Within the first ten years, Nigeria’s National Sugar Master Plan (NSMP) was planned to attract local and foreign direct investments and generate an estimated 107,000 jobs. Within the last decade however, demand still outweighs supply in addition to increase in sugar imports. To reverse the trend, the plan to improve local production needs to be revisited. FEMI ADEKOYA writes.
Last week, the Central Bank of Nigeria (CBN), announced plans to place sugar and wheat on its forex restriction list. The plan was disclosed by the apex bank via its verified Twitter handle in a statement credited to the CBN governor, Godwin Emefiele.
The tweet stated: “Sugar and Wheat to go into our FX restriction list. We must work together to produce these items in Nigeria rather than import them”.
The idea to increase local production through backward integration is not new, however, the concerns border on the government’s capacity to ensure implementation and create an environment for businesses to thrive.
Ten years after the sugar master plan was birthed, production remains unimpressive. The master plan projected the country’s sugar consumption to be roughly 1.75m tonnes in 2020 and production to be roughly 1.797m tonnes in the same year.
The plan equally projected that by 2020, the country would have become self-sufficient in sugar production. Data from the National Bureau of Statistics (NBS) in Q3 2020, showed that the country spent N73.77bn importing raw sugar meant for domestic refining. The volume of import represented 1.37% of total imports for the quarter.
The goal of the NSMP was to raise local production of sugar to enable the country to attain self-sufficiency; stem the tide of unbridled importation; create a huge number of job opportunities and to contribute to the production of ethanol and generation of electricity.
To achieve this, the NSMP estimated that the country would need to establish some 28 sugar factories of varying capacities and bring about 250,000 hectares of land into sugarcane cultivation, over the next 10 years.
While notable investments have been announced by local investors with different levels of progress in terms of sugar plantation and refinery, the current quota appears to be shared along the lines of Dangote 55%, Flour Mills 25%, and BUA 20%, reflecting the perceived market share of the business.
With competition, it is expected that the price of the commodity would drop and assail the fears of ordinary Nigerians but the reverse is the reality.
The March 2020 data by the National Sugar Development Council (NSDC) showed that the average price of local retail sugar stood at N18,895/50kg which is +24.72% higher on a year-on-year basis (Y-o-Y) than the price in 2019. However, on a year-to-date (YTD) basis, the local retail price of sugar has dipped slightly by -1.13%. The latest price for April 2021 showed a marginal decrease at N18,797/50kg at the retail segment.
The average local retail price of sugar was volatile between January 2020 and March 2020, on the back of severe macroeconomic challenges and erratic market forces.
The retail price of sugar was at its highest between March 2020 and May 2020 at the peak of the COVID-19-induced lockdowns and movement restrictions.
The gradual reopening of the economy and businesses in June 2020 reflected in the falling price of the commodity, although not to pre-COVID levels.
With low production and higher prices, the NSDC is expected to identify the reasons for the low domestic production of sugar despite rising domestic consumption, independently establish the amount of investment in the sector by each local sugar manufacturer, determine the investment gaps in the sector, review the National Sugar Master Plan (NSMP) and its recommended policies and adopt a fresh ‘sunset’ period for meeting the sugar self-sufficiency target and put in place punitive measures for manufacturers unable to meet expected milestone production goals.
With the appointment of a new Executive Secretary, stakeholders and consumers hope some of the targets would be met in a timely manner.
Already, the BUA Group, in a bid to address pricing challenges, said it would continue to take steps to ramp up production in an industry which is believed to still be at its infancy stage.
The company is positioning itself to take advantage of the country’s huge comparative and competitive advantage in sugar production.
Presently, the BUA Group has two ultra-modern and automated mega sugar refineries. As response to Nigeria’s backward BIP in the sugar industry, it invested in large scale estates within the country to deepen local sugar production through the acquisition of the Lafiagi Sugar Company Limited (LASUCO) in Kwara State and also, the establishment of the Bassa Sugar Company in Kogi State.
The Senior General Manager, Lafiagi Sugar Company (LASUCO), a subsidiary of the BUA Group, Abdulrasheed Olayiwola, during a tour of the sugar plantation and refinery site said that the company has invested over $300 million on the project since its acquisition of the facility.
