Boost for Nigeria’s Backward Integration Drive

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Chiamaka Ozulumba reports that the federal government’s mandatory directive to dairy companies to source local raw materials for their milk products, has curbed the hitherto existing huge capital flight, thus boosting the backward integration of the supply chain Nigeria, a country of over 200 million people requires nutritional products like milk to keep them healthy. This is being catered for by food companies in the fast moving consumer goods (FMCG) sector, with the production of quality brands and sustenance in view.

Since it is vital for healthiness, every family in the country consumes one brand or the other during meals or at leisure. It provides high level of essential nutrients the body requires for good health and contains calcium which helps build healthy bones, teeth and also maintain bone mass.

Nutritional Benefits

Milk is enriched with protein which serves as source of energy needed for daily activities, as it helps build and repair muscle tissue. Milk contains potassium which is required by the human body for healthy blood pressure.

This nutritional product also contains phosphorus that helps strengthen bones and generate energy; Vitamin D for healthy bones and Vitamin B12 for healthy red blood cells and nerve tissue. In addition, milk is enriched with Vitamin A for immune system, normal vision and skin, while not left out is Riboflavin (B2), which converts food into energy and Niacin that metabolises sugars and fatty acids.

Global Progression

Taking a peep into the global landscape depicts that the first people to drink milk regularly were early farmers and pastoralists in Western Europe and it dates to about 10,000 years ago. They were also some of the first humans to live with domesticated animals, including cows.

Indeed, there has been considerable increase in global milk production over the years. In 2013, 467 million metric tonnes of cow milk was produced and by 2019 the figure rose to around 51 million metric tonnes.

With these figures, world milk production is projected to increase by 22 per cent in 2027, compared to the 2015-17 base period.

Majority of the increase in milk production (80 per cent) is anticipated to come from developing countries, in particular Pakistan and India, which are expected to account for 32 per cent of total production by 2027, compared to 26 per cent in the base period.

While United States tops the list as the largest cows’milk producing country in the world with 91.3 billion kilogrammes in 2019, India is the second with 60.6 billion kilogrammes and China taking the third position with 35.7 billion kilogrammes.

In Africa, the highest milk producing countries are Ethiopia, Kenya, South Africa, and Sudan. Of these countries, Ethiopia has the largest number of cows while South Africa has the greatest milk production per cow.

With the growth in population and high demand for nutritional milk products on the continent, there has been clarion call for dairy companies to source for local raw materials for their products, a situation that gave rise to the policy of backward integration by various African governments.

Having taken note of the vital aspect of dairy milk to humans, China in the year 2000 launched a nationwide campaign to encourage people to consume more milk and dairy products for health reasons.

The Nigerian Story

Back home, Nigeria consumes an estimated 1.7 million tonnes of milk yearly, but produces only 34 per cent to meet demand, while the deficit of over one million tonnes are imported at a cost of $480.3 million.

This huge capital flight from the country has prompted the Federal Government to make it mandatory for dairy companies to source for local raw materials for their milk products.

It followed with the restriction placed by the apex bank, the Central Bank of Nigeria (CBN) on foreign exchange for milk importation, stating that $1.2 billion to $1.5 billion is being spent yearly on that.

The situation brings to the fore, issue of local content development which affected some vital sectors of the economy in 2002 and later spurred the Federal Government to make it mandatory for companies to embark on backward integration, which involves sourcing for local raw materials for manufacturing and production.

Backward integration refers to the process in which a company purchases or internally produces segments of its supply chain. In other words, it is the acquisition of controlled subsidiaries aimed at the creation or production of certain inputs that could be utilised in the production.

Also evident in the cement industry, the backward integration policy in 2002 scaled-up capacity of producers in the sector from 11.9 million metric tonnes in 2008 to 32 million metric tonnes in 2016. Statistics has also shown that the backward integration policy has seen Nigeria move from a top 10 cement importer to a net exporter of cement – earning dollars and lessening the strain on foreign exchange within the last decade.

In the sector, the country has achieved significant level of compliance with more than 95 per cent of the materials used for cement production sourced locally.

