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7. Specific dairy import policies and their effects

Nigeria: Use of classical instruments of trade control
Mali: Pursuit of multiple objectives

The dairy import policies of Nigeria and Mali have been selected for further discussion. In the past, government interference with dairy imports in Nigeria was limited to the imposition of import tariffs, which is a classical instrument of trade policy, but more recently, three other policy instruments have been applied. The following description and analysis of the country's present dairy import policy is based on the work of Nwoko (1986).

The dairy import policy in Mali is a typical example of a government pursuing multiple objectives by employing many instruments. The rationale behind such a policy and its effects have been analysed in some detail by von Massow (1985a), the major aspects being presented in the second part of this chapter together with a separate discussion of the special role of food aid in dairy development in Mali. The latter includes some results of a milk producer survey carried out around Bamako to investigate the effects of dairy imports on local milk production and the potential of using dairy food aid to stimulate it (see Koné and von Massow, 1986).

Nigeria: Use of classical instruments of trade control

Nigeria's dairy import policy
Effects of Nigeria's dairy import policy

Nigeria is the largest importer of dairy products in West Africa. Its human population is dense in the humid southern coastal region, but becomes sparser towards the drier north. Because of tsetse infestation, the cattle population has the opposite distribution (Jahnke, 1982, p. 114).

Dairy imports into Nigeria are almost exclusively commercial, having risen steadily since the 1940s to reach almost 800000 t LME in 1983. Condensed milk and dried milk powder account for about 50% each of the total volume (in LME). Between 1972-74 (av.) and 1980-82 (av.) the volume of dairy imports increased by an average of 15.4% per annum (see Table 4, Chapter 6), but their economic importance remained marginal, accounting for only 2% of the value of Nigeria's total exports in 1980-82 (av.) (von Massow, 1984a, App. 4). The rate of self-sufficiency in 1980-82 was roughly one third of the estimated total dairy consumption of 12 kg LME per person.

Approximately two thirds of domestic milk production originates from traditional producers and one third from mainly large-scale modern dairy enterprises. Ninety-seven percent of the national cattle herd consists of indigenous breeds (Nwoko, 1986, p. 14).

There are three marketing and processing channels for dairy products in Nigeria:

· traditional marketing of milk and products processed on-farm,
· collection and processing of raw milk in dairy plants, and
· distribution of dairy imports.

In all three systems relatively free competition prevails, even though government may be involved in some of the dairy plants. The real distinction between the systems lies, however, in their regional distribution and in the consumers they serve: the traditional system operates mainly in the north, serving low-income rural consumers, whereas dairy imports are sold mainly to higher-income urban consumers in the south.

In theory, dairy plants link rural milk producers to urban consumers, thereby transferring some of the urban buying power to rural areas, but this goal has not been achieved in Nigeria, because there are few processing plants in the country and their operations are limited (Nwoko, 1986, p. 136; Mbogoh, 1984).

Efforts to improve marketing and substantially increase local milk production have so far been ineffective. According to Nwoko (1986, p. 40), "The development programmes have recorded remarkable failures in harnessing local resources to increase domestic milk production. Local milk processing has failed because of the existence of only very few milk collection centres and [because] of the preference of processors for imported raw materials...".

Nigeria's dairy import policy

Information on Nigeria's dairy import policy is available for the period since the country's political independence in 1960, but the objectives of this policy were never precisely defined. Dairy products were considered as merely one element of the total import bill and thus subject to the general policy objectives of saving foreign exchange, generating government revenues and protecting infant industries, although the priorities assigned to these changed periodically (Nwoko, 1986, p.56).

Over the years, four different policy instruments have been applied to dairy imports in pursuit of the stated objectives: general import licensing, import prohibition, import tariffs and foreign exchange control. The effects of the first, third and fourth instruments are compatible with the stated objectives, but import prohibition by definition does not allow for revenue generation from taxing imports.

Before 1984, import licences were either open or restricted. An open licence permitted importation of unspecified quantities from designated countries only, whereas a restricted licence also specified the quantities to be imported. Dairy products were imported under open licences and thus enjoyed a preferential import position, except fresh milk which has been the only prohibited dairy import since 1976.

Import tariffs on dairy products have not been in force constantly, or on all items, although butter and cheese imports have been taxed throughout. The rates imposed never exceeded 40% of the import value and have been lowest on condensed and evaporated milk since 1970. Revenues generated from taxation were insignificant, accounting for less than 0.1% of total government revenues and for a maximum of 1.3% of customs and excise revenues in 1987. Foreign exchange control involves a general inspection of all import bills exceeding N 20000, an advance deposit (until 1984) and foreign exchange allocation by product group.

