SUGAR INDUSTRY SPECIAL REPORT
Similar to the backward integration programme that ended the importation of cement into the country, bulk importers of raw sugar were given a target to end the importation of this very essential commodity used by the food, beverages and pharmaceutical industries by 2020. In the first part of a series of in-depth investigations by THISDAY on the federal government’s import substitution strategy aimed at reducing Nigeria’s over-reliance on imported goods, conserving foreign exchange and job creation, Crusoe Osagie, Hammed Shittu and Abiodun Ajala embarked on tours to Numan in Adamawa State and Lafiagi in Kwara State to assess the level of compliance with the Nigerian Sugar Master Plan by Dangote Group and Bua Group, two fierce competitors that have been at each other’s throats for market dominance in other sector where they operate. They also spoke to the Managing Director, Agro-Allied Division, Flour Mills of Nigeria Plc, Mr. Hugh Glyn Jones
The quest by the Dangote Group, BUA Group, and Flour Mills of Nigeria Plc to meet the target set under the Nigerian Sugar Master Plan (NSMP) to end the importation of sugar into the country by the year 2020 has attained a frenetic pace, with the three firms achieving various stages of development in their backward integration programme (BIP) sites.
To drive the country towards self-sufficiency in integrated sugar production, conserve foreign exchange and create jobs for thousands of Nigerians, the federal government in 2013 signed agreements with the three companies which import sugar to meet the nation’s demand.
Under the agreement, BUA acquired the Lafiagi Sugar Company, now known as BUA Sugar Company, Lafiagi in Kwara State as its BIP project, for Dangote, it was the Savannah Sugar Company in Numan, Adamawa State, while Flour Mills on Nigeria established the Sunti Golden Sugar Estate in Niger State.
Since then, the three companies – all of which are major competitors in the cement and food and beverages industries – have been in a race against time to justify the government’s incentives comprising rebates granted on duty payments, levies on the importation of raw sugar, and machinery to set up their plants. Behind the scenes, THISDAY also got some insight into the cut-throat competition between Dangote Group and Bua Group to outdo one another in yet another segment of the economy in which both firms compete.
Investigations by THISDAY at the various sugar plantations and plant sites revealed that the three sugar estates were at various stages of operation or completion, with two – Savannah Sugar and Golden Sugar Estates – having made considerable progress in attaining the milestones under the implementation of the backward integration plan, while Bua Sugar Company was still in the rudimentary stages of setting up its sugar estate.
Savannah Sugar Leads the Pack
The Dangote Group, at the moment, has just over 6,000 hectares of mature sugarcane, which is currently undergoing harvesting and processing, with the estate running three 24-hour shifts daily. When THISDAY visited its Savannah sugar plantation and factory in Numan, harvested sugarcane was being loaded into a machine which cuts and crushes it from where it moves through four mills where the crushed sugarcane is fully pressed and the liquid separated from the dry residue called bagasse.
While the bagasse goes into the boiler as fuel for producing the steam that turns the turbine for electricity generation, the liquid moves on for further processing which results in the separation of the sugar from the liquid effluent called molasses. The sugar syrup goes through further purification for the production of pure refined sugar while the molasses is also further processed into ethanol and other biofuels.
THISDAY discovered that apart from the processing of the molasses into ethanol and other biofuels which is currently not carried out at Savannah Sugar, all other activities at the integrated sugar production estate, from sugarcane to refined sugar, is carried out at the facility.
Speaking with THISDAY during the assessment of the estate, which the company said has gulped over N35 billion in investments to date, the agriculture manager of Savannah Sugar, Mr. Emmanuel Odaudu, said: “At the moment, the sugarcane plantation covers around 6,000 hectares and the company is currently expanding it to 16,000 hectares. The company has also acquired land in Lau/Tau, Taraba State; Kebbi State; Kaugama, Jigawa State; Mambe, Niger State; Kpata, Kwara State and Kogi State, for expansion.”
