Milk Importation: CBN policy may create monopoly – Expert

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CBN
CBN

By Anayo Ezugwu

FOlLOWING the approval of six companies to import milk and other dairy products into the country by the Central Bank of Nigeria, CBN, an economic expert has criticized the move. Adori Ochai, an economist, said the apex bank was trying to create monopoly in the importation of dairy products.

Speaking in an interview with Realnews, Ochai noted that if CBN wants to impose foreign exchange restriction on importation of milk and other dairy products, it should be holistic.

According to him, the implication of creating monopoly is that Nigerians may not have the choice of products they want; there will be no competition and price control because the companies who have monopolised the market will decide the price.

“The implication is that CBN is trying to create monopoly in the importation of dairy products. The thing is why are you giving some advantage over the others? If you want to help the local production by restricting Forex to dairy products, why are you now giving some access to the same Forex. The truth is if these six companies have the muscle, they can still import enough to over-flood the market,” he said.

CBN had on Monday February 11, listed the companies as FrieslandCampina WAMCO Nigeria; Chi Limited; TG Arla Dairy Products Limited; Promasidor Nigeria Limited; Nestle Nigeria PLC (MSK only) and Integrated Dairies Limited as the companies that can importation milk. The apex bank in a circular signed by Ozoemena Nnaji, director, trade and exchange department, CBN, said the directive takes immediate effect.

“All Forms ‘M’ for the importation of milk and its derivatives by authorised dealers will only be allowed for the aforementioned companies. Therefore, importers that are not on the list of companies cited in the circular should cancel all established Forms ‘M’ for the importation of milk and its derivatives for which shipment has not taken place.”

The directive is in line with CBN’s objective to increase and improve the local production of milk, its derivatives, and other dairy products in the country.

But Ochai said rather than give some companies advantage over others, the CBN should replicate the model it used in local rice production. “I don’t think the policy will help local production. Unlike the rice production where everybody is now talking about production from different parts of the country. We are not talking about the Abakaliki rice, Kebbi rice and so many others. It is as a result of the Forex restriction that brought about this development.

“So if CBN actually wants to encourage local production of dairy products, they should totally restrict access from everybody. It will be expensive initially, but there is a theory in economics called Cobweb theory and it’s applied mostly to agricultural products. If for example there is an increase in price of a particular commodity that increases in price is a motivating factor to farmers.

“Most farmers will go into the production of that particular product in the following season with the main that they will make more profits. For instance, if they say a bag of rice is N50,000 today, more farmers will go into the production of rice next season. As more farmers go in especially in the third world countries where we don’t have storage felicities, the price of that commodity will fall.

“In most cases, the farmers who are motivated by the high price may not meet their targeted revenue. If CBN wants to encourage production of dairy products in Nigeria, they should have the mind to restrict Forex for importation of dairy products totally. Initially it will be difficult for Nigerians, but in the long run more farmers will go into the production and at the end the price will fall.”

In clarifying the intent of the CBN policy, Isaac Okorafor, director, corporate communications department, CBN, explained that the bank engaged the six companies because they showed sufficient willingness and ability and had keyed into the CBN’s backward integration programme in order to enhance their capacity and improve local milk production.

Okorafor explained that the objective of the bank in that sector was to increase milk production in the country from the current figure of 500,000 metric tonnes to about 550,000 metric tonnes within the next 12 months. In addition to facilitating easier access to funding for dairy investors, he said it was the bank’s desire to ensure that the country conserves foreign exchange, trigger economic growth and boost employment opportunities in the sector.

The banks have started the implementation of the directive from the apex bank. Zenith Bank PLC in a circular on Wednesday February 19, said only companies approved for the importation of milk, its derivatives, and dairy products by the CBN would access Forex from the bank. It also directed that all established Forms M for the importation of milk and its derivatives for companies other than the approved companies for which shipment has not taken place would be canceled immediately.

– Feb. 21, 2020 @ 19:25 GMT |

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