Analyst say forex restriction on milk import will save foreign reserves as falling oil prices threaten budget

By Kenneth Afor

The planned Central Bank of Nigeria (CBN) foreign exchange restriction on importation of milk will help to protect Nigeria’s foreign reserves and may just be appropriate for these times as global oil prices begin to be shaky and threaten the 2019 budget, an investment analyst has said.

The Nigerian economy is expected to be a major beneficiary of the policy with growth likely to be seen once full implementation begins, Oluwafemi Osinubi, a senior investment analyst at Cowrie Asset Management Limited told business a.m. Thursday in an exclusive interview in Lagos.

The Central Bank of Nigeria (CBN) policy would also lead to backward integration in the real sector, Osinubi said.

He however noted that incentives such as credit facility for local diary producers in the country should be at single digit rate, as he projected that it will boost investment in the production of milk locally.

“Our take on this is that this is going to help grow the economy in the sense that it will lead to backward integration. Any economy doesn’t grow by importing their products, especially those ones that they can produce. It’s better for us to go the way of local production than importing,” said Osinubi.

According to him, although the gap that would be created by this move by the CBN would be felt by nursing mothers through an increase in the price of milk in the market, it represented a wake-up call to local producers.

“Yes, there is no doubt, there will slight increase in prices, which will affect nursing mothers and children that are developing, but I feel with gradual process and by the time local production increases we should see the increase in price neutralize,” he added.

Currently, the country’s output per cow per day is one litre, and Osinubi is appealing to the government and financial institutions to give subsidy and more incentives to local producers of diary products in order to boost the country’s annual production from 0.6 million metric tonnes to 1.7 million metric tonness.

He said, “We should see more of subsidy. One of those things the CBN actually did when they reduced the MPR to 13.50, they also mentioned that banks can now give loans to the real sector of the economy; that they can access CRR to expand lending to certain sectors of the economy.

“So, for the companies playing in this space, government can give them loans at a very reduced rate. When they give them at a very reduced single digit rate, then they can expand, but most particularly, the challenge here is insecurity. As we have said, we’ve seen farmers being displaced. If government can curb insecurity it will help a whole lot. Look at the herder-farmers situation, we need something like ranching, enough of grazing, enough of our cattle moving from one place to another. It even helps the health of the cattle in producing milk.

“You can see that Nigeria’s output of milk per cow per day is about one litre, while in Kenya the output of milk per cow per day is around 30 – 40 litres.

You can see the difference, and the difference is basically because there, they have a breed of cows that can produce this kind of litres per day; so if government can even assist in importing these kinds of cattle, bring them in and replicate them, I think it will make a whole lot of sense. And I think government can do that for companies playing in this space,” he stressed.

Osinubi added that the move by the CBN has already created a synergy between the Ekiti State government and Promasidor Nigeria Limited, makers of Cowbell milk, in an agreement whereby the state owned farm company; Ekun Diary, would be supplying raw materials for the diary company.

It will also enforce the establishments of cattle ranches in more states just like as it is being done in Ondo and Ekiti states.