Overall, the instruments of the Nigerian import policy have the potential to restrict severely, and even to ban, dairy imports. Depending on their design and implementation, however, they can also leave dairy imports completely unrestricted.

Effects of Nigeria's dairy import policy

The residual term calculated for Nigeria (Table 4) indicates that between 1972-74 (av.) and 1980-82 (av.), other factors have stimulated commercial dairy imports to grow by an average of 10.4% per annum more than the rate of growth implied solely by changes in population, income and domestic production (Table 7). This result does not seem to be in line with the expected effects of the policy instruments applied: import tariffs (Figure 6) and foreign exchange control (Figure 7) tend to decrease rather than stimulate imports.

Until 1984, some stimulus could have derived from the open-licence control of dairy imports, while competing products were subject to restricted licences. This assumes, however, that the consumer was willing to substitute other products for dairy goods, which seems unlikely. For the calculation of the residual term to be valid there must therefore have been other stimulations which overruled the restrictive effects of the applied policy instruments. An attempt is now made to analyse the situation.

Nwoko (1986) used two approaches in assessing the effects of the import control measures applied in Nigeria. First he considered the increasing imports of various dairy products in light of the policy measures applied, and concluded that these measures had had little, and at most temporary, effect on dairy import levels. Tariff reductions seem to have influenced these levels more than tariff increases, but this has not been proven statistically.

The second approach involved calculating log-linear regressions (Nwoko, 1986, p.31), with the quantities of individual imported dairy products and of aggregated dairy products being the dependent variables. The independent variables in the analysis were real import prices (own and cross-price), tariff rates, domestic milk production, real foreign exchange reserves, real per capita income, a time trend and a dummy variable for the Nigerian civil war. External reserves were included in the equations to measure the capacity to finance imports in any given year. The corresponding variable at the micro-level was real income (GDP) per person, which served as a proxy for household expenditure.

Domestic milk production was taken as an exogenous variable, because the changes in production could not be explained. Nwoko argues that strong market segregation may be responsible for this lack of any statistically significant correlations between domestic production and the volumes or prices of imported dairy products. It must also be remembered that milk production data for Nigeria are particularly dubious, since they include a major jump in the time series (Nwoko, 1986, p. 18).

The results of the regressions (Nwoko, 1986, p. 35) substantiate the previous observation that, while generating some revenue, tariffs may not have been effective as a means of reducing imports. The level of external reserves has also had a very limited influence on dairy imports; the calculated elasticity for aggregate imports was +0.15 when external reserves were lagged by 1 year.

Domestic milk production showed the expected negative effect on most of the dairy products imported. The elasticity of aggregate dairy imports to domestic milk production was, however, low (-0.27) and statistically insignificant. Aggregate dairy imports reacted more strongly to changes in real import prices (index weighted over all dairy products), as is shown by the statistically significant price elasticity of -1.08.

A statistically significant correlation was also found between aggregate dairy imports and the time variable (elasticity +0.67). This reflects population growth, but may be due to consumer or processor preference changing in favour of imported dairy products or to the effect of urbanisation, manifested as an increasing reliance of consumers on imports rather than domestic milk sources. The conclusion to be drawn from Nwoko's analysis is that Nigeria's dairy import policy does not account for the large increase in imports; it has not prevented the increase, but neither has it positively stimulated imports.

To explain the growth of dairy imports into Nigeria, another regression equation was specified, using the volume of dairy imports per person as the dependent variable and import prices, the exchange rate distortion factor and domestic milk production as independent variables. This equation (R2 = 0.917) shows that the two main factors responsible for the inordinate growth of dairy imports into Nigeria were real import prices (as indicated by Nwoko, 1986) and the differences between official and real exchange rates.

The increased volume (in LME) of aggregate dairy imports per person between 1972 and 1982 can be attributed mainly to a decline in real import prices and to currency overvaluation. These variables had to compensate for the small (and statistically insignificant) effect of declining domestic production per person.

The elasticities of response (measured at the mean) were -0.78 for real import prices (average unit value in US$ kg-1 LME) and 1.36 for the exchange rate distortion factor as specified in equation 6. The price elasticity of -0.78 is not significantly different from that of -1.1 found by Nwoko (1986), although the import prices are specified in different ways and the periods covered also differ.

