Soaring import stifles self-sufficiency goals on local sugar output

Onome Amuge

Nigeria’s massive sugar importation levels amid soaring demand in the last few years has to a large extent, reflected the failure of the country’s industry giants including; BUA Group, Dangote Plc, and Flour Mills of Nigeria to meet local production targets despite claims to have invested heavily towards the attainment of the Backward Implementation Programme (BIP), a key component of the Nigerian Sugar Master Plan (NSMP).

A 2019/20 sugar consumption and production data generated by the United Nations Food and Agriculture Organisation (FAO), showed that Nigeria, during the period under review, produced an average of 35,000 metric tonnes of sugar while 1.89 million tonnes of the commodity were imported, making Nigeria the 9th largest importer of sugar in the world. The figures also indicated that less than three per cent of the country’s sugar demand is produced locally Te International Trade Centre (ITC), Nigeria imported $463 million worth of raw sugar in 2019. Data recorded by the Nigerian Sugar Development Council, Nigeria’s sugar regulatory agency, showed that the country produced 39,000 tonnes of sugar in 2009 but the figures dwindled to 30,000 tonnes in 2010 and plummeted to 14,918 in 2018.

The year 2019 marked a significant production surge as 38,597 tonnes were produced but the same period also marked an increased importation figure, as over 1.3 million tonnes of sugar were imported. Further analysis of the data revealed that in 2020, the country’s importation level rose to 1.531 metric tonnes in 2020, costing the country N433.4 billion in import expenditures.

Commenting on this, market watchers noted that production successes recorded by the country’s top local producers were largely based on the refinery and repackaging of imported raw sugar for sale in the local market. This has been described as a deviation from the initial sugar production and backward integration targets projected by the industry giants and an economically detrimental system incapable of creating sugar sufficiency except more stringent measures are implemented by the government to bridge the huge gap between local production and importation.

Worried by the country’s soaring importation rates, the Nigerian government recently issued a prohibition on the importation of refined sugar and its derivatives from the country’s Free Trade Zones (FTZs), a calculated move to foster the development of the Nigerian sugar industry , protect the local sugar industry from unrestrained importation, enable the country attain self-sufficiency, secure the Nigerian sugar market for investors in the Backward Integration Programme (BIP) and create job opportunities for the rising populace. The ban, which came through a directive from the Ministry of Industry, Trade and Investment, was contained in a letter by the Nigerian Ports Authority (NPA) Lagos Port Complex, Apapa, dated April 8,2021, titled: ‘RE: Prohibition of Importation of Sugar from the Free Trade Zones into the Nigerian Customs Territory.

According to the letter, the high level of sugar imported into the Nigerian customs territory under the concession granted to enterprises in the Free Trade Zones has posed a potential threat to the goals of the National Sugar Master Plan. “In order to protect our national interest and ensure the returns in the Federal Government’s investment in the NSMP are realised, and in line with extant laws and regulations of the Federal Government of Nigeria, importation of refined sugar and all other sugar derivatives from the Free Trade Zones into the Nigerian Customs Territory are hereby prohibited by the honourable minister, Ministry of Industry, Trade and Investment,” the letter read in part. The recent ban by the government came a few days after the Central Bank of Nigeria hinted at the inclusion of sugar and wheat, the country’s top import commodities, in its forex restriction list to enable the country to extend its focus towards economic diversification plans and conserve national foreign reserves. While one can understand the pressure sugar importation is putting on Nigeria’s foreign exchange reserves and its negative effects on the economy, the government’s move to clamp importation at a time the local production level is relatively minimal has drawn objections from economic analysts who opined that implementing the move at this point in time would force producers of sugar-based items to raise prices to cover the resultant high cost of inputs, further worsening the food inflation crisis affecting the nation, considering that sugar is one of the highest sourced commodities for industrial production of a wide variety of food and drink products and is also an essential constituent of household food items.

Mustapha Wahab, investment analyst, Chapel Hill Denham, a leading independent investment management frm, posited that the federal government needs to shelf its ban implementation plan for the time being and instead, allow the Backward Integration Plan in the sugar industry to actually come into fruition before considering the ban.

“The government should allow the BIP move towards 2028- 2030 levels before one can actually see any substantial sugarcane production in the country,” he added.

Jo a c h i m Ma c e b o n g , senior analyst, SBM Intelligence, a Nigeria geopolitical research consultancy, remarked that restricting sugar imports now would be a wrong step towards assuring sugar production sufficiency. He argued that the ban or restriction should be a gradual process until the country’s major sugar industrialists are able to meet domestic demand or achieve a considerable level of sustainable production.

Sugar production challenges and the way forward

Nigeria’s Sugar Master Plan was initiated in 2012 during the Goodluck Jonathan administration, to boost local production, reduce importation and enhance self-sufficiency. To encourage local producers the government created fiscal incentives aimed at bolstering local production which included; a five-year tax for investors in the value chain, 10 per cent import duty and 50 per cent levy on imported raw sugar, as well as 20 per cent duty and 60 percent levy for imported refined sugar. The plan targeted a production capacity of 1.79 million tonnes by 2020 facilitated and the implementation of backward integration, which was agreed upon by the local sugar producing companies. 12 years later, the NSPM project, plagued by poor execution among other factors, performed way below expectations as production levels. The sugarcane value chain consisting of cane farmers,harvesters,millers,wholesalers,distillers also failed to record significant growth.

 Highlighting some of the challenges responsible for the slow implementation of the Backward Integration Plan by the local sugar companies’ and failure to meet production targets, Kabiru Rabiu, executive director, BUA, identified huge capital cost, conflicts in land acquisition, insecurity, infrastructure deficit, water and environmental issues, lack of synergy among regulatory agencies and skills deficit. Dangote and Golden Sugar, pioneer companies of the BIP programme, also echoed these challenges.

Speaking on how the challenges hindering the growth of the Nigerian sugar industry can be effectively tackled, Rabiu suggested that the federal government through the Nigerian Sugar Development Council can help through the creation of sugar hubs, sugar sector intervention fund, infrastructure gap bridging, direct land acquisition, creating synergy among various stakeholders and building capacity among the industry regulators.

On his part, Zacchi Adedeji, executive secretary, NSDC noted that the sugar industries have shown a lot of commitment towards increased sugar production by constructing commendable sugar refineries in the country. He called for the same level of commitment towards backward integration projects which according to him, is the pathway towards sugar sufficiency in the shortest possible time. Joachim Macebong however raised skepticism regarding the targets and quotas claimed to have been implemented by the big players in the sugar industry.

 “There is a need for the government to verify those claims to know who is abiding by the standards so that the incentives are properly aligned and then one can make factual verifications on the local sugar production levels to see if there is actual progress. The role of regulation is to ensure that the rules that were agreed on are applied across boards and are being abided by the sugar producers,” he said.

Market analysts assert that Nigeria still has a long way to go in its drive towards self-sufficiency but raised optimism that Dangote, BUA, Flour Mills and other local producers have the capacity to achieve the goal if the right investments, implementations, government support, and commitment to shoulder responsibilities are prioritised.