Nigeria has banned frozen chicken import. The move has provided local producers with an opportunity to gain a bigger market share, but it has also presented stakeholders with some challenges, DANIEL ESSIET writes.
The ban on frozen chicken imports would have been a boom to local producers, allowing them to enlarge their market share and boost sales. But, so far, the policy has proven successful only in boosting domestic output. The problem is partly the mismatch between the high demand for poultry products, the productive capacity of the local industry and the harsh operating realities.
Indeed, the mood in the industry is lukewarm. Smuggling continues; high feed costs and red tape threaten growth. The sector that could have turned out to be a huge asset for the growth of the national economy remains a todler.
While the international community may see Nigeria as a fading import market for chicken, stakeholders see the inability of the domestic poultry industry to respond adequately to expanding demand for poultry products, as opening up a market for smuggling.Nigeria is losing about $2.7billion (about N399.4billion) yearly in revenue to smuggling of poultry products, the Poultry Association of Nigeria, has said.
“The supply of corn is not adequate to meet expanding feed use, and restrictions on corn imports could combine to constrain growth in both the poultry and egg industries, raising production costs and consumer prices and slowing consumption.”
The President of the association, Dr. Ayoola Oduntan, said at the Nigeria Poultry Summit that local production of chicken has fallen short of the demand for the product, thereby creating an avenue for smuggling.
According to Oduntan, while the local demand for frozen chicken is above two million metric tonnes yearly, Nigerian farmers produce 300,000 metric tonnes, leaving a wide gap of more than 1.7 million metric tonnes.”Out of this figure, smuggled chicken accounts for 1.2 million metric tonnes annually,” he said.
The industry still appears unprotected, a state of affairs that is being exploited by smugglers. Oduntan said smuggled chicken and rising costs of production are forcing local poultry producers to shed a bigger chunk of the chicken industry. The local poultry industry, experts maintained, has seen the demise of some of smaller poultry producers. In the last couple of years, some of small producers have either gone under, or scaled down production.
According to the PAN President, though the ban on import is supposed to boost production, yields are lower, and the viability of poultry is reduced by its high production costs and increased chicken imports.
To this end, Oduntan said local producers must be committed to increasing output and supplying fresh chicken to limit the import of chicken. While local producers are making efforts to produce more chicken, he said the industry is bewildered by the negative impacts of higher input costs, especially maize, soya, power, labour and fuel.
Feed costs
The high price of feed raw materials is an issue everywhere. Since the high feed costs are felt throughout the industry, operators have found the business less competitive. Feed is the single biggest input cost, making up 60 to 70 per cent of total input costs. Inputs and costs have presented the poultry industry with huge challenges, he said, highlighting the fluctuations in feed ingredients prices.
“Many farmers have complained that the industry doesn’t have the capacity to facilitate smooth movement of poultry products from the farms to supply points. While there are marginal investment in infrastructure, not so much have been recorded to make specialised chick delivery vehicles commonplace”
For the Vice- President (Agriculture), Association of Small Business Owners of Nigeria (ASBON), Mr. Stephen Oludipupo, the sector is not moving forward as it battles soaring feed costs and rising electricity bills. He believes if poultry and egg production are sustained, growth in demand for corn and soybean meal is likely to outpace gains in domestic production.
Farmers like him also complained that the supply of corn is not adequate to meet expanding feed use, and restrictions on corn imports could combine to constrain growth in both the poultry and egg industries, raising production costs and consumer prices, thereby slowing consumption. The same thing is said about soybean meal, which the industry cannot guarantee local surpluses and ready availability.
Currently, the poultry industry accounts for about a third of local maize consumption and almost all the soya consumption in the country, its sustainability and future development are also in danger. This scenario represents an “industry in distress” as acknowledged by experts who are considering measures that help producers to remain in business.
The concern is that Nigeria is on the verge of becoming a major importer of soymeal, thanks to the country’s surging poultry production, boosting feed demand. The layer industry is also expanding rapidly as it is able to provide a relatively cheap protein source compared to other sources of protein. However, poultry feed manufacturers are also finding a ready growth market in livestock, for which production of suitable rations is increasing at an accelerated pace to meet the demand .This has resulted in a shift in demand of soymeal by feed millers from the traditional poultry farmers.
The increased demand for soymeal is driving feed mills beyond their typical origin and supplies also suffer from consistency in quality.