Odaudu said in the current planting season, which began from January 6, the company has so far processed 1,400 hectares of sugarcane farmland, translating into 71,000 tonnes of sugarcane from which 3,800 tonnes of pure refined sugar has been processed.
“Production which takes off with harvesting sugarcane from the farm to processing in the factory goes on for 24 hours every day with workers running three shifts,” he said.
The company’s workshop manager, Mr. John Olayinka, added that Savannah Sugar uses various kinds of tractors and machines with varying capacities ranging from the Steiger tractors (17 units) to Magnum 290 for ridging (45 units). The company also operates dumpers, excavators and Komatsu dozers and each of these tractors can work on two hectares of farmland a day, he explained. “There are also continuous harvesters and grab harvesters all working round the clock to meet production targets,” he pointed out.
Also, factory manager, Mr. Santosh Singh, during the tour, said: “After the separation, the sugar is further refined to pure white refined sugar while the molasses is further processed into ethanol, biofuels and mud which is used as manure for farmlands, among others.”
Managing director of the company, Mr. Taaziya Akila Todi, who spoke at the sugar packaging section, puts current daily output of pure refined sugar from the Savannah Sugar plant at 160 metric tonnes per day and a projected output for this season at an estimated 18,000 metric tonnes of sugar.
“The expansion plan for Savannah Sugar which is currently ongoing, will see planted areas increase significantly along with the installation of a new plant that shall process 12,000 metric tonnes of cane per day. This will result in a total output of 250,000 metric tonnes of sugar produced annually from this company only.
“Ultimately, the plan is to replicate this in six different locations across the country (in Taraba, Kebbi, Jigawa, Niger, Kwara and Kogi States) to take the total output to around 1.5 million tonnes of refined sugar per annum. At this point, Nigeria will not only be self-sufficient in sugar production but will also have excess supply which can be channelled to the export market,” he explained.
On the number of direct and indirect jobs Savannah Sugar has created, he said the company currently employs around 750 persons as full-time employees while also employing over 5,000 workers as contract staff who work in the farms and other parts of the factory.
“We also have guesthouses and accommodation within the estate where all our permanent employees and expatriates who visit the plantation and factory from time to time are accommodated,” he said.
THISDAY also found out that the Savannah Sugar Estate is also being equipped with an airstrip where medium sized airplanes can land and take off. Currently, the facility is equipped with two power plants of 3.2MW capacity each to cater to the entire power needs of the estate with excess capacity to spare for adjoining communities.
Ultimately, according to Todi, power generation will be raised to 45MW in conjunction with the expansion plans of the company, with plans to make Savannah Sugar a net supplier of electricity to the distribution company in the area.
However, with Nigeria’s current sugar consumption put at an estimated 1.7 million tonnes per annum and rising, Savannah Sugar’s projected output of 1.5 million tonnes per annum, falls short of projected demand as per capita consumption rises.
BUA Moving at a Different Pace
But while the tour of Savannah Sugar showed that considerable progress had been made by the firm at its BIP site, the same could not be said of Bua Group’s sugar estate in Lafiagi, Kwara State. THISDAY’s visit to BUA’s sugar estate revealed that the company was slow off the blocks and had a long way to go in attaining the milestones set out for producers under the sugar master plan. It was noted that only land preparation for transplanting its 13-hectare sugarcane nursery in the future had been carried out.
Providing insight, the General Manager of BUA Sugar Company, Mr. Samuel Yisaku, and the Group Head, BUA Agribusiness, Mr. Mario de Matos, said that the company was running its own BIP programme exactly as agreed with the National Sugar Development Council (NSDC) and so was not lagging behind any other company. Both executives explained that BUA was in the process of land preparation, which according to them, is the main milestone expected of their company by NSDC this year.
Yisaku added that BUA was also working to attain reasonable integrated cane processing in the next three to four years and transit to full production around 2024. The spokesman of the group, Mr. Otega Ogra, who also spoke during THISDAY’s tour of the BUA plantation, further explained that hiccups in the privatisation process of the Lafiagi Sugar Estate was responsible for the seeming setback.