Similarly, there have been several policies to promote backward integration in food processing. A look at the economy shows that Nigerian Breweries sources sorghum and barley from Nigerian farmers while De United Foods Industries Limited is sourcing up to 45 percent of materials locally and looking to eventually produce its noodles using exclusively local content.

Flourmills of Nigeria Plc is cultivating a sugar plantation to supply mills; and Dangote Sugar has developed an integrated sugar cane plantation, spanning the whole supply chain from milling through to sales and distribution.

The Diary Connection

Worthy of note is the remarkable progress made in backward integration by Promasidor Nigeria Limited, a leading player in the food and beverage industry. The company which is the makers of top quality products such as Cowbell Milk (Sachet), Cowbell Evaporated Milk, Loya Milk, Cowbell Chocolate, Miksi Milk, Top Tea, ONGA Seasoning, Sunvita Cereals, and others, has made giant stride in sourcing for local raw materials for milk production.

The initiative by Promasidor Nigeria is also in line with former President Goodluck Jonathan’s Agricultural Transformation Agenda (ATA) which was reviewed by President Muhammadu Buhari’s administration under his new agricultural programme christened “Agricultural Promotion Policy,” aimed at addressing the challenge of food and foreign exchange scarcity.

The policy which was piloted by the past Minister of Agriculture and Rural Development, Audu Ogbeh, was also aimed at creating the enabling environment for private participation in agriculture, hence its formation encompasses stakeholders in the sector. It spans from 2016 -2020 and restricted the importation of food items such as rice, wheat, sugar, tomatoes, and milk for local involvement and self-sufficiency in food production.

According to Ogbeh, with the Agricultural Promotion Policy, the federal government believes that the gap in agriculture can be closed by partnering private investors across farmer groups, companies and investors to develop end-to-end value chain solutions.

Promasidor’s Ikun Diary Farm

This move reflects what Promasidor Nigeria had embarked upon at Ikun Dairy Farm located at Ikun-Ekiti, in Ekiti State, an initiative already in full gear by the frontline company.

In order to ensure adequate nutritional milk products for the teeming populace through local supply, Promasidor Nigeria signed a partnership agreement with Ekiti State government on the utilisation of the dairy farm and has since commenced installation of up-to-the-minute equipment for milk supply with purchase of 1,000 cows for commencement.

The pact was sealed on behalf of the partners by the Ekiti State Governor, Dr. John Kayode Fayemi and the Managing Director of Promasidor Nigeria Limited, Anders Einarsson in Abuja last year.

It prompted many visits to Fayemi and Ikun Dairy Farm for consolidation of the memorandum of understanding. Also, the recent two-day visit by the Group Chief Executive Officer of Promasidor Group, Olivier Thiry, from South Africa.

Olivier was at the Ekiti State Government House with top management of Promasidor Nigeria which includes the Company’s Managing Director, Anders Einarsson; Director of External Relations, Andrew Enahoro; and Senior Manager, Finance, Yomi Adenson, from Monday, December 16 to Tuesday, 17, 2019.

Also among them was the Special Adviser to the Governor of the Central Bank of Nigeria on Development and Finance, Anthony Ifechikwu, who was overwhelmed with the level of progress at the dairy farm, with up-to-date facilities. The project will enable Promasidor harness the potentials of the dairy farm with the 1,000 cows already being nurtured for milk supply.

During the inspection tour of the dairy farm, Fayemi who was highly impressed with the modern equipment, the cows and blueprint already in place, commended Promasidor’s effort and affirmed that the people of the state want to see the milk processing plant function soon because of its economic benefit. This, he said, would have significant impact on their standard of living and wellbeing through job and wealth creation, thus boosting the state’s economy.

In line with the governor’s stance, the dairy farm will produce over 9,000 litres of milk per day and enhance the agro-allied nature of the state. It will also create jobs for over 1,000 Ekiti citizens.

Olivier who expressed delight at the partnership, said it has been seamless and restated his strong commitment in ensuring an enduring relationship with Ekiti State, while hoping for maximum exploitation of the farm’s potentials with the competent personnel who have been working earnestly to make the project a success.

The Group Chief Executive Officer revealed an initial investment of $5m in the project which would be used for purchase of cows, modern equipment required to establish a feed farm and also for renovation.

