DAIRY SECTOR IN NIGERIA- AN OVER VIEWDR. AYOK CELESTINE

Nigerian Dairy farming – mainly subsistence

Commercial dairy farm in Northern Nigeria

Young stock

LACTATING COWS

Dairy farm established by Dr. Ayok in 2014

Pivot system in a Dairy farm in Nigeria

Nigerian Dairy farming• Nigerian dairy industry which is largely subsistence, consists of milk production

and or importation, processing, marketing and consumption• 95% of total herd size of about 20 million belongs to pastoralist• Only a few imported cattle breeds such as Friesians, Jerseys and Brown Swiss,

and their crosses are kept by few private commercial dairy farms. • Zebu breeds(Bunaji, Rahaji, & Gudalis) are mostly dual-purpose reared by

pastoralists for both milk and meat .• Traditional milk products include nono (sour milk), Kindirmo ( sour yoghurt)

maishanu ( local butter), cuku (Fulani cheese) and wara (Yoruba cheese).• Feeding systems :Free range, Zero grazing using TMR, Rotational Pasture –based

grazing systems and Mixed systems• Urbanization, improving household incomes and general population growth is

pushing demand for dairy products with growth estimated at 3.2% to 3.5%

MARKET CONTEXT

Nigerian Demographics

• Population: 170 million which is expected to grow to about 1 billion by 2100

• Agriculture contributes 28% of GDP

• Projected that by 2050 population will grow to > 433 million

• Fast economic growth but Wealth concentrated in few hands

• National poverty average around 69% which indicated that 112.5 million Nigerians earn below $1 a day

• Growing food demand usually met by imports

Nigerian Dairy production Statistics

Total Nigerian Production a) 2.37 million cattle produces about 570,000 tones of milk/yr about 0.01% of global production and 13% of West African production.

1. Estimated 12 million small-scale pastoral producers distributed throughout Northern Nigeria.

2. Supply gap of over 1.2 million tonnes met through imports valued at $521 million or 7.4% of the value of all agricultural importsin 2012

Average litres/day under pastoral system

Commercial Dairy Producers

0.7 litre

8 litres

Global average for Pastoralist is 6.6 litres/day

World Average for commercial dairy producers is 30 litres

• Herd size: About 20 million in the country, of which 2.3 million are used for milk production

• Low, milk yields: Average yield remained at ~0.8 litres/cow/day over the past decade

• Large role of imports in meeting national demand but the new trend is towards increasing local sourcing: Domestic milk production was 570,000 tonnes in 2013 while national demand was about 1.7 million tonnes. However, the recent oil shock to Nigeria’s economy and the consequent rationing of forex away from goods and services will likely lead industries players to focus more urgently on import substitution.

• Growing domestic milk production and dairy industry: Dairy is the 2nd largest segment in the F&B industry in Nigeria, growing at a CAGR(Compounded annual growth rate) of 8% since 2010. Domestic milk production grew slower than the overall industry growth, at a CAGR of 3% between 2000 and 2013.

• Strong growth opportunities for high and low end dairy products:

(1) substantial opportunity for increased per capita consumption given our low per capita

consumption of about 10 litres/head vs. 40 litres/head globally and 28 litres/head in Africa);

(2) increasing urbanisation and rising per capita income is driving increased demand for value-

added and/or premium dairy products in Nigeria

Key market statistics and trends

Dairy Production in Nigeria (2000-2013)

-

100,000

200,000

300,000

400,000

500,000

600,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

ton

nes

Nigeria Dairy Sectorial review• According to a 2014 industry report, the entire dairy industry is the second

largest segment in the food and beverage industry in Nigeria, generating an estimated revenue of over (2 billion dollars) ₦345 billion in 2013 and growing at a CAGR of 8% since 2010.

• Among the various segments which make up the dairy industry i.e. (milk, yoghurt, ice cream, butter, infant formula), milk has the largest share and accounts for 61% of the turnover in the industry. Nigeria’s ice cream market alone is estimated at 10 million litres, with a value of approximately $40 million per year.

• For the forecast period of 2014 to 2019, drinking milk products (which includes fresh milk) are expected to increase by a value CAGR of 3% and yoghurt and sour milk based drinks (which includes the sour milk that is traditionally available in unpackaged forms) are forecasted to increase by a value CAGR of 2% .