“The privatisation process through which we acquired Lafiagi Sugar took a long time to be completed and we were only able to take full ownership of the associated lands in late 2014 with the help of all stakeholders involved. The sugar council which regulates the industry was carried along every step of the way and targets were set and agreed upon based on the reality of the situation on hand.
“We have so far met our agreed targets which have been reviewed by the sugar council and for which we have received glowing recommendations from the inter-ministerial National Sugar Roadmap Implementation Committee. We are also confident we will meet our targets for 2016 as agreed with the sugar council,” Ogra stated.
BUA at the moment has a 50-ton per day manual cane crushing plant which it is phasing out and plans to install a state-of-the-art plant that will turn out 1.2 million tonnes of refined sugar annually when the estate is fully operational. At the moment, according to Yisaku, the estate has 25 permanent employees and very few casual workers. It is not yet harvesting or processing sugarcane but mainly ploughing, tilling and preparing farmlands for mature cane seedlings presently occupying 13 hectares of land on the estate.
Apart from the land preparation equipment at the Bua estate in Lafiagi, the company also showed THISDAY some office blocks and three warehouses where it has stored pre-fabrication materials that are to be used to set up 100 units of accommodation for both workers and visitors to the estate.
Flour Mills is on Target
On its 17,000-hectare estate in Sunti, Niger State, Flour Mills of Nigeria, having spent N18 billion to date, has met one-third of the milestones under the national sugar plan. Its mill, according to the Managing Director of the Agro-Allied Division, Flour Mills of Nigeria, Mr. Hugh Glyn Jones, is also nearing completion and will commence trials soon.
Jones said the Sunti Golden Sugar Estate has complied with its approved BIP and is on target to achieve its full implementation by 2020. According to him, the estate is 17,000 hectares in size and the first phase of cane development will be for 10,000 hectares.
“The processing plant will commence production with a capacity of 3,500 tonnes cane per day (TCD) that will be expanded to 4,500TCD when sufficient sugarcane is available for processing,” he said. He added that the plant will produce molasses for use in the group’s animal feed operations and bagasse for production of electricity, noting that currently, 750 people are employed at the estate. The number of employees at the estate, he said, will gradually grow to 3,300 as the plant increases output.
He added that there will be an out grower scheme of 3,500 hectares developed alongside the estate to supplement sugarcane delivery to the mill. This, Jones said, will be developed as the irrigation infrastructure is extended beyond the core estate.
No Love Lost
But as Nigeria marches towards self-sufficiency in sugar production, what became apparent during THISDAY’s investigation was the war of attrition between two major players – Dangote Group and Bua Group – in the sugar sub-sector. Both firms, with vast investments in cement and the food and beverages industries, have transferred their rivalry to the sugar sub-sector.
According to industry watchers, the President and Chief Executive of the Dangote Group and without contention Africa’s richest man, Alhaji Aliko Dangote, is often bemused by the fact that the president and chief executive of BUA, Alhaji Abdulsamad Rabiu, keeps snapping at his heels. Even more curious is that both men have not tried to conceal their rivalry through the occasional acts of one-upmanship in the various segments in which they operate.
While business rivalries may be beneficial to consumers in the long run, observers who spoke to THISDAY were of the view that in a 180-million-strong Nigerian market and excellent prospects for sugar exports to the West African sub-region and beyond, the market is more than large enough to accommodate Dangote, Bua, Flour Mills of Nigeria and other entrants into the industry.
Given the determination Dangote and Rabiu have displayed in expanding their cement concerns, what has become evident is that the race for market share and dominance in the sugar sub-sector will be an interesting one to watch. And just like the cement industry, it will only be a matter of time before Nigeria sees the back of raw sugar importation.