It may thus be said that a major part of the increase in dairy imports into Nigeria was the result of policy, but not of specific dairy import policy. The instruments applied are consistent with the stated policy objectives and with each other - they tend to restrict imports, but their effect has been overshadowed by the effects of the declining real dairy prices on the world market and of overvalued domestic currency. The latter is, of course, influenced by government policy, but not specifically by dairy policy.

Despite a policy aiming to restrict dairy imports (which, if successful, would have benefited domestic milk producers), the Nigerian Government has stimulated dairy imports by way of its exchange rate policy to the benefit of consumers, particularly the urban consumers in the south. More detailed analysis is needed to investigate the link between dairy imports and domestic milk production and the hypothesis of segregated markets, but the quality of the available data was inadequate for this to be undertaken within the present study.

Mali: Pursuit of multiple objectives

Dairy import policy in Mali
Effects of Mali's dairy import policy
The use of dairy food aid in Mali
The effects and prospects of food aid

Mali is a land-locked country sparsely populated by about 7 million people of whom 10-15% live in the capital Bamako. The national cattle herd has been estimated at about 5 million. According to the Ministère charge du développement rural (1982), 41% of the animals are in the south of the country and in the Sudanian belt, another 35% are in the inland delta of the Niger river and the remainder are scattered in other pastoral or agropastoral systems (von Massow, 1985a, p. 2 et seq.).

Inter-regional marketing links for milk and dairy products are even weaker than in Nigeria. Around Bamako, for instance, there is no established milk marketing system (von Massow, 1985a, p. 3; Koné and von Massow, 1986), although the cattle population in the area numbers about 140000 head. Domestic milk production is generally low and only in pert-urban Bamako is there a move towards specialised production.

Estimates of per capita consumption suggest that pastoral areas may have a milk surplus which, however, does not reach the market. The main milk-deficit areas are Bamako, where annual milk consumption per person is 27-29 kg (von Massow, 1985a, p. 8), other major towns and the southernmost part of the country. Dairy imports serve primarily Bamako and other major towns. During the drought years of 1972-74, emergency foodstuffs were distributed in many parts of the country, and some dairy food aid came in as part of the 'Food for Work' project.

Commercial dairy imports increased from less than 1000 t LME in 1968 to a peak of 34000 t LME in 1975 and have since then dropped to between 15000 and 21000 t LME (von Massow, 1985a, App. 4). Dairy food aid peaked in 1974 at almost 23000 t LME or 43% of total dairy imports for that year, but since 1979 food aid has ranged between 6000 and 11000 t LME19 per year. The rate of self-sufficiency in dairy products in 1980-82 (av.) was 0.85, or 0.79 if food aid is included. Commercial dairy imports (in value terms) constituted 3% of total exports and provided on average 3.8 kg LME per person (von Massow, 1984a, App. 4).

19 The two extremes were in two consecutive years and may have been due to a delay in shipment. If we take their average, food aid ranged between 7500 and 9200 t LME

Dairy import policy in Mali

Although the objectives of the Malian dairy import policy20 are not explicitly mentioned in the Government's 5-Year Plan for 1981-85 (Gouvernement de la République du Mali, 1981), it can be assumed from the policy instruments used that the Government is concerned about foreign exchange and revenues, and that it is also somewhat interested in consumer and producer welfare. As with other imports into Mali, dairy imports are subject to licensing and allocation of foreign exchange, and to a value added tax (VAT) which in 1984 was 11.11% (Commerce intérieur et prix, Bamako, personal communication). In addition to these measures, dairy food aid is used for milk reconstitution in dairy plants.

Any authorised importer is entitled to a foreign exchange quota and can allocate it between different products at his own discretion, as long as this is within the respective regulations. All foodstuffs are subject to an import tariff, the rates for dairy products having been fixed in 1967 at 15% of the import value (c.i.f.) for butter; at 25% for cheese; and at 10% for all other dairy products. In 1983/84, import tariffs were 40% for butter and cheese, 10% for yoghurt and 5% for liquid milk.

20 For a more detailed description of the Malian dairy import policy see von Massow (1985a, p.13).

These import tariffs may reflect the objectives of generating funds, or of saving foreign exchange by reducing import demand, or both, or they might also have been intended to protect the domestic milk processing industry. But the country's only dairy plant, the Union laitière de Bamako (ULB) sells hardly any processed dairy products, offering instead milk and sour milk (fait caillé) reconstituted mainly from food aid.

