The Federal Government plans to achieve self-sufficiency in sugar. It targets domestic production of 1.7 million metric tonnes of sugar by 2020, to, among others, halt the yearly loss of about N350 billion to importation of the product and create jobs. But the realisation of these targets via the implementation of the National Sugar Master Plan (NSMP) is being threatened by smuggling, community hostility, and flooding, among others. Already, investors are worried that they may not savour the sweetness of their multi-billion naira investments in sugar, unless remedial steps are taken urgently. Asst. Editor CHIKODI OKEREOCHA reports.

The three major investors in the Nigerian sugar industry – Dangote Sugar Refinery Plc, BUA Sugar Refinery Limited and Golden Sugar Company Limited – are, no doubt, big ticket investors credited with having the Midas touch. Their successes in turning businesses into extremely profitable ones are widely known. However, their foray into the sugar sector appears not to be enjoying a smooth sail.

The Nation learnt that the investors’ prospects of reaping bountifully from their substantial investments in the Federal Government’s Backward Integration Programme (BIP), to boost the implementation of the National Sugar Master Plan (NSMP), have come under severe threats. The activities of smugglers and host communities’ hostilities as well as incessant flooding of sugar estates, among others, may have conspired to prevent the investors from savoring the sweetness of their investments in sugar.

The implementation of the NSMP commenced in January 2013. It was aimed at achieving self-sufficiency in sugar production by stepping up its production within 10 years. Specifically, Nigeria, under the plan, targeted domestic production of 1.7 million metric tonnes of sugar by 2020. This was in the hope of halting its importation that has been digging a hole in the Federal Government’s purse to the tune of N350 billion annually.

It also sought to create numerous job opportunities, contribute to production of ethanol and generate electricity. While 37,378 and 79,803 direct and indirect/seasonal jobs were expected to be churned out from the sector, respectively, the plan targeted the production of 161.2 million litres of ethanol annually. It also envisaged that Nigeria will ride on the back of the sugar master plan to generate 411.7 megawatts (mw) of electricity yearly.

To meet these ambitious targets, the NSMP said there was the need to establish about 28 sugar factories of varying capacities, and bring about 250,000 hectares of land into sugarcane cultivation. The sugar master plan made it clear that the bulk of the investment capital required to meet the targets would come from private investors.

This was why the government entered into a tripartite arrangement with Dangote Sugar Refinery Plc, BUA Sugar Refinery Limited and Golden Sugar Company to drive the implementation of the roadmap. Accordingly, each of them, driven by a combination of patriotism and prospects of bountiful returns on investment, has committed significant investment capital into the sector.

 

Dangote throws his hat in the sugar ring

Pan African investor and President of Dangote Group Alhaji Aliko Dangote last month signed a Memorandum of Understanding (MoU) with the Niger State Government for the establishment of a $ 450 million fully-integrated sugar complex.

The MoU will allow the indigenous conglomerate access to 16,000 hectares of land at Lavun Local Government Area of the state for the production of raw sugarcane. The project, on completion, will create over 15,000 jobs in the state. It will also turn around the state’s economic fortunes, according to Dangote.

“The Dangote’s Integrated Sugar Project in Niger State will include the establishment of integrated sugar mills, generate power, produce molasses, ethanol fuel, biomass and produce animal feeds,” the serial investor said, during the signing of the MoU in Government House, Niger State, in August.

Giving more details on the project, which has put Niger State Governor Abubakar Bello and the people of the state in an expectant mood, the Group Managing Director of Dangote Sugar Plc, Abdullahi Sule, said the integrated sugar mills have the capacity to produce 160,000 mt of raw sugar. He described the MoU as a game changer for Niger State economy and Nigeria as a whole.

However, the $ 450 million investment in the state was not the only project upon which Dangote hinged his hope of giving impetus to the BIP on sugar and, by so doing, making profit. The conglomerate, which boasts of Africa’s largest sugar refinery in Lagos, also has a sugar cane plantation in Numan, Adamawa State.

