PwC has been operating in Nigeria since 1953, and has offices in Lagos, Abuja and Port Harcourt, more than 1,000 staff and 26 resident partners.
The study highlights the importance of the agricultural sector to the country: of its total land mass of 92.4m hectares, arable land accounts for 82m hectares.
While dairy does not feature as one of the top agricultural products, it does come in fourth in the list of the nation’s most important exports at $68m of a total export value of $1.4bn.
Low investment in agriculture
PwC says in the report the recent fall in crude oil prices has led to discussions about the role of agriculture to the nation’s economy. However, it points out that agricultural yield is low, and processing and marketing activities have been plagued by poor infrastructure, low investment, and unfavorable government policies.
Some dairy industry challenges in Nigeria:
Difficulty in acquiring land
Climatic variation – high temperature and irregular rainfall
High cost of power generation
High cost of processing equipment
Limited storage facilities
Poor road network
Low cost of imported products
The report notes Nigeria produces 600,000 tonnes of milk per year, but consumes 1.7m tonnes – leading to milk imports of $480m a year.
PwC argues production needs to be improved, as does the connection between producers and processors.
It also points to figures that state by 2050, Nigeria will have the fifth biggest population in the world, 400m, and that food consumption will grow at 4% per annum.
However, Nigeria’s consumption of milk is also low, at 10 liters per person, compared to 28 liters per person in Africa, and 40 liters per person globally. The report states that, because of this, there is scope for dairy products to grow as the population increases.
Value chain
The report notes that in Nigeria, ‘pastoralists’ account for an estimated 95% of the total dairy output, but only a small percentage of these small farm producers’ milk (around 15%) is collected by formal processors, limiting the amount of milk available for processing.
This, in turn, results in high powder imports.
With low yields per cow, processing companies that do collect milk from collection centers can generally only handle around 50 liters per day. The report says that the lack of infrastructure and lack of advanced technology means many products are sub-standard.
Traditional Nigerian dairy products include:
Nunu (sour milk)
kindirmo (sour yogurt)
manshanu (local butter)
cukwi (Fulani cheese)
wara (Yoruba cheese)
Most dairy producers reconstitute imported milk powder into liquid milk and other dairy products. Imported milk is sourced from New Zealand, Australia, South Americam the EU, India and Ukraine.
The report mentions some multinational companies have partnered or acquired Nigerian dairy companies to reconstitute or repackage imported milk powder.
The utilization of imported milk, the report argues, does not encourage backward integration within the value chain.
Strategies for improvement
The report outlines ways in which the Nigerian industry can improve. Firstly, milk production can be increased with breed improvement to increase the yield of milk, however, this could take 10 years to complete.
Scaling up of dairy services is another area of potential.
Milk quality can be improved, the report states, in part, by training on animal health and hygiene.
Better organization, via producer groups and cooperatives, would improve accessibility for processors, while serving the small farmers better.
This would allow processors to have a better supply of milk, however, improvements are also needed in equipment. The report points to homogenizers, fillers, pasteurizers and blenders as areas needing attention.
This would, the authors argue, reduce spoilage, and increase production amounts and raise quality.
The lack of cold storage facilities also hinders the industry, and improving storage facilities across the country would help in the distribution of dairy products over greater distances.
Large dairy companies in Nigeria
There are, however, large international companies already working on some of these issues alongside the Nigerian government and local producers.
In March, FrieslandCampina WAMCO signed a Nigeria Dairy Development Programme MOU, while Arla Foods has also signed an MOU with the government to improve the industry.