Nigeria dairy sector: how a business is driving efficiency in the local value chain

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The global dairy sector plays a key role in the global food system. Apart from playing a key role in the global food system, the dairy sector provides valuable incomes to rural families. According to an IDF report, about 1 billion of the approximate 7 billion global population live on dairy farms. By implication, the sector provides livelihood to a chunk of the world’s households.

If consumed consistently, milk aids proper bone development. It also mitigates cognitive decline. Hence, the importance of this beverage, amongst other nutritional values, as an essential food for the proper development of the younger segment of a nation’s population as well as the maintenance of cognitive balance among those who are slightly advanced in age. The foregoing explains the growing importance of the global dairy sector which, as of 2020, was valued globally at $827.4 billion.

Like most countries in the world, the Nigerian dairy sector is dominated by smallholder farmers who operate on small scale farmlands and are largely nomadic. A good number of them who settle in a place live far away from major cities while focusing on rearing their herds for meat with milk as a by-product.

The larger focus on rearing cows for meat amongst several inefficiencies in the sector has led to the shortage of raw milk for use in the production of healthy products such as cheese, yoghurt and packaged milk. The shortage means the country needs to channel a sizable portion of its scarce foreign exchange, as much as $2.5 billion in 2020, into importing raw milk to bridge the gap in local milk supply – a setback to the nation’s forex reserve and the incomes of smallholder dairy farmers.

Precisely, the inefficiencies bedevilling sufficient local milk production include poor milk collection and cold chain logistics systems, low cattle reproductive health, sparse adoption of modern dairy farming techniques among the dairy farmers, in addition to the low level of the farmers’ household exposure to formal education. Until recently, these hurdles have impeded growth in the Nigerian dairy sector and undermined the country’s potential of establishing a thriving dairy industry that adds verve to the economy.

Mindful of the sluggish development in the whole agriculture value chain, the Federal Government, through the Federal Ministry of Agriculture & Rural Development (FMARD) and the Central Bank of Nigeria (CBN), designed the Agriculture Transformation Agenda (ATA) to tackle the ingrained productivity challenge across the agriculture sector. This plan focused on scaling private sector investment in agriculture as well as developing useful infrastructure for growth and providing valuable access to inputs, finance and modern agriculture practices. 

Outspan Nigeria Limited, a subsidiary of ofi (olam food ingredients), has been a key player in the local dairy value chain. Through its “Milk Mission” initiative, a signature dairy value chain development vehicle, the business continues to demonstrate its goal of driving real growth in the local dairy sector.

Hence, in partnership with the Kano Dairy & Livestock Husbandry Cooperative Union (KADALCU), it keeps executing valuable backward integration (BIP) efforts including the strategic location of four well-equipped milk collection centres (MCCs) close to dairy farm clusters. As well, it is providing logistic systems to aid the effective collection of raw milk and deepen market linkages for the farmers.

As part of the overall focus on pulling all growth levers to stimulate value chain development, it carried out cattle vaccination and artificial insemination exercises for over 100 cattle and distributed rich compound feed to the farmers. Also, through the periodic organisation of workshops, the business continues to empower and expose smallholder dairy farmers to modern farming practices. 

To further demonstrate its profound prioritization of growth actions that would yield continuous improvement in the dairy value chain and the livelihood of smallholder farmers, the business celebrated World Milk Day 2022 by engaging the farmers deeply. 

On June 1, 2022, in Doguwa LGA, Kano, the subsidiary of ofi launched a modern cold truck for raw milk, delivered more enriching compound feed to cater for local cattle, extended training of the farmers on modern dairy farming, donated and distributed notebooks and school bags to the farmers’ children.

These latest actions focused will help fortify cattle health, tackle the increasing economic loss of dairy produce, drive sustainability actions in the local dairy value chain, as well as enhance the learning experience of the children emerging from farming communities.

Evaluating Outspan’s BIP efforts, Bilkisu Mahe Wali, the Branch Controller of the Central Bank of Nigeria (CBN) Kano, during the cattle vaccination efforts said, “I am happy that these dairy value chain development activities are taking place in our local government. These initiatives will increase local milk production in such a way that in the nearest future our dairy farmers will be exporting fresh milk to countries within the West African region”.

Dr Suleiman Musa, a veterinarian and consultant to Kano Dairy, said, “To be honest with you, I am impressed. I am impressed in the sense that they (Outspan) made a promise and they are fulfilling it. We have not had to start running after them to perform what they promised.”

Also, rehashing the impact of the business expanding value chain development efforts, Usman Abdullahi Usman, the chairman of Kano Dairy Union, explained, “The Kano Dairy Union, which is made up of over 70,000 members, keep seeing improved milk production outputs since Outspan embarked on the backward integration programme.”

Praveen Paulsamy, Vice President, for ofi Dairy in Nigeria, fittingly captured the business’ strategic value chain growth focus: “We prioritize investment in key areas of the local dairy value chain. Our scaled growth actions as seen in the launch of the cold truck for our Milk Collection Centres (MCCs); the distribution of a rich compound animal feed comprising cottonseed cake amongst others which contain a high level of fibre and protein that nourish dairy cattle to smallholder farmers; the lecture on modern dairy farming practices; and the distribution of useful stationery items to dairy farmers’ children, underpin our strategic approach to improving the local dairy sector, the livelihood of smallholder farmers, and the host communities, in line with the federal government agriculture and economic development agendas.”

Going by the projection by global analysts that dairy consumption will increase significantly going forward, Nigeria’s agriculture sector can look forward to meeting the scale demands for milk in the local market. Of course, Outspan Nigeria Limited’s expanding role in the local dairy sector, in addition to the policy and investment efforts being pursued by the CBN, FMARD, and other private investors, assure that the projected increased demand for milk can be catered to locally. 

Toyin Afilaka
Toyin Afilaka
Toyin Afilaka writes with simplicity and insight. He aims to enrich the Nigerian small business landscape. Through Hustle24 he connects entrepreneurs with information about new policies, enterprise solutions and opportunities that will aid their 'hustle'. He has written extensively for CobraReview, a product review portal, and served as a lead project manager for MarketingMix where he consulted as PR consultant for MTN Project Fame and Business Next Titan etc.

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