Brands & Marketing

The Nigerian Sugar Master Plan: How the Leading Players Have Fared

Nigeria’s sugar industry has been in existence since the 1960s although, for years, it could only supply about 2% of the country’s requirement. This is in spite of the comparative and competitive advantage sugar production has in the country. This poor performance stripped the country of virtually all the benefits that could have accrued from the vibrant sector. The impact was more evident in the annual drain on the country’s foreign exchange earnings placed at N101.9 billion as of 2011.

Nigeria was equally losing a great number of employment opportunities for skilled and semi-skilled labour and food insecurity following the dependence on the importation of sugar. In a bid to turn things around, the Federal Government in 2008 directed the National Sugar Development Council (NSDC), to develop a road map for the attainment of self-sufficiency in sugar within the shortest time possible. In compliance, the Council came up with the Nigerian Sugar Master Plan (NSMP) in 2012.

The Nigerian Sugar Master Plan estimated that Nigeria’s demand for sugar would breach the 1.7 million metric tonnes (MMT) mark by 2020. To be able to fill this gap through domestic production, it was proposed that the country will need to establish about 28 sugar factories of varying capacities and bring about 250,000 hectares of land into sugarcane cultivation, over the next 10 years from 2012 when the NSMP was created.

The bulk of the investment capital was to come from private investors. However, considering the fact that there is the need for a conducive policy environment that will provide a solid base for the implementation of the NSMP, the Federal Government, borrowing from international best practices, enacted a number of policy instruments. They comprised mainly of fiscal incentives and tariffs, a mandatory import substitution regime otherwise known as the Backward Integration Programme (BIP), as well as the re-focusing of a better-funded Sugar Levy to provide the funds required for the execution of the much-needed R&D studies and essential infrastructures.

All of these were designed to not only attract new investors but also protect both existing and new investments in the sector. In return, investors in the sugar industry who took part in the Backward Integration Programme received incentives in form of a five-year tax holiday, a three-year concessionary import duty tariff of five per cent, with a five per cent levy, on imported raw sugar for refineries. 2023 was supposed to be the peak of the Nigerian Sugar Master Plan (NSMP) and how much of an impact it has made.

So far, it doesn’t look like the country has made any significant progress by way of the NSMP. According to the latest data analysis made available on the NSDC online platform, importation (tons) from 2013 through to 2018 peaked at 1,374,338, 1,433,471, 1,484,724, 1,559,573, 1,286,729, and 1,216,110.

Nevertheless, the Executive Secretary of the National Sugar Development Council (NSDC), Dr. Latif D. Busari noted that the implementation of the National Sugar Master Plan (NSMP) reached 40.3% between 2013 and 2016 while expressing hope that the master plan would record meaningful success in the years ahead.

Nigeria has three main sugar processors and they are Dangote Group, BUA Sugar Refinery, and Golden Sugar Refinery. In a midterm review meeting of the NSMP held by the NSDC, it was revealed that out of the three main sugar processors, Golden Sugar Company was doing exceptionally well in its backward integration plan.

The Flour Mills-owned company scored 58% in the targets set in the backward integration plan, including a number of projects, new sugar factories, land developed, land under cane, out-grower farms, sugar produced, and job creation. According to the report’s verdict “the new estate and factory established by Flour Mills Nigeria Limited, Sunti, appears to be the key significant achievement under Phase 1 of BIP implementation.

Dangote Refinery followed closely with 45.8%, while BUA performed below par with 17%. At the midterm review, Dr. Busari revealed that BUA produced zero tonnes of sugar out of the 15, 600 metric tonnes of sugar the company promised to produce during the period under review.

Dangote however produced 20, 200 metric tonnes, being 28 per cent of the 72, 000 metric tonnes it promised to produce, while Golden Sugar produced 800 metric tonnes, being one per cent of the 57, 750 metric tonnes the company ought to have produced during the period.

In the words of Busari, “other expected developments particularly the expansion of factory operations at DSR’s Savannah Sugar Company, Numan, developments at Lau/Tau and installation of the factory at BUA’s Lafiagi Sugar Company, all of which would have impacted positively on the local sugar production, dimmed the performance of the sector.”

It was nonetheless reported that “having identified the constraints and designing measures to contain them, the prospects for the effective implementation of the NSMP over the next five years is bright.”

NSDC further revealed that “the combination of the new guidelines with the actions that Government and relevant agencies will be taking will result in a greater commitment by operators and ultimately, more sugar projects and substantial increases in local sugar production levels.”

