africa

Nigeria: How Nigeria’s Sugar Production Collapsed for Decades, Allowing Dangote, Bua Imports to Thrive


Nigeria has relied almost entirely on sugar imports for at least 30 years despite the government’s professed efforts to boost local production.

Nigeria produced far less sugar in 2020 than it did in 1990 and repeatedly failed to meet its production targets, allowing massive importation to flourish for decades as domestic demand grew, government data show.

The data, Nigerian Sugar Development Council (NSDC), show that despite the government’s professed efforts to boost local production of sugar, and claims by Dangote Plc and BUA Group to have substantially invested in that programme, the nation has relied almost entirely – over 98 per cent — on the importation of raw sugar for the last 30 years.

The figures show that successes recorded by industry leaders like Dangote, BUA, Flour Mills of Nigeria have been anchored more on bringing raw sugar into the country where it is refined and sold, an economically costly model with negative implication for the Naira, job creation, and government revenue.

While Nigeria produced 41,478 metric tonnes of sugar in 1990, the figure fell to 38,597 metric tonnes in 2019. Imports rose astronomically from 603,000 metric tonnes in 1990 to 1.6 million metric tonnes during the period, according to the data.

“SUGAR WAR”

Nigeria’s sugar production crisis came to the fore in early April after two of the industry’s biggest merchants, Dangote and BUA, squabbled over import quotas and the construction of a new refinery.

Official correspondences show the row started in January when Dangote Sugar Plc and Flour Mills of Nigeria Plc accused the BUA Group, led by one of Nigeria’s richest men, Abdul Samad Rabiu, of undermining the government’s national sugar masterplan by setting up a sugar refinery in Port Harcourt when it has not invested enough in sugar cane plantations.

The National Sugar Development Council mandates sugar companies to invest in sugar farming and increasingly use locally produced extracts for their refineries, a process called backward integration. In the meantime, the companies are allowed to import extracts based on the scale of their plantation investment.

In a January 28, 2020 letter to the Minister of Industry, Trade and Investment, Niyi Adebayo, Dangote Sugar Plc and Flour Mills of Nigeria Plc said BUA did not fulfill the government’s Backward Integration Policy (BIP) requirement to build a new refinery.

“Under the revised guidelines released by the NSDC, it makes it absolutely clear that the allocation of quotas henceforth, shall be based on quantitative and verifiable improvements in the Backward Integration Programmes of players in the Industry,” they wrote.

“The mid-term review conducted by the NSDC was clear in its conclusions – BUA has failed to invest substantively in local production or comply with its undertakings under its BIP.”

The letter, signed by Mr Dangote and John Coumantaros, chair of Flour Mills of Nigeria Plc, alleged that BUA’s only intention was to use its claimed backward integration achievements to obtain importation quota.

“The impunity with which BUA has contravened the provisions of the NSMP, has placed the other players, who are abiding by the regulations, not only at a significant disadvantage, but has discouraged them from undertaking the huge investments that would deliver the desired objective of 100% local production of sugar, unless of course, the ministry wades in and addresses the situation,” the document said.

Dangote Sugar said its backward integration programme began with a 10-year sugar development plan to produce 1.5 million metric tonnes per annum of sugar from locally grown sugarcane. The project commenced with the acquisition of a large expanse of land in strategic locations such as Taraba, Adamawa and Nasarawa States.

“To this end, three (3) BIP sugar companies; Dangote Taraba Sugar Limited, Dangote Adamawa Sugar Limited, Nasarawa Sugar Company Limited were incorporated,” it said.

The BUA Group denied the claims, saying that the company has invested well in the local production of sugar cane, citing its three sugar holdings in Nigeria: a 720,000 metric tonnes sugar refinery in Lagos, a 20,000-hectare Lafiagi Sugar Plantation and Ethanol Production Complex and an 850,000mt export-focused sugar refinery in Port Harcourt.

BUA argued that its project in Port Harcourt was approved by President Muhammadu Buhari, under Nigeria’s free trade zone law, the NEPZA Act, and accused Dangote Sugar and Flour Mills of attempting to “sabotage” the country and its institutions to get rid of the competition.

The company said its Port Harcourt refinery is focused on exports, not the Nigerian market. It, however, said it would intervene if Dangote and Flour Mills “try to increase prices with wanton abandon locally.”