Milk powder and condensed milk are not open to private trade, but come under an import monopoly21 given to the parastatal Société malienne d'importation et exportation (SOMIEX). A major importer of all food commodities, which it sells in its own retail shops, SOMIEX's role is to secure the continuous supply of basic consumer goods at 'reasonable' prices (SOMIEX, Bamako, personal communication). These prices are subject to government approval and are uniform throughout the country, regardless of differences in transport and distribution costs.

21 The monopoly includes the right to authorise private traders to import milk powder and condensed milk.

Both dairy products covered by the SOMIEX monopoly are still subject to import tariffs and VAT but, at FCFA 55 kg-1 for milk powder and FCFA 44 kg-1 for condensed milk, these rates22 are considered to be preferential. On the other hand, consumers of SOMIEX's products appear to belong to a group of people whose incomes are lower than the incomes of those who buy 'luxury' dairy products carrying higher tariffs (SOMIEX, Bamako, personal communication). Thus SOMIEX has the slightly ambivalent objectives of benefiting lower-income consumers through import subsidy, while generating funds for the national budget through import tariffs. Unfortunately, there are not enough data available to calculate the net drain or contribution to the national budget of this import monopoly.

22 1984 rates, the exchange rate in that year was FCFA 1000 = US$ 2.296.

A summary of policy measures applied to different types of dairy imports, and of the quantities imported, is given in Table 8. It is clear that the instruments of the Malian dairy import policy result in inconsistencies. Revenue generation, import control and consumer and producer welfare cannot all be achieved simultaneously (see Chapter 5, Figures 6-9) since these aims are not compatible and the success of one implies the failure of another.

Table 8. Dairy products imported into Mali and the policy measures affecting them, 1982.

Type of dairy product

Quantity imported

Policy measure applied


(t LME)


Dried and condensed milk



SOMIEX import monopoly
Import tariff of FCFA 55 and 44 kg-1 respectively
Retail price fixing

Import control
Import control
Consumer benefit

Luxury products2



Import tariff (5-40% of c.i.f. value)

Revenue generation

Skim milk powder and butter oil as food aid



'Sales tax'
Dairy development projects
Retail price fixing

Revenue generation
Producer and consumer benefit
Consumer benefit

Project food aid



Targeted distribution

Consumer benefit

All imports



Value added tax
Import licensing
Foreign exchange allocation

Revenue generation
Import control
Import control

1 The objectives are those which follow logically from the expected effects of the measures applied.
2 Includes fresh milk, butter, cheese and yoghurt.
Sources: Author's compilation based on FAO Trade Yearbooks (various years), FAO (1984a), SOMIEX (personal communication) and various other sources in Bamako.

A conflict arises with products subject to both import monopoly and retail price fixing: restricting the quantity of imports increases consumer prices above free-market levels (unless the restriction is handled in a non-restrictive way and then, by definition, it is superfluous), while retail prices fixed below the free-market prices benefit consumers. This obvious contradiction is partly explained by the government's intention to maintain a uniform national price level regardless of substantial differences in transport costs, which implies that consumers in areas of high transport costs are subsidised by consumers in areas with low transport costs. Even then, since SOMIEX retail prices are fixed at a level that supposedly covers transport costs to Bamako, the monopoly need apply only to areas with transport costs lower than those to Bamako.

Effects of Mali's dairy import policy

The effects of government policy on dairy imports into Mali have been discussed in detail by von Massow (1985a), but it is useful to re-examine the most important findings. First, the calculation of the residual term (Chapter 6) does not provide any strong evidence about the overall effects of policy and other factors on dairy imports. With a growth of only 0.3% per annum between 1972 and 1982, commercial imports have increased slightly less than the 1% that would have been expected from increased population and incomes and decreased domestic production per person. And even when dairy imports are adjusted for the effects of the Sahelian drought (1972-74 is replaced by a trend value for 1968-82), the unexplained change in dairy imports is only +2.2 per annum (see Table 4).

More detailed analysis by product shows that in Mali, dairy imports have generally been sold below the local market prices (in FCFA kg-1 LME), so that by setting the retail price the Government has been subsidising consumers. Retail prices for condensed and reconstituted milk (in FCFA kg-1 LME) are also lower than the c.i.f. import prices even without deducting transport costs. If transport costs are included, the slight taxation of consumers of dry milk is converted into a subsidy (von Massow, 1985a, p. 27).