Promising Future for Local Sugar Production
Following the visits to the sugar estates in Numan and Lafiagi, as well as the interviews with Flour Mills of Nigeria and the NSDC, it was apparent that some progress had been made in meeting the milestones given to producers of refined sugar under the master plan.
The Savannah Sugar Estate was ahead of the competition and already producing sugar at its facility in Adamawa State, with plans to expand production to 1.5mt per annum from six other sites in the country; Flour Mills of Nigeria was on course to join Savannah Sugar in the production of refined sugar before the end of the year, effectively reducing Nigeria’s dependence on imported raw sugar; however the Lafiagi Estate, having been hampered by post-privatisation delays at the sugar plantation and plant in Kwara, still has a long way to go before production can take off at its facility.
The mixed results, notwithstanding, the light at the end of the tunnel showed that the backward integration programme of the federal government in the sugar sub-sector has promise. It was a cue for the Ministry of Trade, Industry and Investment to take note and replicate the BIP in other sectors in Nigeria’s march towards economic diversification.
• Additional reporting by Ijeoma Nwogwugwu
About Nigeria Sugar Master Plan
According to the National Sugar Development Council (NSDC), 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 per cent while local production accounted for less than 2 per cent. Today, demand has risen to about 1.5mmt while local production has stagnated.
This underdeveloped state of the sugar industry and the low local sugar production has deprived the country of all the benefits derivable from a vibrant sugar sector leaving some unwanted consequences notably, the annual drain on the nation’s foreign exchange earnings, loss of hundreds of thousands of employment opportunities, and food insecurity arising from sugar import dependence.
Given the strategic importance of sugar, it became imperative that the nation’s precarious dependence on sugar be checked particularly since Nigeria has the potential to become a net exporter of the commodity, if the capacity of the existing sugar plants is enhanced, new plants established, and sugarcane out grower farmers encouraged and supported through the provision of credit facilities, procurement of necessary inputs, and the development of basic infrastructure.
In realisation of this fact, the NSDC developed a road map called the Nigeria Sugar Master Plan (NSMP) for the attainment of self-sufficiency in sugar within 10 years. The NSMP was approved by the federal government in September 2012 and its implementation commenced on January 1, 2013.
The approval of the NSMP by government and its adoption as the strategic road map for the development of the sugar sector was a clear demonstration of government’s commitment to leveraging on agriculture and industrial manufacturing to diversify the Nigerian economy and revenue sources in addition to creating employment opportunities for its citizens.
Busari: Companies That Signed up to the Sugar Master Plan Have Shown Commitment
The Executive Secretary of the National Sugar Development Council, Mr. Latif Busari, spoke to Crusoe Osagie on the level of compliance with the Nigeria Sugar Master Plan aimed at attaining self-sufficiency in sugar production in the country
What has been the performance of the Sugar Implementation Committee and the Sugar Industry Monitoring Group with respect to compliance with the backward integration mandate in the industry?
There are two platforms for monitoring the implementation of the Nigeria Sugar Master Plan (NSMP): both the Sugar Road Map Implementation Committee consisting of the relevant ministries, departments and agencies (MDAs) of government and the Manufacturers Association of Nigeria (MAN), and the Sugar Industry Monitoring Group comprising the chief executives of the sugar refineries, have been quite effective in monitoring raw sugar quota utilisation and they also undertake periodic evaluation visits to the backward integration programme (BIP) sites to ensure that the projects meet targets and timelines and advise government accordingly.
So how are the players in the sugar sector implementing the backward integration policy on sugar?
So far, pretty good. The companies that signed up to the BIP with government in 2013 have shown commitment to their plans. Specifically, Dangote Sugar Refinery has expanded field and factory operations at its BIP site at Savannah Sugar Company, Numan, Adamawa State with about 6,000 hectares of sugarcane plantation and refurbishment of the factory. The company plans to acquire a new mill of 12,000 tonnes cane per day (TCD) for the facility and expand the estate to include adjoining Guyuk (7,500ha) recently granted by the state. The company has also acquired land in six other states for sugar projects – Lau/Tau in Taraba State; Kebbi State; Kaugama in Jigawa State; Mambe in Niger State; Kpata in Kwara State; and Kogi State.