Dangote Sugar Refinery, according to Sule, was also developing a sugar backward integration plan, through the production of 1.5 MT/PA in 10 years in Nasarawa, Adamawa, Kogi, Kwara, Taraba and Niger States.

The Nation learnt that since 1981 when the Group started its foray into sugar business, it has injected a $ 104 million into the Savannah Sugar Company Limited, which it acquired from the government in 2003. This year alone, the acquired firm is said to have produced 20,000 mt of raw sugar from its plantation.

 

BUA Group takes the plunge

BUA Sugar Refinery Limited has never hidden its intention to give Dangote Sugar Plc a run for its investment in sugar. The 2008 acquisition of Lafiagi Sugar Company (LASUCO), in Kwara State, which has over 20,000 hectares of arable land suitable for sugar cane plantation, was seen as a demonstration of its resolve in this regards.

“BUA is serious and is ever ready to surprise Nigeria and Nigerians in its current efforts to become a mega local sugar producer and first sugar exporter in the country,” the Managing Director of BUA Sugar, Mr. Ibrahim Yaro, said.

That was at the recent visit of the Minister of State for Industry, Trade and Investment, Hajia Aisha Abubakar, and the National Sugar Development Council (NSDC) to the firm to ascertain the level of progress at the LASUCO sugar plantation.

The NSDC is a parastatal of the Federal Ministry of Industry, Trade and Investment. The Council developed the road map called the NSMP for the attainment of self-sufficiency in sugar. It’s mandate was to articulate policies and programmes that will bring about rapid development of the sugar sector.

Specifically, the Council was charged with progressively reducing the level of sugar importation by increasing local production so as to achieve self-sufficiency. Its mandate also included encouraging greater private sector participation in sugar production while reducing direct government involvement.

During the Minister’s visit in the company of the Council, Yaro announced the company’s investment of $ 300 million in its sugar plantation, in line with the Federal Government’s BIP in the sugar industry. He said the sugar plantation, which will gulp over $ 300 million, was strategically located to serve the northern and southern markets.

He explained that the 500 hectares the company earmarked for nursery development in 2016 has been developed. According to him, what is ongoing is the land clearing and development preparation for additional 5,000 hectares, which would take the company through 2018.

Yaro said: “We are focused, determined and vigorously marching forward to meet our set targets. LASUCO targets the production of two million tons of sugar cane annually and this segment alone could produce over 4,000 jobs. LASUCO operates the second largest sugar refinery in Sub-Saharan Africa.”

The Group’s investment in sugar includes sugar refineries in Lagos and Port-Harcourt and cane-sugar estates in Kwara and Kogi states. The combined capacity of its two sugar refineries of around 1.5 million mt/p.a makes BUA Group, arguably, the largest single refiner of sugar within Nigeria.

 

Golden Sugar Company Ltd also

Since its inauguration in June 2013, Golden Sugar Company Ltd’s state-of-the-art N40 billion sugar refinery has been delighting customers and businesses with its premium white sugar. With a production capacity of 750,000 tonnes of sugar, it is one of the largest facilities in Africa.

 

Why investors walk tightrope

For investors in the sugar value chain, the stage appeared set for the transformation of the sector by riding on the back of the BIP on sugar. With their mind-boggling investments and NSDC’s commitment towards achieving set targets, the investors looked forward to rewarding returns.

They sure have reasons to be expectant. For one, the implementation of the BIP in the cement sector in 2002, during the administration of former President Goodluck Jonathan, paid off.

The adoption of the policy in the production of cement by ensuring  that cement import licences were granted only to importers who show proof of building factories for local cement manufacturing in the country, worked magic.

On the strength of the BIP on cement, Nigeria has since moved from the era of cement importation to exportation. And this has significantly cut the huge foreign exchange spent on the importation of the product while also creating several jobs.

However, government’s and investors’ attempts to replicate the BIP’s success in the sugar industry appear to have been met with daunting challenges. The activities of smugglers across the nation’s numerous porous borders, host community hostilities, persistent flooding of sugar estates and dearth of infrastructure, among others, may have instilled fears in the investors that their investments might go down the drain, if nothing is done urgently. They have also raised fears that the sugar self-sufficiency target may not be realised.

