ACCORDING to the latest data on sugarcane, the stem is the world’s third most valuable crop after cereals and rice and occupies 26,942,686 hectares of land across the globe. As a matter of fact, the first chemically refined sugar appeared on the scene in India about 2,500 years ago. From there, the technique spread east towards China, and west towards Persia and the early Islamic worlds, eventually reaching the Mediterranean in the 13th century. Cyprus and Sicily became important centres for sugar production. Throughout the Middle Ages, it was considered a rare and expensive spice, rather than an everyday condiment. Today, thousands of years later, sugarcane and its by-product, sugar has become an integral part of our daily living and nutrition. From beverages to confectioneries, and daily sweetening usage by individuals and families, sugar serves as an invaluable sweetener and the demand for this by-product continues to be propelled by the demand for these other products that require sugar for taste. Therefore, countries around the world have continued to put in place various structures to aid their drive for sugar self-sufficiency and thus aid in meeting up with demand. Nigeria is not left out in this quest.
The quest for Nigeria to be self-sufficient in the production of sugar through the 250,000 hectares needed to produce the 1.8 metric tons of sugar consumed annually has been a progressive venture. Tosatisfy the sugar demandfrom domestic production, Nigeria will 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.The Federal Government, through the National Sugar Development Council (NSDC) and under the Nigerian Sugar Master Plan (NSMP) established the bulk of the investment capital for local sugar content development to come from private investors. From the Dangote Sugar Refinery (DSR) to BUA Sugar Refinery (BUA), and the Golden Sugar Company (GSC) owned by Flour Mills of Nigeria Plc, these private stakeholders drive about 80 per cent of the sugar BIP investment in Nigeria.
Dangote Sugar Refinery is committing over $700million to its sugar projects which would have the capacity to crush 12,000 tons of cane per day (tcd), while 90MW power will be generated for both the company’s use and host communities. BUA Group on the handcommits investment of over $300million in its Lafiagi Sugar Company (LASUCO) – an integrated milling factory that is comprised of a Sugar mill, Ethanol plant, sugar refinery, and power plant that will be integrated into the national grid.BUA’s sugar company with 20,000 hectares of land has a processing mill capacity of 10,000 tcd from sugar cane to widely accepted white sugar, with a refining capacity of 220,000 metric tonnes. While FMN Flour Mills of Nigeria Plc (FMN) through its subsidiary Golden Sugar Company situated on the Niger river in Niger state has invested over N73 billion. At Sunti, the Company has an area of 22,000ha on which a 15,000-hectare sugar estate is being developed. The FMN sugar estate is made of 3,500ha of irrigated sugar cane and a Sugar Factory with a 3,000 tons per day milling capacity. The Factory is the only one constructed under the NSMP and producing sugar today and upon the completion of the facility, about 150,000 tons of sugar will be produced per year by GSC.
But just like every other project designed to bring a certain level of transformation and even a paradigm shift from what was initially obtainable to what can be sustainable, there tend to be challenges. In the case of the attainment of sugar self-sufficiency in Nigeria, these setbacks emanate from both existing and emerging socio-economic factors. For instance, the issue ofsugar smuggling, a menace that affects both national, corporate, and householdcontinues to plague the industry. Nigeria currently loses at least 300,000 tonnes of sugar to smuggling annually which has hindered the employment of at least 250,000 Nigerians.
More so, smuggling activities created a space for the influx of adulterated sugar brands in Nigeria which greatly puts human nutritional food requirements and needs at great risk as most of the smuggled products do not have NAFDAC approvals. Although, through coordinated efforts and empowerment of the various players in the industry through the BIP and strategic import quota regulations policy, the Federal Government has created a market for the availability of quality, nutritious, and locally processed sugar brands in Nigeria. This has aided in curbing sugar smuggling activities in Nigeria. But the question here is, are these players meeting up with the local demand for sugar in Nigeria? To create an insightful outlook on this inquest, it is pertinent to establish a background on how the industry operates in terms of sourcing raw materials and processing finished goods for end-users and corporates. Back in 2012 through the National assembly Act on NSDC and a further amendment in 2015, the Council is established to catalyze the development of Nigeria’s sugar industry with a view to ensuring that Nigeria attains at least, 70% self-sufficiency in her sugar requirement within the shortest possible time and even export to earn foreign exchange. The Council, therefore, serves as the main focal agency responsible for the regulation of all activities in the sugar sub-sector ranging from production, marketing, importation, and enforcement of relevant industry standards in collaboration with relevant government agencies. It is, therefore, pursuant to this mandate that the Federal Government through the Council regulates the activities of the players within the sugar processing industry in Nigeria especially as it pertains to importation and investment in developing local production of sugar.