Golden Sugar Company belonging to Flour Mills of Nigeria Plc, on the other hand, has a new 4,200TCD estate at Sunti Golden Sugar Estate, its BIP project which it commenced in 2012/13 will become operational in May 2016. The development at the Golden Sugar Estate, the first sugar factory under Nigeria Sugar Master Plan near completion is a testimony of Flour Mills of Nigeria’s commitment to invest in the country.
The development of Lafiagi Sugar Estate, the BIP site of BUA Sugar Refinery, while not at the same pace as the others, is expected to accelerate in 2016. The company is ramping up its seed multiplication nursery pending the outcome of its site feasibility study, which is being handled by a reputable UK company called Booker Tate.
Given the incentives put in place for investors under the Nigeria Sugar Master Plan, are there any sanctions for non-compliance with the milestones set for operators in the sub-sector?
Yes, the NSMP provides adequately for sanctions and the operators are very much aware of them.
We understand that some companies just go and rent machines and place them at their sites as a form of window dressing in a bid to deceive BIP inspectors. Is there any truth in this allegation?
The council has no proof of that allegation and so far, council and the BIP monitoring groups believe that all machinery/equipment at BIP sites have been duly procured. Again, since machinery/equipment leasing and/or outsourcing of certain project activities are legitimate business options in Nigeria and a fairly common practice in construction projects, companies may take any of the options to execute projects. Council would like to believe that any machinery/equipment sighted at any project site is for legitimate project implementation.
How far has the government implemented and monitored the raw sugar quarterly allocation policy?
So far so good, this year marks the fourth year of the administration of raw sugar quota allocations to the refineries and the monitoring has been robust and in line with the provisions of the NSMP. Infractions have been minimal and have been sanctioned as applicable.
Between the Lafiagi, Savanah and Golden sugar estates, which of the facilities are actually producing sugar in the true sense of the word?
Savannah has been producing sugar every year since 2013 and even before. It is just that output has been low, but now production is projected to grow from 20,000mt in 2015 to 50,000mt in 2016, and 100,000mt by 2017. This is based on the expansion plan envisaged and being pursued by the Dangote Sugar Refinery. The Golden Sugar Estate, as mentioned earlier, is a new sugar project site that will be inaugurated in May 2016 and 28,600mt of sugar is projected to be produced in the first year. Lafiagi is of course at the planning and land development stage.
By your estimates, when will you stop the importation of raw and refined sugar importation?
Indeed 98-99% of all imports in the last five years or more have been of raw sugar; very little refined sugar is imported. Raw sugar is refined through some value addition to meet demand for industrial users and for homes. Industrial consumption is much more, about 80%. From this perspective, when we achieve self-sufficiency in production from sugarcane-to-sugar projects, refinery operations will obviously fall to meet the export market, if that is competitive. The NSMP target is to satisfy national demand first. Self-sufficiency will be achieved gradually over time but the NSMP has set a 10-year time line.
How would you advise government on other robust policies to encourage investments and development of other sectors of the economy?
The national dream is for Nigeria to be self-sufficient in sugar production. That is the ultimate NSMP goal and we, in the council, remain focused on the implementation of the plan in view of the numerous economic and social benefits this will bring to Nigeria. With regards to the general economy, I think, as a country, we need to avoid policy somersaults except where it is very necessary or becomes unavoidable. The policies enunciated in the Nigerian Industrial Revolution Plan have been acclaimed as generally lofty. Government however needs to demonstrate the will to see through its implementation so as not to send the wrong signals to the investing public. Of course where there is need to adjust implementation modalities, in view of emerging realities, that should also be done. I will therefore say that generally we already have good and robust policies for most of the sectors, we should now focus on diligent implementation.