From a semi-nomadic herdsman, Olatunde Rafiu has transformed into a rancher. He hails from Iseyin community, which is located 100 km north of Ibadan, the Oyo State capital, southwestern Nigeria.
Rafiu now manages Genius Integrated Farms, owning more than 100 cows and producing raw milk for a Dutch dairy maker, FrieslandCampina WAMCO. Through the help of the company, he crossbreeds his cattle and now produces stronger breeds such as Sokoto Gudali, Asha and Fulani.
Scientists say that crossbreeding leads to superior performance of a crossbred offspring and breed complementarity, and may also result in the production of more milk and beef.
“Ordinarily, a cow in Nigeria produces less than 1 litre of milk, but a crossbred cow can produce up to 5-10 litres. This is the advantage we have with our crossbred cattle,” Rafiu said.
“The cows you see here are genetically modified ones and can produce up to 10 litres of milk. The more milk they produce, the more milk is supplied, and the more more you make,” he said.
Now a graduate of Federal School of Surveying in Oyo State, Rafiu ranches on 80 acres of land and has six members of staff. He has a solar-powered borehole which provides regular water for his cattle.
Rafiu is not the only one in the value chain. In another village of Oyo State named Fasola, herders are also in a competition to supply raw milk to dairy makers. Aishat Hassan wakes up early as 4.30am to milk her four cows. From 6.30am to 7.00am, she supplies 4-6 cans of raw milk to FrieslandCampina WAMCO every day.
The Dutch dairy firm has extended this project to other communities in Oyo State, including Maya, Akele and Sakin. In fact, it has moved to four other states in Nigeria where the model is being replicated.
The dairy maker now collects 40,000 litres of raw milk from local farmers daily, the reporter learnt.
Raw milk is often imported into Nigeria, but FrieslandCampina WAMCO is sourcing some of it locally through herders. The advantage of this is that it saves import costs and reduces the firm’s exposure to the foreign exchange.
“We are the highest off-takers of fresh milk produced locally from five states in Nigeria. Today, we are running some plants on the local milk,” said Chief Executive Officer of FrieslandCampina WAMCO, Ben Langat.
“We have brands that are 100 percent Nigerian in our portfolio,” he further said.
For FrieslandCampina WAMCO, the local raw materials sourcing is paying off. The revenue of the dairy maker rose by 35 percent to N268.4 billion ($335.5 million) in 2021, from N199.5 billion ($249.37 million) recorded in 2020. Its turnover increased to N324.7 billion ($405.88 million) in 2022, up by 21 percent from N268.4 billion in 2021.
This is happening at a point some local manufacturers are incurring losses due to a foreign exchange crunch.
An economist, Dr Rufus Adekunle, said local input sourcing had proven to be a game changer for the dairy firm.
“It reduces the company’s exposure to the foreign exchange and brings stability in its revenue projections,” he said.
Palm oil revolution
The revolution is also taking place in the palm oil industry. PZ Cussons is expanding its oil palm plantations in Cross River State through its subsidiary, PZ Wilmar.
When the reporter visited the oil palm plantations in Cross River State, he was told that the company’s plantations sat on 26,318 hectares of land. Located in Calaro Estate, Ibiae, Akampa, and Akpabuyo all in Cross River State, the plantations support PZ Cussons’s vegetable oil manufacturing plants in Cross River and Lagos states.
There are two production plants at Calaro Estate: the kernel crushing plant (KCP) and the palm oil mill (POM). The POM produces 45 tons per hectare, while the KCP’s capacity is estimated at 2.5 ton per hectare.
With the palm oil, the company produces vegetable oil at cheaper rates and sells to all segments of the Nigerian market.
Total investments in the plantations are estimated at N45 billion ($56.25 million). More than N20 billion ($25 million) has been invested in an oil palm refinery in Lagos, Nigeria’s commercial nerve centre, said its former CEO, Santosh Pillai.
“You can imagine what could have happened if the company imports palm oil amidst the foreign exchange scarcity. It risks incurring losses and even going out of business. However, it is the local input content that is making the difference,” said Dr Adekunle.
PZ Cussons Nigeria’s revenue stood at N113.96 billion ($142.5 million) at the end of the year ending May 31, 2023, indicating a 15 percent year-on-year growth from the previous year.
Flour Mills of Nigeria also sources palm oil locally and is developing local sugarcane plantations in Sunti, Niger State.
The first phase of Sunti Golden Sugar Estate Limited will produce 100,000 metric tonnes (MT) of sugar while saving about $50 million in foreign exchange for Nigeria.
The plan is produce raw sugar locally and use it to manufacture sugar in the Lagos plant, said Chairman of Flour Mills Group, John G. Coumantaros.
Nigeria’s raw sugar importation hit N1.945 trillion between 2013 and half-year of 2023, according to an analysis of the National Bureau of Statistics (NBS) data.
About N963.769 billion worth of sugar was imported into the country from 2021 to first half of 2023, Economy Post earlier reported.
The sorghum adventure
For the brewery industry, sorghum is a substitute for barley. Russia, Germany, Australia and France are key exporters of barley. With the foreign exchange crisis in Nigeria, an importation of barley has become nearly impossible.
The Nigerian Breweries (NB) has resorted to sourcing sorghum and cassava from Psaltry International Company Limited.
In fact, NB had tested the use of local sorghum in 1988, but it has now expanded it given the current economic realities.
“A lot of us have gone into sorghum farming because of the new market being created by the brewery industry,” said a Jigawa State-based farmer, Inuwa Abdullahi.
He said brewers sourced 60-70 percent sorghum as by-product for brewing beer and malt.
Guinness Nigeria is also sourcing most of its inputs locally. It obtains sorghum, cassava, yeast and other inputs directly from farmers.
“Guinness uses heavily roasted maize or sorghum which is locally sourced and its own distinct yeast,” said Nigeria’s second biggest brewer on its website.
Guinness Nigeria, a subsidiary of Diageo Plc, posted a revenue of N59.5 billion ($59.5 million) for its first quarter period ended 30 September 2023, representing a 13 percent increase in topline. Its profit rose by 33 percent over the period.
The challenges
But it has not been smooth sailing for manufacturers. Several farmers supplying these inputs in northern Nigeria have either been killed or sacked by terrorists.
In early November 2023, about 15 rice farmers were killed and several others abducted by Boko Haram terrorists in Borno State, northeastern Nigeria.
Boko Haram terrorists and herdsmen have inflicted severe pains on farmers and even demanded taxes from them in several communities.
“We have a problem with insecurity. Manufacturers empower communities, but insurgents often disrupt the process and make it difficult for manufacturers to defend themselves,” President of the Manufacturers Association of Nigeria (MAN), Otunba Francis Meshioye, told Economy Post.
“There is also lack of infrastructure, which should be attended to. As an association, we are drawing the government attention to partner with us to complement our efforts in several communities,” he added.
Chief Executive Officer, Centre for Promotion of Private Enterprise, Dr Muda Yusuf, said that investing in local inputs or backward integration could be quite expensive.
“The Nigerian macroeconomy is challenged, and investing in backward integration is quite expensive. There is often little or no government support in this area. However, it is something businesses should do long-term to stay afloat and sustainable,” he noted.
*This story was originally published by Economy Post. It is republished here with permission.