For instance, despite the Federal Government’s ban on the importation of sugar to encourage operators in the sugar value chain, it still lacked the political will to enforce the ban.

Interestingly, it was NSDC that brought this situation to the fore when it recently expressed regrets that St. Louis cube sugars are still being smuggled into the country. Its Executive Secretary, Dr. Latif Busari, lamented that smuggling was threatening the businesses of local cubing and packaging companies.

Busari, who spoke at NSDC’s recent mid-term implementation report in Abuja, however, said the Council has evolved new strategies for effective implementation going forward, including increased inter-agency cooperation and sanctions for defaulters.

But as investors and stakeholders in the sugar industry await such increased inter-agency cooperation to begin to yield fruits, about N190.3 billion worth of sugar was said to have been shipped into the country from Brazil between April 2016 and April 2017.

That was not all. The Nation also learnt from reliable industry sources that between March and April this year, 137, 000 metric tonnes of raw sugar estimated at N23.7 billion were discharged at the nation’s seaport.

 

Host communities throw spanner in the works

As if smuggling of sugar into the country was not enough to push investors to the panic mode, many of their projects, which would have raised the NSMP’s implementation profile were said to have been stalled by government and host community’s unwillingness to give out land.

For instance, despite Dangote Sugar Refinery’s acquisition of 6,500 hectares of land in Guyuk for the expansion of its Savannah Sugar Company Limited, Numan, in Adamawa State, the project, according to the report, was stalled by unrealistic demands by local community leaders.

The company’s project site in Lau/Tau in Taraba State, also suffered the same fate. Although, the company was said to have gotten a certificate of occupancy, and had paid compensation following which 20 hectares of nursery was established for further development, the Taraba State administration allegedly frustrated the projects with its “untenable demands.”

The pan-African investor also got a raw deal from the political elite in Kebbi State. The report said that despite undertaking preliminary perimeter surveys and initiating action for topographical and soil surveys for the establishment of a sugar estate in Zaria Kalakala, Kebbi State, political elite’s interference and demands stalled the project.

The Sugar Council also said the establishment of a new green field project by the Great Northern Agribusiness Limited – Lee Group, a Kano-based conglomerate – was disrupted by political elite interference.

Golden Sugar and BUA Sugar also suffered similar fate. For instance, Golden Sugar Estate, Sunti, according to the report, witnessed many disruptions during its development, even as recent as March 22, 2017, requiring interventions by police and local chiefs.

“The company’s intention to expand its cane fields stalled due to hostile and anti­-investment sentiments,” the Council said. Same for BUA Group, which reported community hostilities against operations at its project site in Lafiagi Sugar Estate.

According to NSDC, BUA Group recorded four incidents of physical attacks against contractors working on estate roads and irrigation canals. Flood protection dykes constructed at very huge costs were breached and cane fields washed away. Farm infrastructures – irrigation systems were damaged.

 

Long road to sugar self-sufficiency

In fairness to NSDC, the mid-term implementation report gleaned from its website indicated that some considerable achievements were recorded during the review period.

For instance, the mid-term implementation report showed that the sector attracted N157 billion in new investments. And the establishment of a new 50, 000 tons per annum sugar estate at Sunti was said to be the best investment in sugar.

Also, 9,000 hectares of land were brought under sugarcane cultivation as at 2016. It was an increase of 250 per cent from 2013 when NSDC’s implementation commenced.

The NSDC mid-term report also showed that 481 hectares of out-grower farms supplying cane to sugar estates were in place, up from 81 hectares in 2013. This represented 600 per cent increase.

The sector also created 7,850 jobs, up from a total of 3, 500 employed by all the refineries as at 2013. It was 224 per cent increase.

Two new companies namely, McNichols and Dogan’s also came on stream at the downstream segment of the sugar value chain. This, according to the Council, led to the emergence of Packaged Sugar Producers Association of Nigeria (PSPAN).

