Uganda is set to flag off 200,000 tonnes of powdered milk to Nigeria valued at over Shs3.7 trillion ($1.02b) -at factory price, at the end of this month, in a deal, which promises to create another large scale milk off taker for the country after Algeria.
The western African market comes at a time Kenya continues blocking Uganda’s dairy and dairy products since 2023, when the Ruto administration opted to promote local production against cheap imports.
‘Nigeria is coming on towards the end of November this year,’ Samson Akankiza, the Commissioner for Dairy Development and Production in the Ministry of Agriculture, said.
The two countries will use a Nigerian cargo carrier to transport the milk from Entebbe to Lagos, Nigeria, in a deal brokered by former President Olusegun Obasanjo.
Nigeria will be the largest off taker at 200,000 tonnes after Algeria, which takes 20,000 tonnes per year. The western African populous country is reported to be spending Shs5.2 trillion ($1.43b) annually on importing milk from Europe due to the persistent domestic production gap.
Nigeria faces low domestic production of milk. It’s estimated that on average, pastoralists’ cows in Nigeria produce at least 0.5 to 1.5 litres daily. Accordingly, the country imports 70 percent of its milk needs, amid concerns of low investments, poor access to finance and a weak regulatory environment in the dairy industry.
Comparatively, Uganda has a competitive advantage in milk production as its cost of production per litre is lower than other countries in the region. The country also exports milk worth Shs921.8b ($254.15m) as per 2023 data from the Finance ministry.
Until 2023, Kenya was the leading buyer of Uganda’s milk.
However, the Kenya Dairy Board subjects imported dairy and dairy products to import levy equivalent to 10 percent of the value of the import determined using the cost, insurance and freight basis. Typically when powder milk, which costs Shs18,500 per kilogramme at the factory is delivered in Kenya, the 10 percent excise duty pushes up the price to Shs20,350 each kilogramme, making it uncompetitive.
Uganda has always protested Kenya’s protectionism measures, on grounds they violate the East African Community Protocol, especially the free movement of goods within the region as outlined in the East African Community Common Market Protocol.
‘I have been notified Uganda has been negotiating to waive these barriers,’ Ms Lynette B Bagonza, Permanent Secretary Ministry of Trade Industry and Cooperatives, said in a November 11 interview.
She described the Kenya-Uganda milk war as more of politics. Her comments come shortly after Uganda’s Trade minister, Gen Wilson Mbadi and Kenya’s cabinet secretary for trade Lee Kinyanjui agreed in Mbale that all goods originating between the two countries would be treated as ‘transfers’.
This means, at least on paper, the two countries ended the use of discriminatory excise duties, levies, and non-tariff barriers (NTBs).
Yet Under EAC law, goods traded within the bloc are not meant to be treated as ‘imports’ but as intra-regional transfers. Uganda is now betting on Kenya to overhaul its Dairy Industry Act (Cap 336) to remove dairy products restrictions.
Uganda counting losses
Apart from Brookside Dairy Uganda Limited, which has been waiting for permits for more than two years now, the Presidential Advisory Committee on Exports and Industrial Development (Paceid) says Kenya also limits Ultra-High Temperature (UHT) milk from Uganda, through issuance of import permits. Other firms whose products are restricted include: Muhangi Dairy Farm, Lakeside Dairies, Rainbow Dairy Uganda Limited, and Amos Dairies Limited, translating into a loss of Shs270b ($74.4m) in revenue from exports annually.
For Mr Allan Ssenyondwa, the director of policy research and advocacy at the Uganda Manufacturers Association, despite the challenges in Kenya, Uganda’s milk industry is poised for a positive outlook in the long run, driven by rising production capacity, a strong demand in the new markets and the stable farm gate prices on the domestic market.
For example in Uganda’s cattle corridors, the Agriculture ministry says the farm gate price of raw milk has averaged Shs1,100 ($0.31) per litre in the past three months to September this year, up from about Shs700 ($0.19), attributed to a growing demand.
Yet, Mr Joram Kajwenge, who spends Shs600 ($0.17) on silage per kilogramme, his wish is for the farm gate price to reach Shs1,500 ($0.41) per litre to report a profit.