• Premium products such as non-fat, low-fat milk, milk cubes, and milk-based energy drinks are becoming increasingly popular among high and medium income consumer segments in Nigeria.

MARKET STRUCTURE & PERFORMANCE

M4P Donut

SUPPORTING FUNCTIONS

Pastoralists Producers

Inputs

Commercial Farmers

Wholesalers/Retailers

Urban and Rural Consumers

Financial Services

Veterinary Services

Transport Services/Cold Chain

Training and Extension

Research

Quality Standards (FLD, NAFDAC & SON)

Informal Traditions and Norms

Gender Relations

Land Tenure Practices

Security and Conflicts

Policy Institutions (MDAs, SMANR, etc)

RULES

Factory Processing

Imports

Local Processing

Water & Feed Supply

Pastoralist herders ~12 million pastoralists

Distributors / Wholesalers

Consumers of traditional dairy products(mainly rural or semi-urban consumers)

TRADITIONAL DAIRY PROCESSING & MARKETING (INFORMAL SECTOR)

MODERN DAIRY PROCESSING & MARKETING(FORMAL SECTOR)

Consumers of modern dairy products such as fresh milk, UHT milk, milk powder, yoghurt, icecream, etc. (mainly urban consumers)

Traditional Processing

Retail

Consumption

Production

Collection & Aggregation

Retail/Wholesale

Consumption

Production

Processing

Cooperatives

Commercial Farms(~28 farms including Zaidi, Garko,

Inter-City, Joda, etc.)

Vertically integrated dairy companies 12 integrated farms: L&Z, Majestik , Farm Fresh, Milky Way, Sebore, Nagari, Jamil, Niyya, Shonga, Mai Zube, Tilde, Lamda

Retailers supermarkets, hotels, restaurants,

& other modern retail outlets

Imported dairy

products

Imported milk

powder

Milk hawkers

fre

shm

ilk

Independentaggregators

Dairy processors8 large processors + medium scale processors + cottage industries

Imported milk

powder

Associated with medium-scale processing

Associated with cottage industries

Minor channel

Two major sources of Dairy Production are Import (60%) and Local production (40%)

Local Production is supplied by

i) Traditional pastoralists accounting for 95% of Nigerian milk production and

ii) Commercial farmers producing 5% of Nigerian milk production

Key inputs required for dairy production are:

• Cows – largely local breeds owned by small-scale pastoralists; cows are mostly gotten from inheritance and other cultural practices such as gifts; few commercial farmers purchase theirs from cattle markets or import exotic breeds and/or semen.

• Feeds (mostly natural grasses and other roughages) gotten from grazing areas, grazing reserves and crop residue. There are also supplementary feeds of various types.

• Veterinary inputs and biological – for prevention and management of animal diseases, mostly obtained from trained and untrained veterinary practitioners.

[Production systems]

• There are very few organised mechanism for collection and aggregation of milk. Most of the fresh milk is locally processed by the pastoralists women into different products.

• There are some pastoral women who purchase fresh milk from other pastoral producers and migratory pastoralists – which is also processed in the local way as described above.

• Other form of aggregators are by commercial farms/firms processing milk – Friesland Campina, L&Z, Niyya, etc that are engaged in commercial dairy processing. Here the collection is done by a number of intermediaries starting with a cart, bicycle or motorbike transporting milk to either a collection centre, where milk is then picked up in a truck and transported to the processor or transported to consumption centres for sale through wholesale and retail.

• There are few milk bulking, collections or buying centres owned by dairy cooperatives, dairy self-help groups, individual bulk buyers and agents of large milk processors – e.g. MILCOPAL (Cooperative set up by National Livestock Projects Division of the Federal Ministry of Agriculture) in Kaduna and few such centres owned by Friesland Campina Plc.

• Presently only one milk collection centre with standard cooling equipment is in operation located in Fashola, Oyo State being managed by Friesland Campina.

[Collection and Aggregation]

Milk collection

Milk Testing

• There are very few large, well equipped dairy processors in the country with throughput of well over 50,000 – 1million per day . There are various small scale processing outlets with capacity of processing 50 litres per day, but there are also plants processing more than 1,000-5,000 litres per day.

• Both the pastoralists and the commercial producers process the milk they produce. While the pastoralists women directly sale their dairy products, the commercial producers sale their products through distributors and retailers.