The system allows the Council to allocate a certain importation quota to the industry players annually and each player gets a certain percentage of allocation based on their BIP performance to utilize or leverage in line with their strategic discretion.For instance, in 2022, Dangote Sugar Refinery (DSR)was allocated 864,000MTof import capacity, while Golden Sugar Company (GSC) was assigned 400,000MT of import capacities, BUA Sugar Refinery (BUA), and Bacita Sugar Company (BSC) wereassigned 386,000MT and 50,000MT of import capacities respectively.
But, currently, in Nigeria, due to market expansion, which is partly triggered by population growth, nutritional adjustments mostly due to urbanization, and the advent of a broader sugar-requiring products range, the industry players have expended over 83% of the allocated quota. This quotarun ratetook place right before one of the peak celebratory seasonsin the Nation or what is popularly called the ‘Ember’ season. More so, corporate customers are operating on lower-than-average stocks compared to the past as they are the heaviest sugar consumers in all markets, which is indicative of supply constraints. Demand for sugar is incessant and it must be stressed that demand spikes occur during Ramadan and end-of-year festivities, which coincide with the advent of the dry season during which soft drink and juice producers need to stock up. When it comes to dealers, demand is even stronger as sugar is sold straight off the trailers as opposed to the standard practice of stocking it in warehouses.
A brief insight into how progressive and expansive the industry has grown over the years will aid in creating a better understanding of how the industry operates in Nigeria. In the last two to three decades, the demand for sugar in Nigeria was estimated to have grown from 442,867 metric tonnes in 1995 to about 1,301,494 metric tonnes in 2005 showing an average annual growth rate of 7%. Today demand has risen to about 1.5mmt as the extensive use of sugar in snacks and packaged beverage products are propelling the growth of the market.
In line with these industry growth indices, it is projected by industry and economic experts that the Nigeria sugar market is projected to grow at a CAGR of 3.5% between 2022 and 2027 with the market being aided by the rising demand for sugary fast food and cereals and the extensive use of sugar in beverages such as soft drinks.The rising demand for soft drinks manufactured by both local and international companies is surging the use of sugar.As these industries expand in terms of market and nutritional transitions mostly due to urbanization and globalization, the sugar demand trajectoryalso increases. This rise in demand now presents the industry players and the government with an urgent decision to increase sugar quota allocation while they continue to invest in the sugar BIP to avoid scarcity.
Furthermore, with the global recession and the Russian-Ukraine crisis, the sugar importation quota needs to be urgently increased to avoid being pressured into importing already finished sugar products that are readily availableamid the impending scarcity. This entails that while NSDC continues to hold all the industry players accountable for developing local capacities in sugar production, there is a need to also ensure that Nigerians should be allowed to stick to sugar brands that they are already used to, and the need to also continue to improve the capacities of the local brands. Also, quota increment will generate more revenue for the government through taxes, and duties which will be a welcome development especially now that we need to increase our internally revenue-generating sources.
The quota increment process will be regulated based on the NSMP (National Sugar Master Plan) mandate which allows for constant and deliberate investment towards growing local content and in this case sugarcane to ensure that while we still need to import most raw materials for sugar processing, we would not need to continue that in the long run. Thus, this gives local processing companies an opportunity to continue to meet the local sugar demand needs while sustainably growing local capacities.
With the provided insight, one can realistically proffer an answer to the question posed earlier on in this feature, which is ‘are these players meeting up with the local demand for sugar in Nigeria?
As we continue to transit into the ‘ember’ season, which literally translates to festivities and celebrations, it is key that all parties involved in the food cultivation and processing value chain continue to take into consideration the spending capacities of the citizens. Policies and efforts that would help ameliorate excessive spending and the high cost of food products must be adoptedand, in this case, sugar which is extensively used in the food and beverage industry to enhance the flavour profile of productsneeds to be made available and affordable as any increase in price will greatly reflect in the finished product.
- Nnamdi writes in from Lagos
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