Already, like the Chairman,Lagos Chairman,Dr Dotun Agbojo once disclosed, local operators have demanded permission to import soybean meal, to help them deal with the impending competition of cheaper smuggled chicken. Producers think this will help the poultry industry to get cheaper raw material and reduce its cost of production, which is three times the cost of production of imported ones.
He said corn supply was important because the commodity was the main material used in poultry feed, which currently consumes 90 percent of national corn production.
However, as he said, it is not only feed prices that present challenges to producers. The sector now faces a number of issues and difficulties including water, food, electricity and other major problems. As a result, the economic efficiency of local producers does not compare as well as their technical efficiency, largely due to higher production costs. Therefore, the industry is struggling to remain competitive. Many farmers have abandoned commercial poultry production because it was uncompetitive, and instead focus on other things. In addition to the challenges posed by the various pathogenic diseases, the farmers also face the problem for low capital. Unfortunately, lack of financial support and incentive packages for players in the industry has, over the years, led to the gradual collapse of the industry and the retrenchment of a large number of employees in it. Due to the high-risk nature of poultry farming, many commercial banks shied away from giving loans to operators in the industry.
Foreign direct investment (FDI)
Foreign direct investment (FDI) has, so far, not been a major factor in the development of poultry sector. But to watchers the nation’s competitive, and potentially large industry offers investment opportunities in input activities, such as breeding, medicines, feed, and equipment, as well as vertical integration and processing. While the country permits FDI in these activities, investments are constrained by market and policy uncertainty, poor power and transport infrastructure, and high taxes on processed food.
Capital and infrastructure for future production is a concern. Very little investment in infrastructure has been made in the last 10 years because of poor returns, restricted access to credit because of the economic situation, the difficulties in obtaining planning permission and the new requirements for environmental permits. Currently, the poultry business is still kept by smallholders.
The poultry production system is a mix of family businesses and commercial operations, from the small- to large-scale with varying degrees of modern technology. This has clear implications for rising demand for poultry meat.
Bird flu
There have been four more outbreaks of highly pathogenic avian influenza in Nigeria. The outbreaks were of the H5N1 subtype, and all four involved layers of different ages between 20 and 60 weeks.
“Except there is a development plan for the poultry sector to boost production of chickens and eggs, the import ban on frozen chicken meat may not achieve its goal”
There were 668 deaths from the disease out of a susceptible population of 3600. The remaining birds were destroyed to prevent the disease spreading. The disease report to the World Organisation of Animal Health (OIE) commented that the one farm and three backyard operations involved displayed poor biosecurity. Help from the side of the government and other investment institutions, is all that is needed by them for ensuring health growth and development conditions for the domesticated animals.
Power
Meanwhile, as far as poultry farmers are concerned, a more reliable supply of electricity is needed if food security is to be truly enhanced. Some frozen food traders in Ijora-Olopa, Lagos, lost approximately N10 million worth of product to spoilage in late May, following a electric grid blackout compounded by a scarcity of petrol to power backup generators.
Inefficient supply chain
A major concern is the inefficient supply chain in handling poultry production and distribution is another of those sob stories which still poses a big question mark on management skills.
Oduntan said cold chains , a crucial part of the supply chain infrastructure in poultry production is not sufficient to support massive production. His concern is that not only is the industry lacking in the issue of storage facilities but other vehicles such as refrigerated vehicles. For him, the cold chain is essential. This is because it is the conduit for the flow of poultry products.
He is not alone sharing this concern. Other stakeholders believe the cold chain segment plays a critical role in the poultry supply chain. Most of the domestic poultry business is in chilled product, but freezing is necessary for longer journeys. Stakeholders believe the industry operators of cold chain transportation need to pay close attention to market trends and best practices as continuous temperature monitoring is also of growing importance to the industry. Many farmers have complained that the industry doesn’t have the capacity to facilitate smooth movement of poultry products from the farms to supply points. While there are marginal investment in infrastructure, not so much have been recorded to make specialised chick delivery vehicles commonplace. These differences in infrastructure and logistics performance translate into real costs for supply chains. To overcome these constraints, government intervention is required, for instance, to build infrastructure such as roads, which need to be improved to allow heavy feed trucks and chicken transporters move around easily in rural areas.
