CBN to ban forex access to milk importers

…to provide credit to cattle ranchers

The Central Bank of Nigeria (CBN) has said it will soon implement forex restriction on milk importation, noting that the country can be self-sufficient in milk production.

CBN Governor Godwin Emefiele stated this, yesterday, while briefing journalists at the end of the July 2019 edition of the Monetary Policy Committee (MPC) meeting held in Abuja.

At the meeting, the CBN held all key parameters constant with the benchmark lending rate still at 13.5 percent.

Mr. Emefiele said the backward integration from the milk importers in Nigeria has become inevitable and might not only impact local production of milk but also be a panacea to the recurring herders/farmers conflicts.

This is even as the CBN has promised that anyone willing to ranch cattle in Nigeria and produce milk will be provided credit to acquire land and build relevant infrastructure.

“We believe that milk is one of those products that can be produced in Nigeria today. We have seen the importation of milk in Nigeria for over 60 years,” he said, adding that FrieslandCampina and West African Milk, the foremost milk importers have done so for over 60 years.

“Today the import bill for milk annually stands at between $1.2bn and $1.5bn…Given that it is a product that we can produce in the country, we can’t continue to import milk,” the apex bank governor emphasised.

“Let’s ask ourselves the question, what does it take to produce milk? Get a cow, give it lots of water and food, position the cow in a place without it roaming around, and milk it. The reason our cows can’t produce enough milk is that they roam around. They don’t have enough water to drink, and consume whatever they find. As they roam from one place to another, they destroy farms and farm produce and this leads to clashes,” he explained.

According to the CBN governor, “about three and half years ago when the restriction of forex policy started, we considered including milk in the list of items that should be banned from forex but we conjectured that based on the kind of sentiments, we needed to be careful.”

“At that time, we called in the management of WAMCO, the oldest milk importer in Nigeria; we held at least three meetings with them. We told them milk would have been restricted from forex but we stepped it down. We encouraged them to backward integrate and begin the process of developing milk in Nigeria,” he said, adding that that hasn’t happened after over three years.

Mr. Emefiele said local production of milk can be in two schemes. He explained that the milk importers can acquire their own land and begin to ranch their cows, and of course they can be complemented by the pastoralists who would have their smallholder cattle farming arrangements and they can get additional milk from them.

Secondly, he said the big milk companies in Nigeria could support the pastoralists, get them concentrated in one place rather roam around, provide them facilities, water, hospitals, schools, sell them grass etc and they can get milk from them to recoup their investments. Expert’s reaction on MPC interest rate decision

According to Lukman Otunuga, FXTM research analyst, “persistent inflationary pressures in Nigeria have prevented the Central Bank of Nigeria (CBN) from joining the global monetary easing bandwagon this month.”

The CBN kept its benchmark interest rates unchanged at 13.5% in July as the bank focused on price stability, even as economic growth remained important.

Otunuga said: “Although a rate cut is in the pipeline, this will be heavily influenced by inflation which has been above the target range of 6%-9% for more than four years. With the pace of economic growth still fragile and the nation exposed to external risks in the form of oil volatility, it becomes a matter of “when” rather than “if” the CBN will cut rates.

“Repeated signs of consumer prices cooling should provide the central bank with enough ammunition to pull the trigger on a rate cut in September.

“Given how lower interest rates will stimulate consumption, encourage businesses to boost investments and give banks more incentive to borrow, this could be one of the medicines Nigeria needs to restore lost strength.”