The company has also set a target of the first quarter of next year for the completion of the sugar refinery factory presently under construction in Lafiagi.
He said when completed, the sugar factory and plantation will have about 5,000 direct staff and indirectly create over 10,000 additional jobs.
He described the project as the fastest-growing BIP in the country’s sugar sector.
Olayiwola said: “We took over Lafiagi formally in 2014 and the project started in 2016. Since then, there has been no going back. This is the fastest-growing BIP project in the country at the moment. Lafiagi is divided into two areas: the plantation development and the infrastructure development.
“For the plantation, we have a lot of fields to be developed, a minimum of 15,000 hectares would be under cane.
“As at the time we took over, what was attached to the sugar plant was just 5,000 hectares, but because BUA really has the intention of producing sugar in the country, we had to go for more land and we were able to get Lafiagi to 20,000 hectares and the soil composition is very good for sugar cane production.”
According to him, the project is an integrated factory, which will be four factories in one.
“This is a Greenfield project, which we started from scratch. We’re building a mill – a 10,000 tonnes per day mill. That is the highest capacity in the country; we are building an ethanol plant – none of the sugar plantation plants in the country presently have ethanol plants.
“We are not stopping at the mill because that is the brown sugar you see, but we are migrating to a refinery, we are going to be refining the sugar. So, we have the refinery under construction at the moment, and we are building a power plant- a 35 megawatts power plant and part of it would be solely for the refinery and part of it would go to the national grid.
“So, in a way, BUA Group, with this plantation, is contributing to different sectors of the economy,” he added.
Already, close to 7,000 hectares of the plantation have been cleared and is being developed for planting, while close to 2,000 hectares of land have been cultivated. LASUCO has a special nursery, where different varieties of cane are tested. It is situated on about 17 hectares of land.
Also, the Head of Project, LASUCO, Mr. Labaran Saidu, said apart from the plantation, which is the main attraction, the BUA Group had embarked on aggressive infrastructure development in its host communities, while also highlighting the corporate social responsibility projects it has undertaken in Lafiagi.
“For us at the BUA Group, we believe whatever is worth doing at all, is worth doing well. That was why we started this sugar project on a big scale.
“We have over 20 varieties of sugar cane here at Lafiagi that we are testing presently and the idea is to know the one that is best suited for commercial propagation,” he stated.
Saidu said the Lafiaji factory is one of the sugar production sites highly rated by the sugar council.
The Chairman/Chief Executive Officer, BUA Group of Companies, Alhaji Abdulsamad Rabiu, recently pointed out that the sugar plantation and refinery projects situated in Edu local government area of Kwara state, “is one of the most advanced anywhere in the world.”
“Kwara State is one of the states with land, water and climate and we set up our business here because we know sugar refining will succeed here.”
He added that, “Instead of importing raw sugar and processing it in Nigeria, we decided to establish a sugar plantation and refinery in Nigeria and Kwara State happens to be the best located state for the investment.”
The Kwara State Governor, Alhaji Abdulrahman Abdulrasaq, had pledged the state’s support for the project.
AbdulRazaq had commended the BUA Group for citing the sugar plant in Lafiagi, saying the facility would make the local government the richest in the north central.
He said, “BUA today is the biggest investor in North Central Nigeria and we are happy that their investment is in Kwara State. I am in fact happy that it is in Lafiagi, Edu Local Government.”
He said the plant would produce about 25 per cent of Nigeria’s sugar needs when it begins operation later next year and 75 per cent of the country’s sugar needs in the next 10 years.
“Kwara wants to be the epicentre of sugar production in Nigeria and we are creating a peaceful environment for business to thrive,” AbdulRazaq said.
He added that such investments would cut the poverty rate and strengthen Kwara’s capacity to achieve the United Nations Sustainable Development Goals since the issues of water and electricity would be tackled once the factory begins operation.
With a national yearly import of over $337million, the management of Dangote Sugar Refinery Plc has declared its commitment to the Backward Integration Policy (BIP) of the Federal Government to reverse the trend and make Nigeria self-sufficient in sugar production.
The company which is committing over $700million to its sugar projects told visiting members of the Nasarawa House of Assembly at the weekend that the company’s investments in sugar will revolutionalize the economy of the state and lift its people as other people-oriented infrastructures would come with the sugar projects.