Dairy Farming in Nigeria

FOR Muhammadu Abubakar, life is an uphill struggle. Farming in Nigeria is tricky at the best of times. Only the brave or the downright crazy would think of dealing in a perishable product like milk.

On his ranch on the dusty fringes of Kano, the biggest city in Nigeria’s north, he faces a daunting array of problems. The electricity grid is hopeless. So, at the gateway, two generators splutter away 24 hours a day. Diesel sets Mr Abubakar back about 1m naira ($5,100) a month. “We’ve had two hours of power in three days,” he says. “There’s no option.”

There are no good cows for sale nearby, so Mr Abubakar’s company, L&Z Integrated Farms, plans to start importing its own. There are no good seeds for fodder; he brought in cuttings on a commercial flight from Kenya. There is no mains water, so he must drill boreholes to irrigate his fields. Fertile land has a tendency to turn to dust. He has to train his own staff to use complicated machinery. Plenty of batches get spoilt along the way. By the time it is processed, a litre of milk has already cost about 320 naira (£1) to produce.

Then the milk has to get to market. “Three or four years ago we used to fly our milk down to Lagos,” he says. “It cost a fortune. The milk would spoil sitting in the airport. We had to pay off customs. It was a nightmare.” Nowadays, the firm uses costly refrigerated trucks instead. Drivers must brave day-long journeys on disintegrating roads. Each truck requires about 200,000 naira ($1,000) in opaque licence fees every month. Even when those are paid, local authorities send thugs out to get more.

“They make you buy new paperwork,” one trucker says. “We probably pay 3,000-4,000 naira (roughly $15-$20) every journey.” When the milk finally arrives on supermarket shelves, it costs around three times what it would in Europe. Cheap long-life imports sell for less than half the price of local milk. Nigeria spends roughly $1m a day on imported milk powder, according to Sahel Capital, a private equity group which recently invested the same amount into Mr Abubakar’s business in the hope of changing that.

Other types of farming are equally fraught. Nestlé finds it cheaper to bring starch in than to buy it locally. Olam, a Singapore-listed agribusiness, says that processing costs up to 30% more than in other countries. Mukul Mathur, who heads its Nigerian business, says that moving a container from Kano to Lagos costs as much as from Lagos to Osaka, though the distance to Japan is 13 times greater.

Agricultural reforms have begun in the past four years, including the introduction of new subsidies for smallholders. The arrival in Nigeria of foreign supermarkets such as Shoprite and Spar provides a guaranteed market for some growers. Domestic production appears to be rising, though Nigeria still has hardly any companies that add value to basic crops, for example by turning fruit into juice. And larger problems such as lousy roads, a shortage of finance and the insecurity of land tenure remain unchanged.

Until the 1960s, Nigeria was a net exporter of food. Now it imports $3 billion a year more than it exports. Agriculture contributes almost nothing to government coffers. As oil revenues plummet and foreign reserves dry up, this matters.

Mr Abubakar remains one of a depressingly small group of commercial farmers in Nigeria. Most of his dairy competitors, he says, are politicians who “can afford to sink money into it”. Yet for all the difficulties he faces, he is struggling to meet demand. “We are making a very good profit,” he says. “If you can do that with milk, you can do it with anything.”

Source: Economist

June 6, 2015
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