Insight

Nigeria’s 94% sugar deficit despite huge incentives

Despite the implementation of the Backward Integration Programme (BIP) Nigeria has failed to achieve self-sufficiency in local sugar production, BAYO AKOMOLAFE reports

Moves by the Federal Government to attain self-sufficiency in sugar production in 2020 have crashed by 1.62 million tonnes as the price of sugar at the global market soared to $365.70 per tonne. Finding by New Telegraph revealed that despite the implementation of the Backward Integration Programme (BIP), domestic production by sugar firms has further plunged by 6.25 per cent from 80,000 tonnes to 75,000 tonnes per cent within one year due to lack of infrastructure to meet local demand. Also, plans by the government to woo new investors in order to produce two million tonnes of sugar annually have not yielded results. Government had promised that new investors could enjoy a sugar importation incentive if they were able to by fulfil the following conditions. For instance, it was said that they would be required to submit a sugar development project plan with realistic timelines for a minimum capacity of 100,000 tonnes per annum. Government, however, said that they must diligently execute the plan to at least 40 per cent before they could be qualified for sugar importation quota.

Investors’ complaints

However, the Group Executive Director, BUA Group, Kabiru Rabiu, noted that huge capital cost, conflicts in land acquisition, insecurity, infrastructure deficit, water and environmental issues, lack of synergy among regulatory agencies and skills deficit were the major factors which had slow implementation of BIP. He disclosed this recently in Abuja while speaking on “Challenges of Emerging Sugar Companies in Meeting the Sugar Demand of Nigeria”. Kabiru explained that the best option was for the Federal Government, through the National Sugar Development Council (NSDC), to assist the operators by creating sugar hubs, sugar sector intervention funds, infrastructure gap bridging, direct land acquisition, synergy among various stakeholders and building capacity among the industry regulators. The company also declared that it was planning to produce 100,000 tonnes of sugar after the sugar refinery is completed in December 2020, adding that BUA is expecting to feed the coming refinery from its sugarcane plantations in Kwara State. The Chairman of BUA Group, Abdulsamad Rabiu, said “what we are trying to do is to produce not only plantation of raw sugar but also refined sugar”.

Implementation

The implementation of the sugar BIP began with the official take-off of the Nigeria Sugar Master Plan (NSMP) in January 2013. Under the plan, three refineries were approved as BIP operators. The operators were made to sign formal commitments, detailing a number of indicators by which their performance would be measured. Raw sugar quotas at the concessionary tariff of five per cent duty and five per cent levy was to be allocated to operators on the basis of performance of their BIP projects and as incentive to encourage operators to plough back profits to their BIP projects.

Tariff monitoring

The concessionary tariff was to last for three years in the first instance. Operators’ performance was to be assessed by two committees set up by the NSMP; Sugar Road Map Implementation Committee (SURMIC) and Sugar Industry Monitoring Group (SIMOG). The monitoring committees are expected to conduct quarterly monitoring of all BIP proj-ects. Outcome of each monitoring exercise would be forwarded to all operators with copies sent to the NSDC. Also, in October of each year, SURMIC and SIMOG shall hold a joint review meeting to harmonise their rating of the BIP performance of all operators. Copies of the harmonised performance report shall be forwarded to NSDC and the minister of Industry, Tourism and Investment and shall form the basis of the next round of sugar quota allocation. Already, the government had in 2017 given grace to all operators to improve their performance based on the erstwhile quota allocation format, warning that any operator that subsequently fails to get the quantity of raw sugar it needed would be sanctioned. According to NSDC, any operator that fails to achieve the perfor-mance target for the year, based on its BIP commitments, as released by the joint harmonisation meeting, shall be penalised for poor performance with reduction in its quota commensurate with its performance scores.

Low investment

Although some of the companies have already invested over N157 billion to sugar projects in the last six years but investigation revealed that the firms general performance, was below average at about 40 per cent of projected performance as importation of the commodity has further gone up by 1.07 per cent from 1.87 million tonnes to 1.89 million tonnes in one year because of the huge deficit, leading to opposition by relevant government agencies on the exceptional tariff they enjoyed from the government

Low output

Currently, the country’s projected demand for sugar has reached 1.7 million tonnes this year but production output accounts for only seven per cent of its demand while annual revenue generated by the government is estimated at $24.88 million despite the Central Bank of Nigeria (CBN)’s anchor borrower scheme. Under the scheme, the country is expected to produce 1.7 million tonnes of sugar annually but it only has capacity to produce only 80,000 tonnes. Total sugar production under the plan between 2013 and 2019 stood at 505,000 tonnes. As the country continues to face huge shortage of sugar despite the increased consideration given by the government to improve its local production sugar, the import bill between January and February, 2020 was N22.06 billion ($60.44 million) as two Lagos Port’s terminals took delivery of 188,085 tonnes of the commodity. The imports were part of the first batch of the 1.89 million tonnes of sugar booked in 2020. Brazil is the largest supplier of sugar to Nigeria with over 80 per cent market share estimated value at $500 million. In January, MV Baranee Naree arrived at Greenview Development Nigeria Limited (GDNL) Lagos Port with 45,7000 tonnes of sugar. Also, four ships berthed at the GDNL and Apapa Bulk Terminal Limited of port in the period. Three of the vessels discharged 135,655 tonnes of the consignment at GDNL with Kapetan Sideris leading with 47,000 tonnes, Chariana L, 44,000 tonnes and Aruna Hulya, 44,655 tonnes. Also, Desert Oasis offloaded 52,430 tonnes of the commodity at ABTL.