Experts have also said that the outstanding performance recorded by Flour Mills is not surprising in view of the investments made by the company in the last three years. The President of the Federal Republic, Muhammadu Buhari, had commissioned Flour Mill Nigeria’s N50 billion Sunti Golden Sugar Estates in March 2018, which had 17,000 hectares of irrigable farmland and a sugar mill processing 4,500 metric tons of sugarcane in a day. At full capacity, the estate can produce one million tons of sugarcane which roughly translates to 100,000MT of sugar yearly.

Dangote Group which operates Savannah Sugar is investing a whopping $3.8 billion in sugar and rice and promises to produce enough sugar to satisfy the country’s demand in ten years. The company began its Backward Integration Programme (BIP) with a 10-year sugar development plan, to produce 1.5 million MT per annum of sugar from locally grown sugarcane. The Project commenced with the acquisition of a large expanse of land in strategic locations such as Taraba State, Adamawa State, and Nasarawa State. To this end, three (3) BIP sugar companies; Dangote Taraba Sugar Limited, Dangote Adamawa Sugar Limited, Nasarawa Sugar Company Limited were incorporated.

The Dangote Group has equally commenced rehabilitation and expansion of its Sugar Factory at Numan which the NSDC executive secretary noted was one of the major developments that would impact positively on the local sugar production and boost the sector. Sugarcane planting has also commenced in the company’s two other BIP locations.

BUA has about 15,000 hectares of land in Lafiagi, Kwara State, but as the midterm review revealed, the company seems to have done little or nothing in terms of plantations and backward integration. When the Minister of Industry, Trade and Investment visited BUA Sugar facility in Kwara about two years ago, BUA noted that “what we are trying to do is to produce not only plantation of raw sugar but also refined sugar… we have all the equipment for us to be able to complete this project by December next year, God willing. We have the equipment that will make us produce 10,000 tons per day.”

In spite of the promises, the backward integration project has remained in the same state even after months. BUA had hinged on community hostilities against its operations at its BIP project site in Lafiagi Sugar Estate. This is including four of such incidents of physical attacks against contractors working on estate roads and the fact that irrigation canals were recorded within the period. But the same disruptions were reported by Golden Sugar Estate, Sunti which according to NSDC executive secretary witnessed so many disruptions during its development…requiring the intervention of the Police and local Chiefs.”

BUA has opened a new-export-focused sugar refinery in Bundu Free Zone in Port Harcourt. As chairman of BUA Group puts it, “it is pertinent to note that our export-focused Port Harcourt Refinery is mainly for exports rather than for the Nigerian market.”

The new export-focused sugar refinery has a lot of reasonable opportunities in job creation and helping the country earn the much-need foreign exchange. Although focused on exporting refined sugar, it could intervene in the local market following an arbitrary increase in price by the protesting companies as allowed by the laws of Nigeria. With its Nigerian Export Processing Zone Authority (NEPZA) licence, it can intervene locally in order to stabilise the price.

But critics opine that the move is quite hollow and to the disadvantage of other investors as the same FX would still be used to import raw sugar. This why Dangote and Flour Mills of Nigeria Plc, in a joint petition to the Minister of Industry, Trade and Investment, Chief Niyi Adebayo, declared that the establishment of a new sugar refinery plant in the country by BUA Group posed a threat to the attainment of the National Sugar Master Plan (NSMP), as well as the sustainability of Nigeria’s local sugar industry.

Read Also: Successful Entrepreneurs in Nigeria – Their First Jobs (part 5)

But in a swift response, the Chairman of BUA Group said the company took serious exception to what he described as the ludicrous claims by his two major competitors, pointing out that his sugar export-focused project in Port Harcourt, would not affect in any way, the backward integration programme, stressing that “the only way it will affect Nigerians is that Nigerians will pay lower prices for sugar.”

The petitioners demanded a level-playing field that provides fair competition in the local sugar market in order for the country to realise the sugar master plan.

They specifically urged the ministry to prevail on the Nigeria Customs Service (NCS) and the Central Bank of Nigeria (CBN) to ensure that the provisions of the NSMP are enforced and that no additional allocation of quota should be given for raw, VHP, or refined sugar for the sugar refinery in Port Harcourt for local market production.

In response, BUA explained that though the Port Harcourt refinery is mainly for exports, BUA is allowed under the Nigeria Export Processing Zones Authority (NEPZA) Act and current approvals/rules to intervene locally in order to stabilise sugar price, “where it is absolutely necessary in the face of arbitrary price increases and collusion to force scarcity of the product locally.”

Piercy Mabel