However, not a few experts and industry stakeholders note that when these achievements are placed side by side with the projections of the sugar master plan, the success rate was everything but inspiring.

For instance, the three major sugar producers – Dangote Sugar, BUA Sugar and Golden Sugar (a subsidiary of Flour Mills of Nigeria Plc) were said to have achieved only 40.3 per cent of the target set in the NSMP.

While the NSMP projected that five new projects would come on stream in the sugar sector by 2016, up from one that existed in 2013, four new projects were recorded within the review period.

It also projected the establishment of new or refurbishment of five sugar factories by 2016, up from one in 2013. But only two were recorded by 2016. Against the 39,200 hectares of land expected to come under sugar cane cultivation, from 3,600 in 2013, only 9,000 was achieved by 2016.

Also, while local sugar production was projected to hit 145,300 by mid-term of the implementation of the master plan, up from 6,000 in 2013, only 21,000 metric tons of sugar production was recorded in 2016.

Moreover, by the middle of the implementation of the plan, 16,236 jobs were expected to be churned out. But only 7,000 jobs were recorded by 2016. On the other hand, out-growers farms stood at 281 as at 2016. Eighty-one out-growers farms were available in 2013. This was below the plan’s 3,250 projections.

 

To meet the target

The Minister of Industry, Trade and Investment, Dr. Okechukwu Enelamah, was emphatic that Nigeria must get the sugar revolution right just as she did in the cement sector.

According to him, the value of getting it right will be enormous in an economy as large as Nigeria’s with a huge market unrivalled in Africa.

The Minister, who was at the public presentation of the status report on the mid-tern implementation of the NSMP, said revolutionising the sugar sector will have huge effects on job creation and reduction on foreign exchange for sugar imports.

He, therefore, pledged Federal Government’s commitment to assist investors involved in BIP in the sugar sector to overcome their challenges.

Although, Busari said the prospects for the effective implementation of the NSMP over the next five years was “bright,” the Director General, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Emmanuel Cobham, said less emphasis on market monopoly will do the tricks.

Cobham, who observed that sugar production companies are there to make profit and monopolise the market, said rather than investors thinking more of monopolizing the sugar market, they should concentrate on satisfying the need of the customers and on how to create more employments in the sector.

He, therefore, urged the Council to develop policies that will create more jobs by allowing local players come into the field. This, he said, will make the market expand and rub off positively on the nation’s economy.

On the issue of smuggling, which has been a pain in investors’ neck, Cobham said the blame might not be put on the doorstep of Nigeria Customs Service (NCS). According to him, it could be coming out from illegal routes, because when one product is banned, it does not take the normal routes to come in.

Other industry experts, who expressed optimism that Nigeria could still achieve the set targets in the sugar master plan, pointed out that there need to develop value chain for sugar as a commodity right from production to the market.

They noted that the value chain begins with farmers, who must be provided with all the necessary inputs including the variety of sugarcane to plant to be able to deliver the quality of sugar required, and the right quantity per hectare.

Apart from bringing the farmers extension into it, there is also need to encourage not just large scale sugarcane plantation, but also Small and Medium Enterprises (SME’s) to provide their own support to the sugar master plan.

Experts also canvass full involvement of members of host communities as farmers who will be involved in the sugar value chain instead of allowing them become spanner in the works for investors.

The consensus is that sugarcane out grower farmers should be encouraged and supported through the provision of credit facilities, procurement of necessary inputs and development of basic infrastructure.

Will government summon the political will to address the issues agitating the minds of investors and stakeholders in the sugar sector, particularly, by reining in smugglers and host communitie’ hostilities? Will investors replicate their successes in other sectors in the sugar sector, despite the daunting challenges?

While answers to these remain a matter of conjecture, what is, however, clear is that the sugar industry has the potential to help diversify the economy, generate significant foreign exchange and also create employment opportunities.

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Posted on Sep 25, 2017 - Last updated on Sep 25, 2017
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