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FG’s backward integration suffers as N581.5bn raw sugar is imported

Major sugar producers in the country have slowed down the Federal Government’s Backward Integration Project, thereby leading to massive importation of raw sugar into the country. Findings revealed that the development could affect the country’s economy in the long-term as 3.76million tonnes of the commodity, valued at N581.5billion ($1.53billion), was imported in the last two years through the seaports. Also, it was gathered that due to the huge importation of raw sugar, the country’s refining capacity had increased to 3.4 million metric tonnes per annum from 2.75 million metric tonnes per annum. The Federal Government had targeted 800,000 tonnes of raw sugar production by 2022, but it has not met five per cent of the target as at March, 2021, leading to a deficit of 1.81million tonnes.

The commodity is not among the food products affected by Central Bank of Nigeria (CBN)’s forex restriction because of the incentive granted to local sugar firms under the backwards integration programme of the Federal Government. The companies have been enjoying a five-year tax incentive for sugar production; 10 per cent import duty and 50 per cent levy on imported raw sugar; 20 per cent duty and 60 per cent levy for imported refined sugar. As at December, 2020, the country had the capacity to produce only 75,000 tonnes as the companies involved in local sugar production preferred to import raw sugar. Between 2016 and 2020, the National Sugar Development Council (NSDC), through the National Sugar Master Plan (NSMP), introduced a 10 per cent duty and additional 80 per cent levy for raw sugar; 20 per cent duty and 85 per cent levy for refined sugar imports. Also in 2019 and 2020, refined sugar attracted 10 per cent duty, 30 per cent levy for raw sugar imports.

Meanwhile, the major investors, Dangote Group, Flour Mills and BUA Group are currently at war over who controls the sugar market. Chairman of Dangote Group, Alhaji Aliko Dangote, and Chairman of Flour Mills Nigeria, Mr. John Coumantaros, had written to the Minister of Industry, Trade and Investment, Niyi Adebayo, to investigate the quantity of sugar imported by BUA. The two firms accused BUA refinery in Bundu Free Trade Zone in Port Harcourt of undermining the national sugar master plan, NSMP.

They called for a fair and disciplined implementation of the NSMP by Nigerian Sugar Development Council (NSDC). The firms said: “This investment in the Port Harcourt refinery was clearly done with the intention to undermine the NSMP. “We are particularly surprised by the brazenness as we believe that the choice of location and the publicity campaign behind the investment has been deliberately engineered to provoke public sentiment and put the Federal Republic of Nigeria against its people.” They also asked the ministry to ensure that no additional allocation of quota was given for raw, very high polarity sugar or refined sugar for the refinery in Port Harcourt for local market production. Responding, Chairman of BUA Group, Abdul Samad Rabiu, said that his company’s project was governed under the Nigeria Export Processing Zones Authority (NEPZA) Act and the Free Zone approved by President Muhammadu Buhari. According to him, both players already had 80 per cent of raw sugar allocation (Dangote-55 per cent, Flour Mills, 25 per cent) without commensurate investment in backward integration to actually warrant such allocation. Rabiu said: “We see this as an affront to the powers of the president and an attempt to undermine Nigeria and its institutions as well as edge out competition, to gain a monopoly that holds the country to ransom. “They are only just acting as friends in connivance because of their interest to push out competition and create a monopoly for themselves.” The chairman explained that under the NEPZA Act, companies were allowed to process and, if they so wish, sell 100 per cent of their production in Nigeria with payment of duties based on the current raw material tariffs.

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