk production, within the framework of a progressive reduction of dependence on milk powder imports.