Corroborating Fayemi’s views, Olivier mentioned that no fewer than 1,000 Ekiti citizens would be employed when the dairy farm is fully operational and also has spill-over effect on small and medium enterprises.

Indeed, the commitment towards rejuvenating thefarm has prompted the physical work already done and with the cows which are nurtured for a successful backward integration initiative.

On this Olivier avowed “with the installation of state-of-the-art equipment and zeal in attaining our backward integration goal, we hope to have an edge over competitors in the dairy industry.”

This has prompted the level of work at the farm which would be completed soon for a robust operation. Also to be utilised, is the dam close to the farm, which would be well preserved for daily activities.

Eulogising the momentous progress made by Promasidor, Ifechikwu pointed that it is the most practical step ever made by milk producing companies in the country. He expressed satisfaction at the level of work and urged the company to continue in such stride.

Also, the Managing Director of Fountain Holdings Limited, Seyi Ayeleso and the Chairman of the Board, Jide Ogundare, both commended Promasidor Nigeria in its quest for local raw materials for milk production and the existing partnership with Ekiti State.

They affirmed that Fountain Holdings, the investment company of the state will provide the necessary support for the actualisation of Promasidor’s vision and also meet the expectation of Fayemi’s administration.

Prior to Olivier’s visit, the management of Promasidor Nigeria led by Einarsson paid a four-day visit to Ekiti State Government House and the inspection of Ikun Dairy farm in August last year.

They met with top members of Fayemi’s cabinet, during which the Commissioner for Agriculture, Folorunso Olabode, assured the team of adequate support in the company’s resuscitation bid.

Olabode said the dairy farm is well positioned to boost supply of raw materials and expressed delight at the company’s strong commitment to its backward integration initiative in line with Federal Government directives.

He added that Ikun-Ekiti community and people of the state are very delighted at the recent development and the businesses that would emanate from the project.” The partnership is not a political gimmick and we are certain it will contribute to the growth of the state’s economy and employment opportunities for the citizens,” Olabode affirmed.

In addition, the Special Adviser to Ekiti State Governor on Investment, Trade and Innovation, Akintunde Oyebode, said the collaboration with Promasidor will greatly help in the integration of the people and their living standards with the emergence of other small enterprises.

Against this backdrop, Einarsson described the partnership with Ekiti State as an exciting prospect for the company and that Promasidor is prepared to regenerate the dairy farm and make it functional in full-scale.

He affirmed that the project would in no small measure provide opportunities to enhance local milk supply and boost the portfolio of the company’s milk products.

It was in the light of this, that Promasidor Nigeria caused a disruption in the industry when it first launched the first milk powder sachet product, Cowbell Milk, into the Nigerian market in March 1993, before being emulated by competitors in the industry.

Cowbell Milk is quite delicious, nutritious, affordable and tastes just like fresh milk. It is made from skimmed cows’ milk and vegetable fat, fortified with Vitarich, a unique blend of vitamins A, C, D, E and K.

Also rich in essential vitamins and minerals as well as beneficial protein and calcium is Loya Milk, one of the company’s premium products. It is a full-cream milk powder product that has been enriched with Forvita, a booster blend of the five most important vitamins for good health and nutrition, namely vitamins A, C, D, E and K.

With a range of conveniently-sized sachets to meet any need, Loya powdered milk products are affordable without compromising on quality. In addition, the company enhanced its milk portfolio with the Cowbell Evaporated Milk which was launched into the Nigerian market in 2018.

This was part of its quest for the wellbeing of Nigerians and to reinforce its flagship proposition as well as awareness initiatives for complete healthy breakfast.

Promasidor Nigeria, the leading company in the dairy sector has array of other quality products such as Cowbell Chocolate, Miksi Milk, Top Tea, ONGA Seasoning, Sunvita Cereals, and others. Its quality milk products has made local source of milk supply, like the Ikun Dairy Farm initiative, paramount in order to reduce dependence on importation.

Located in Ikun-Ekiti, in Moba Local Government Area, Ikun Dairy Farm spans across 1,000 hectares of land area and was established in the early 1980s with hundreds of fattened cows as an integrated agro-allied farm to boost the state’s economy.