One of the most enduring lessons I’ve learnt from the man who taught me to love economics is this – where you collect data from is not always the same place where the problem originates.
Four years ago, The Economist magazine interviewed a certain Muhammadu Abubakar of L&Z Integrated Farms about the challenges of dairy farming in Nigeria. Mr. Abubakar, at the time, ran a sizeable dairy farm in Kano. He listed several problems with producing milk from cows in Nigeria. The first one is obvious – power. He had to run his generators 24 hours a day as power supply was so erratic. Then there is water – cows drink a lot of water (a rule of thumb is that 1,000 cows will need to drink 20,000 gallons of water per day). There’s also a lack of cows and seeds to grow fodder so both of them have to be imported.
If after all of that you manage to produce some milk, then getting that milk to the market is another big challenge. He tried flying the milk to Lagos from Kano but suffered losses due to the milk sitting at the airport and not being flown on time. He then switched to refrigerated trucks but those ones too came with their own challenges namely bad roads and various ‘authorities’ who harass them for bribes and all manner of ‘licence’ fees during the journeys. Long story short, by the time his milk arrives in Lagos from Kano, it costs about three times the price of milk in Europe.
None of these problems is about milk. You can be trying to produce water or wine in Nigeria and you will run into the same problems. At the same time, you cannot solve these problems just for milk. It will be ridiculous to build a 100MW power plant, for example, just to serve the dairy industry. It will take forever to sell enough milk to pay back the cost of the plant and make a profit for the power plant’s owners. We also cannot build ‘milk roads’ for milk trucks to ply so they can get to market faster.
If one then looks at how much Nigeria spends on importing milk and decides it is a problem, you cannot possibly deduce where the real problems lie from that import bill figure alone. That is to say, the data on milk imports is in one place while the reason for the milk imports is in a totally different place. Yet, the Central Bank Governor, Godwin Emefiele, has collected some (dubious) data on milk imports; decided that it is where the problem is; and proceeded to ‘solve’ it by effectively banning the import of milk. People import milk because they are confronted with a hard constraint in the market – in a country with plenty of poor people, there is a limit to how much people can pay for milk and unfortunately the local cost of production is above that limit. Of course, some can always afford milk that is produced locally however expensive it might be but as milk is not something that people cannot survive without, many will simply and quietly choose to go without it.
There is no milk problem that can be solved by banning the use of forex for the import of milk. You will simply solve the problem at the point where you collected the ‘problem’ data from. If you look at the amount spent on importing milk as a problem, you can easily make that problem disappear by refusing to give anyone forex to import it. But you will not solve any of the problems faced by Mr. Abubakar in producing milk. Instead, you will make it possible for him to continue his business as it is while giving him a bigger market by eliminating the alternatives.
It is disturbing how the Nigerian government does not have any qualms about implementing its economic ideas on top of the food that Nigerians eat. Is milk really a problem worth solving in Nigeria of today? I have two young children and they consume far more milk than I do as an adult. I can go several days without milk at all (when I drink coffee, I drink it black) but my children have milk almost every day. There’s a good reason why this is so. 90% of a human being’s brain grows in the first 1,000 days (about 3 years) of a person’s life. The nutrition, care and mental stimulation that children receive in those first 1,000 days will determine their ability to learn anything later on in life.
Millions of children are born in Nigeria every year and they already face a challenge being born into what we must admit is a tough environment. How much is Nigeria going to save from milk imports (which is not even in the top biggest 10 imports for the country) that can be worth having millions of adults later in life who are not able to reach their full cognitive abilities simply because they did not get a chance to receive nutrition as children? You might save a few hundred millions of dollars today in forex but it will cost you billions in future spent on education for which you cannot receive full value simply because you tried to save money on milk in the past.
There is no milk import problem. Nigeria consumes far less milk per capita than even its African peers, never mind comparing globally. There is a lot of scope to increase the demand and consumption of milk locally by tackling the actual problems that make it out of reach for Nigerians instead of focusing on the source of the data. If you double local production of milk today and also double imports, the market will easily absorb it provided the price moves in the opposite direction. But the Central Bank’s policy is simply to take the demand for imported milk and shift it to local producers.
What a tragedy.
- Feyi Fawehinmi is an accountant and public affairs analyst.