Africa’s most populous country will soon start importing its milk and coffee from Uganda, Nigeria’s former president Olesegun Obasanjo said after a visit to Uganda’s president.
- •During his visit to Uganda on September 18, Obasanjo visited a dairy farm in Mbarara City in western Uganda, and coffee farms.
- •Uganda ramped up its annual production of milk from 2.51billion litres in 2018 to 3.85 billion litres four years later.
- •It sells most of its milk exports (80%) to Kenya, with dairy exports across the border tripling from June 2022 to June 2023.
“I am here to see how Nigeria can buy Ugandan milk, expand production of processed milk and Coffee,” Obasanjo said, adding that he had just discovered that Uganda is the net exporter of milk on the continent.
In the June, the Nigerian government begun implementing a dairy policy, aiming to save up to $1.5bn annually on imports. The country consumes about 1.6 billion litres of milk every year, but its current domestic production cannot meet the demand.
To fill the gap, Nigeria imports milk from several countries, mainly outside the continent, including New Zealand, France, Ireland and other producers in Europe.
The Long View
Nigeria’s high and rapidly growing population means that it is struggling to meet its resultant milk, and generally food, demand. This presents a great opportunity for Uganda and other countries with a food surplus.
Nigeria is also undergoing economic turmoil, which might make the intra-African trade even more complex. A key reason why Ugandan exporters prefer Kenya as a market is the foreign exchange difference, which favours them compared to their home market, relative currency stability on both sides of the border, and proximity and cultural ties.
The Naira has fluctuated in recent years, forcing Nigerians to use alternative currencies with more predictable trends. Some of Abuja’s measures to stem the currency crisis have affected dairy products directly, because importers need foreign currency to trade with exporters.
In March, the Central Bank of Nigeria (CBN) lifted restrictions on sourcing foreign exchange to import dairy products. The apex bank had previously restricted sourcing foreign exchange from the government to just six companies.
Ugandan exporters will likely need an elaborate market entry strategy that takes into account the dynamics of intra-African trade, the currency issues, profit margins, economies of scale, and other factors.