• In the traditional Fulani family, the women process fresh milk into traditional milk products such as Nono (sour milk), Kindirmo (sour yoghurt), Manshanu (local butter), Cukwi (Fulani cheese) and Wara (Yoruba cheese).

• Under the commercial setting, raw milk is processed into various dairy products such as Pasteurized milk, UHT, evaporated milk, yoghurt, and ice cream.

[Processing ]

•Traditional marketing system is mainly carried out by Fulani women and girls who directly sale to consumers by hawking local dairy products. These milk products are carried on the women’s heads, as they walk to sale points such as rural markets, roadside settlements and semi-urban areas.

•The commercial farmers and the importers engage the services of distributors, wholesalers, depots, bicycle boys, retailers and other market outlets. Their dairy products include packaged liquid milk, yoghurt, butter, ice cream, evaporated milk, powdered milk, baby formula, and cheese. There is increasing applications of milk powder as inputs for processing local foods such as ice cream, pastries, yoghurt, biscuits, confectioneries and beverages.

•There is the emergence of supermarkets/retail chain malls due to increase in the number of urban consumers.

•Re-packaging of dairy products into smaller containers to meet consumers purchasing power are the new measures being adopted by most processing plants.

[Marketing]

•Consumption:– Low income bracket amongst majority of consumers– Poverty level is high – Poor cooling facilities at household level discourage bulk purchase of dairy

products

• Other constraints include:– high costs of local food processing activities and poor infrastructure across

the country. – Many bulk, intermediate and processed inputs utilized by local food

processors are imported. – For high premium commercial processors, there is strong competition from

lower-priced untreated or boiled milk of low quality as well as sub-standard quality raw milk from small-scale farmers.

Market constraints

•Supporting rules in the dairy value chain are:

•Policy institutions - Agricultural policy prescribe the set of laws relating for domestic agriculture and imports of foreign agricultural products. Key institutions involved are Departments and Agencies in the Federal and State Ministries of Agriculture, Finance, and Environment.

•Quality and standards – there are a number of regulatory legislations – the regulating agencies includes NAFDAC, SON and Federal and States Departments of Veterinary Services.

•Land tenure – regulate access to land for both traditional breeders and commercial farmers.

•Security and conflicts – Cattle rustling and conflict between pastoralists and farmers impacting negatively on local productivity.

Formal and Informal Rules

MARKET OPPORTUNITY

• There are enormous opportunities for growth in the dairy value chain. The market has over the last ten years recorded increasing demand for higher quality dairy products such as , evap. milk ,sachet powder milk, UHT, ice-cream, yoghurt and butter.

• The Nigerian economy is growing at an estimated rate of about 7%, there is increasing consumer incomes, a growing middle-class and high population (about 170 million people, the 8th largest in the world).

• There is also high urbanisation rate, expected to grow subsequently.

• The rebasing of our economy has put Nigeria as a frontier for investment having good returns on investment.

• The commercial companies are rapidly innovating – and super/retail markets are rapidly expanding providing market opportunities for dairy products. Additionally, hotels, restaurants, and shopping malls in the major cities is spurring further demand for dairy products.

Overall growth opportunity in the dairy market

•In response to changing consumption trends in urban centres , commercial processors are introducing numerous marketing and product innovations to attract new dairy consumers. Examples of the innovation and dynamism in the Nigerian dairy industry includes:

1. Introduction of flavoured milk based drinks (targeting children);

2. Smaller packaging of milk-based drinks (targeting price-sensitive

consumers).

3.Small sachets for condensed/evaporated milk (targeting those using

milk complements for tea and other beverages and foods);

4.Increased visibility and widened distribution of smaller commercial

players in certain dairy segments.

Overall growth opportunity in the dairy market

•Imported milk powder is the dominant input into the dairy industry, accounting for over 75% of inputs .

•Nigerian dairy processors are known to import and repackage milk powders or to reconstitute imported milk powder into liquid milk and other dairy products.

• The use of imported milk powder is a growing practice also among most local yoghurt processors.

Overall growth opportunity in the dairy market

•Government is now using monetary policy to indirectly discourage imports of powdered milk so as to enhance backward integration of dairy value chain.

•This new trend will encourage large scale commercial players to come into this sector thus opening myriads of opportunities for partnership amongst commercial dairy farmers within Nigeria and other African Agic- businesses for investments

Conclusion

Thank you for listening