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‘CBN’s forex exclusion policy for milk laudable but disrupting investment environment’

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Describing the commitment of the Central Bank of Nigeria (CBN), to the backward integration agenda of the Federal Government as laudable, especially in the dairy industry, the Lagos Chamber of Commerce and Industry (LCCI), has said that the sequencing and strategy of the policy must be right to achieve the objective.

According to the LCCI, the policy will do more harm than good, both to investors and the citizens.

Specifically, the chamber noted that the apex bank’s forex exclusion policy would trigger avoidable disruptions and dislocations in the investment environment and further undermine investors’ confidence while creating huge supply gaps in the market with severe harmful consequences.

Furthermore, the LCCI noted that there are over one million direct and indirect jobs that will be in jeopardy across the value chains of these industries, adding that for a country that is grappling with an unemployment crisis, the consequences will be too grave.

The LCCI then urged the CBN to put on hold its proposal to exclude the dairy industry investors from the Foreign Exchange Market in order to save the economy of the consequential shocks, business disruptions, investment dislocations, and job losses.

The Guardian had exclusively reported the CBN’s decision to restrict dairy manufacturers’ access to foreign exchange, citing the need for them to backwardly integrate and invest in ranching.

The CBN Governor, Godwin Emefiele confirmed the report at the Monetary Policy Committee meeting, last week Tuesday, stating that the country had for six decades depended on imported milk when capacity could have been developed locally.

Though operators expressed concerns about the decision, the LCCI yesterday stated that the Nigerian economy was not ripe for the policy.

“For all practical purposes, it is tantamount to a ban on importation of milk in whatever form as most banks would not process Form M for any product on the CBN forex exclusion list.

“We currently do not have dairy cows in the country. The dominant milk-producing system in Nigeria is the Fulani Nomadic System whose cows have a milk yield of fewer than two litres a day, whereas a good dairy cow will produce an average of 28 litres of milk per day over ten months. During peak lactation, a high yielding dairy cow can produce as high as 60 litres of milk per day.

“The reality is that Nigerian cows have very low yield because of poor genetic composition, poor feeding practices and the laborious nomadic system of breeding. These are fundamental issues that we need to fix before contemplating any form of import restriction.

“These are challenges to be posed to the Federal Ministries of Agriculture and Water Resources at the federal and state levels as the present administration moves to the next level. These are the agencies of government that have primary responsibilities for such matters. The environment needs to be created for these investments to happen”, LCCI Director-General, Muda Yusuf said yesterday.

Yusuf however urged that enough timeline be given to diary companies for a sustainable transition from the current state of affairs to the desired level of backward integration in the dairy industry.

“There should be robust incentives to attract investors to the supply chain in the dairy industry in line with the backward integration aspiration.

“The ministries of Agriculture and Water resources should take on the challenge of driving this change process through the creation of incentives for modern animal husbandry facilities and practices. There should be generous support from Government to facilitate the importation of cattle breed [dairy cows] suitable for milk production”, he added.


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