Anxiety

Worried by the low performance, the Executive Secretary, NSDC, Dr Latif Busari, explained that the country is currently producing only five per cent of its total demand, while it depends on importing the rest. While the council’s objective is to boost domestic production of sugar to attain self-sufficiency by 2020, Nigeria is only able to meet 4.96 per cent of the projected sugar production. Busari, however, said in Abuja at the signing of “Sugarcane Irrigation’’ agreement between BUA and Netafim that the country would be self-sufficient in refined sugar production by 2023. The executive secretary added that the agreement will boost sugarcane farming, thereby, providing raw materials for refined sugar production. He said: “We import raw sugar and our refineries which have a combined capacity of about three million tonnes refining capacity. “Dangote, BUA and Golden sugar import raw sugar, add a bit of value and in the process create some few jobs.” In 2012, the Federal Government had said that no sugar would be allowed to come into the country from 2019 but up till now, the country can only meet 4.96 per cent of the projected 1.66 million tonnes of the commodity under the NSMP. In the plan, the government introduced a 20 per cent import duty and 75 per cent levy on refined sugar in 2019.

Failed incentives

Part of the incentives to boost domestic production of sugar include a five-year tax relief for investors in the value chain; 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. It was also revealed that the National Sugar Development Council Act was further amended in June, 2015 to further support the Nigeria Sugar Master Plan as funding remains inadequate to support the development of Nigeria’s sugar industry. Nigeria’s current domestic supply has not kept pace with the rising demand despite the incentives offered by the government to boost local production. Despite this, a global trade portal on Nigeria imports Index Mundi revealed that this year, importers have ordered for some 1.89 million tonnes of raw sugar because of its dwindling local production. Data by the Nigerian Ports Authority (NPA)’s shipping position for instance revealed that Lagos Port Complex alone took delivery of some 935,000 tonnes of sugar valued at N109.7 billion 300.46 million) in between January and September 2019. The imports were discharged at Apapa Bulk Terminal Limited (ABTL) and Greenview Development Nigeria Limited (GDNL).

Analysis

Imports analysis revealed that sugar importation value rose in the last 29 years from $265.66 million in 1990 to over $1 billion in 2019. The analysis further showed that import volume of raw sugar rose by 955,803 tonnes in 27 years from 603,770 tonnes in 1990 to 1.7 million tonnes in 2020. Worried by the low output, the Director-General (DG), Raw Materials and Research Development Council (RMRDC), Prof Hussaini Ibrahim Doki, said that almost 90 per cent of the sugar consumed in Nigeria is imported with huge foreign exchange. He said: “We are concerned as a council and for some time we have been looking at reducing the figure to the barest minimum. We are looking for alternatives to achieve this, acquiring land, working with sugarcane farmers and exploring other areas of partnerships. Doki explained that RMRDC is trying to support the National Sugar Development Council by providing improved and better sugarcane seedlings. He added that the project is underway as the council has moved past the trial stage which was achievable with the input from some state governments. The DG further explained that the council is in partnership with an American-Nigerian, who is into sugar production, and will be instrumental to the implementation and marketing of the project. Doki added that the equipment and machinery for the sugar project have arrived in the country, saying that after the lockdown the team will be able to assemble them and start the project. As part of efforts to support investors, the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, said that the bank has invested about N26 billion towards the completion of a sugar refinery in Niger State in order to promote import substitution. Emefiele said in Sunti, Niger State, the CBN will support genuine investors toward self-sufficiency in local production of essential goods and the economic diversification drive. According to the governor, the apex bank invested the money in order to encourage import substitution and backward integration strategy. Such investments, he added, are geared toward self-sufficiency, generate employment, and create wealth. Emefiele urged small-scale sugarcane farmers in the area to leverage on the presence of the Sunti Golden Sugar factory to boost production, as the company will now buy all their produce. Also, the Chairman of Flour Mills of Nigeria, John Coumantaros, who commended the CBN for its support, noted that the refinery will create over 15,000 jobs, including 3,500 direct jobs and 3,000 small-scale out-grower farmers.

Last line

The amount of foreign exchange spent on sugar importation annually is enough to produce infrastructure to sustain the sugar sector.

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