No data are available on how SOMIEX handles the import monopoly. It would appear, however, that the consumption of SOMIEX dairy products has been subject to two contradicting effects. First, if handled restrictively, a monopoly, like restrictive foreign exchange allocation (Figure 7), reduces imports and thereby consumer welfare. On the other hand, if retail prices are subsidised, they stimulate imports and increase consumer welfare (Figure 6).

There is some evidence that SOMIEX's retail prices indeed stimulate demand, but that the quantities imported under the monopoly are not sufficient to meet that demand. Additional amounts of dry and condensed milk are imported without SOMIEX's authorisation. 'Black imports' may also result from regional differences in transport costs which in the southern and western regions are so low as to make it attractive to break the monopoly and the system of nation-wide uniform pricing.

Following the theoretical approach shown in Figure 6 (import subsidy/tariff), but using different assumptions about the own-price and cross-price elasticities of demand, von Massow (1985a, p. 34 et seq.) calculated the changes in consumer surplus. The important conclusion of this welfare calculation is that the overall changes in consumer surplus resulting from the government's dairy import policy are relatively small. If the government seriously intended to benefit the consumers of imported dairy products, it has failed to achieve its objective.

This statement may be slightly modified by considering the distributional effects of the Malian dairy import policy; the further north and east of Bamako that SOMIEX sells imported dairy products, the more these sales are subsidised, because uniform price fixing ignores differences in transport and distribution costs. Von Massow (1985a, p. 7) estimated that about 60% of SOMIEX's dairy imports are consumed in Bamako. The government's policy may thus have provided more substantial benefits to consumers through that part of the remaining 40% which is sold in areas with transport costs exceeding those incurred in reaching Bamako.

Also, despite their high nutritional value, milk and dairy products are often not considered a basic foodstuff in Mali. Grain and rice, not dairy products, tend to be the staple food of the poorest sections of the community, particularly in the urban areas and in the southern and western regions of the country where cropping rather than livestock is the basis of subsistence. This implies that the government's dairy import policy does not affect the lowest-income groups of the population.

The stated concern of many African governments that increases in food prices would cause particular hardship among the poor thus needs careful examination where the food in question is a dairy product. The Malian Government certainly does not seem to be too concerned, since it continues to charge import tariffs on all dairy products to generate revenue.

Besides consumer welfare, the other implicit objectives of Mali's dairy import policy are revenue generation and import control. Yet despite the government's restrictive policy, unauthorised importation of dried and condensed milk is common, suggesting that this policy cannot effectively control the set targets.

So while Nigeria's policy is an example of a consistent dairy import policy overruled by other policy (i.e. exchange rate policy), in Mali, dairy import policy itself simultaneously pursues conflicting objectives, with the result that there may as well have been no policy at all.

The use of dairy food aid in Mali

The leading institution in dairy development in Mali is the Union laitière de Bamako (ULB), which has only one processing plant, located in Bamako itself. ULB was established with external assistance in 1967 and started milk processing in 1969, with a planned capacity of 10000 litres day-1 Its two main objectives were to help develop milk production in agropastoral and pastoral farming systems and to provide milk and milk products to urban consumers in sufficient quantities at low prices (see Koné, 1983).

From 1969 to 1974, raw materials for milk reconstitution were provided by the World Food Programme, and the revenues were to be used mainly for the promotion of dairy development, through a fund allocated to the Sotuba research station23 (FAO, 1978c, p. 18).

23 The station's crossbreeding programme is designed to produce for dissemination a new standard breed of 50% Montbeliarde, 25% Zebu Maure and 25% N'Dama inheritance (INRZFH, personal communication).

Since 1984, the EEC has been supplying annually 600 t of skim milk powder and 200 t of butter oil as food aid. These products are sold by the government to ULB at a price of FCFA 95 kg-1 for skim milk powder and FCFA 235 kg-1 for butter oil. The revenues from the sale (FCFA 104 million per year) are credited to the Commission nationale d'aide aux victimes de la sécheresse in the Ministry of Interior, but the allocation of this so-called 'compensation fund' was open for renegotiation in 1986. ULB's profit in 1986 was taxed at the special rate of 33.3%, applicable to young industries; in the long run, the tax rate is expected to be 50% Of the post-tax ULB profit, 60% is allocated to the Sotuba research station, 35% is reserved for ULB's investment fund, and 5% goes to a social security fund (ULB, Bamako, personal communication).