Day-old chicks and broiler producers
The industry’s challenges also include lack of large quantities of day-old chicks and broiler producers or even farmers who could move into poultry. Though the number of broilers slaughtered and poultry meat produced have increased, the industry does not produce sufficient quantities to satisfy demand, with the shortfall addressed through imports.
Opportunities for sector expansion
There are various opportunities available to commercial poultry producers, and chief among these are production of further processed products, expansion of broiler breeding facilities to meet hatching egg requirements.As foreign nationals are not involved in production, partnerships between current medium-size producers and foreign companies with access to capital and technology are the way forward. There are good opportunities for the poultry industry, which Oduntan summarised as the growing demand for foods and those produced to higher welfare standards, as well as cost savings.
The business environment
Watchers have expressed concern that the once flourishing small-scale poultry industry has over the past two decades undergone a severe deterioration as a result of fortunes that have diverted the industry from near self-sufficiency to a net importer of poultry products. The market has followed a steep and uncontrolled influx of cheap poultry meat from subsidised poultry producers from advanced countries. A multiplicity of factors have accounted for the decline and mortalities of the domestic poultry industry. These include unfair competition from subsidised smuggled poultry from advanced countries, unfavourable and indifferent government’s policy direction, escalating costs of production, inefficient methods of production, lack of funds and credit, inadequate knowledge in poultry management, lack of information needs on the part of small-scale poultry farmers, inadequate access to market, lack of processing facilities, and high rates of perishability. The business environment for the poultry industry has been challenging in recent years. For Oladipupo, if the challenges are overcome and poultry production and industry are enhanced, the industry has the potential of employing more people and thereby helping to reduce the problem of unemployment in the country.
Watchers believe if Nigeria creates a more friendly business environment, the poultry industry will grow and attract more investment.
Technical training and assistance for farmers
More specifically, poultry producers face multiple challenges such as inefficient feeding practices and low quality of baby chickens-the two key inputs that together represent a large percent of their costs.
Another issue is disease management, which are critical to the sustainability of the industry.
To address a lot of issues, stakeholders canvassed training programmes to provide awareness to the famers on various diseases, health conditions, strategies and techniques to ensure the quality of poultry products and for the better health of the chickens, ducks and other domesticated animals.
Training and mentoring on poultry production and business are also needed. Small poultry farmers need the services of specialist extension officers who are continually assessed and up-skilled. Gaining market access is a common problem. The poultry sector has lost a lot in profits over the years. This loss is primarily due to the fact that local SMEs lack formal training on farm management and struggle to stay profitable.
Prospects for change
The outlook for the future is unclear. The plight of the poultry industry comes to the fore with regular cries for help from the industry, followed by regular promises from the government and answered with regular accusations of insufficient government support. The solution lies in the hands of the government.The other issue is that watchers are not anticipating any major industry investments in the short-term, given the country’s economic situation. A lot of farms are facing challenges due to limited access to bank credit and operating funds. For farmers, food security will be put at risk if the chicken business is not well funded. The one thing that might change this picture again could be future developments. To observers, except there is a development plan for the poultry sector to boost production of chickens and eggs, the import ban on frozen chicken meat may not achieve its goal. Oladipupo urged the government to provide incentives for poultry farmers, such as support for those who import poultry feed and other inputs, so that those items can be obtained at affordable prices. He wants commercial banks encouraged to give favourable responses to the funding of the poultry industry by devising innovative products to meet the needs of poultry farmers. For him, there is a compelling need for such interventions to restore the vibrancy of the poultry industry and create jobs, which will also help realise the government’s dream of reducing the rate of unemployment. There is need to work with Small and Medium Enterprises (SMEs) and farmers in the poultry sector to strengthen their technical skills, increase profitability, and expand access to markets. The government needs to build the capacity of local poultry companies and poultry farmers, address industry-wide challenges, such as lack of veterinarian skills and bio-security standards, low production efficiency, and limited farm management skills.
For sure, the ban calls for further action and reaction. On the whole , producers in the poultry industry are welcoming a government ban on poultry products imports. The ban was imposed following ongoing concerns about potential health threats.Farmers say, the ban will boost business for local poultry producers by giving them an increased foothold in the local market.Poultry farmers had been advocating for a ban to protect the local industry . They say the ban will support hard working small holder farmers. They also say the ban is good news for small and medium enterprises and will provide more job opportunities in the community. They said the ban is a step forward in the right direction towards improving policies that will protect local produce and increase trade