The ULB sale price for milk was fixed in 1982 by a government directive at FCFA 110 litre-1 (wholesale ex factory) and FCFA 130 litre-1 (retail). Comparing ULB's sale price with the border equivalent price for reconstituted milk we see that in 1982 and 1983, the wholesale price for reconstituted milk was 76% and 73% respectively of the estimated border price equivalent (von Massow, 1985a, p. 27). Thus, even without allowing for transport costs, the ULB consumer has been subsidised.

The sale price of reconstituted milk has the second function of determining the competitive position of food aid against domestic production. ULB's sales affect only the area immediately around Bamako. Depending on season, Bamako retailers of fresh milk charge consumers between FCFA 200 and 225 litre-1 which is almost double the ULB retail price (von Massow, 1985a). The reason given for the price difference is poor quality of reconstituted milk, but even so, it would appear that the Malian Government has not set an appropriate retail price for food aid sales. Yet although the consumers benefit, local production is unlikely to be affected directly, since fresh milk and ULB's reconstituted milk serve different clients i.e. the market is segregated into two consumer groups (see also Koné and von Massow, 1986).

ULB's past efforts to promote local milk production have not been very successful. Its two milk collection centres at Dialakoroba and Bankoumana (each about 60 km from Bamako) only operate in the rainy season and at far below their capacity. The prices paid to producers are the lowest in each area and producers complain about irregular services (Koné and von Massow, 1986). As a result, the share of local milk in ULB's total output is negligible (von Massow, 1985a, App. 8). Recently, ULB has started taking milk directly from the newly created dairy cooperative (Cooperative laitière de Bamako; COLAIBA), whose producer price is significantly higher at FCFA 225 litre-1 than that paid at the collection centres, although it is based on the supply of a minimum quantity.

The availability of dairy food aid has allowed ULB to neglect local milk collection, and ULB has even gone so far as to import milk powder and butter oil commercially, allegedly because no milk is available from local producers. This argument does not stand close scrutiny, for the increasing deliveries of COLAIBA producers, and certainly Koné and von Massow's (1986) survey, clearly show that the potential is there. Increased milk production only needs stimulation and appropriate market outlets.

Funds from ULB sales have also not had much positive effect on dairy development, since the Sotuba crossbreeding station has yet to produce any significant results. The amounts allocated for dairy development are only a minor fraction of the benefit of the dairy food aid, while a major part is diverted to other purposes. Of the wholesale value of any one litre of milk reconstituted from food-aid materials that is sold at FCFA 110 litre-1, FCFA 49 (44.5%) goes on processing costs, FCFA 20 (18.2%) on raw materials (to the so-called compensation fund), FCFA 20.5 (18.6%) is tax (assuming a 50% tax rate), and only FCFA 12.3 is spent on dairy development at the Sotuba research station. The last amount represents only 11% of the wholesale price or 30% of pre-tax profit. Even if all ULB investment (a further FCFA 7.2 litre-1) is assumed to benefit milk producers in the long run, this still means that less than 50% of the pre-tax profit goes to stimulate dairy output.

The effects and prospects of food aid

The use of food aid for dairy development in Mali was only partially successful. Although ULB succeeded in one of its roles, that of providing urban populations with milk and milk products in sufficient quantities at low prices, it may be argued whether ULB's present output, which provides Bamako residents with about 10 kg LME per person per year, can be called 'sufficient'. Moreover, given ULB's present production technology, the actual wholesale price per litre is FCFA 15 less than the cost of commercially imported milk powder and butter oil, without any profit margin (von Massow, 1984a, p. 48). Thus, at a consumption of 10 kg of ULB milk annually, the average inhabitant of Bamako is subsidised by FCFA 150 per year through food aid.

In contrast, milk producers around Bamako do not seem to have gained any benefit from dairy food aid, although market segregation prevents its direct disincentive on domestic milk production through depressed consumer prices. But an indirect disincentive has occurred, reflected by ULB's marked reluctance to improve its marketing services to producers. Also, the financial support given to Sotuba has not led to any genetic improvement in the herds, since no crossbreds have as yet been disseminated (Koné and von Massow, 1986).

In the past, the Malian Government has chosen not to control ULB's activities closely and to withdraw a major part of the food aid benefit for other purposes, but there is some reason to believe that a change has taken place since 1986. ULB's effort to stimulate direct milk deliveries to the factory gate by a higher price and to set minimum quantities, is a move in a new direction. The government also needs to reconsider the extent to which it should drain potential funds24 from dairy development.

24 The use of funds generated by dairy food aid is discussed by Koné and von Massow (1986).

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