Scanty Investment in Sugar Production Threaten Self-sufficiency

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In this piece, James Emejo writes that the lack of appetite for investment in the sugar production, coupled with unbridled menace of smuggling dampen the prospects for achieving self-sufficiency and being a net exporter of the commodity

In the quest to catalyse the development of the sugar industry as well as attain 70 per cent self-sufficiency, the federal government had deemed it necessary to chart a course for a potential revolution in the segment, one akin to the recent breakthrough recorded in local rice production.

The intention of government was to further produce enough for export in order to earn foreign exchange.
The National Sugar Development Council (NSDC) became inevitable vehicle to address a hitherto ineffective and un-coordinated planning and supervision of the sugar sub-sector due to absence of a regulatory agency that could coordinate and monitor sugar development in the country to enable it contribute to the nation’s industrial and economic development.

These among other things necessitated the floating of a roadmap known as the Nigeria Sugar Master Plan (NSMP) by the council for the attainment of self-sufficiency in sugar within 10 years.
The NSMP was approved by the federal government in September 2012 while its implementation commenced in January, 2013.

The approval of the NSMP by government and its adoption as the strategic roadmap for the development of the sugar sector was seen as a clear demonstration of government’s commitment to leveraging agriculture and industrial manufacturing to diversify the economy and revenue base to provide employment opportunities for its citizens.
Nonetheless, five years after the implementation of the masterplan commenced, the road to its actualisation has been bumpy.

The roadmap to self-sufficiency had taken into account that the demand for sugar in the country was estimated to have grown from 442,867 metric tonnes from 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.

But, demand had since 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,” the NSDC stated in its document.

It added that, ”Given the strategic importance of sugar, it became imperative that the nation’s precarious dependence on sugar be checked particularly since Nigeria has the potentials to become a net exporter of the commodity, if the capacity of the existing sugar plants is enhanced, new plants established and sugarcane outgrower farmers encouraged and supported through provision of credit facilities, procurement of necessary inputs and development of basic infrastructure.”

Especially, the target under the masterplan is to be able to produce about 2 million metric tons of sugar, enough for local consumption and export.

Already, there is a Sugar Development Fund currently valued at N12 billion, which is domiciled in both the Bank of Industry (BoI) and the Bank of Agriculture (BoA) for the growth and expansion of the industry.

Although, the Executive Secretary, NSDC, Dr. Latif Demola Busari, recently said plans had been finalised to disburse a total sum of N3.9 billion out of the total fund to beneficiaries in various sugar projects, progress had so far been limited partly because of low appetite by investors to commit monies to investments that could take up to a minimum of five years before yields could be expected.

Despite the potentials, which the sugar industry offers, presently, only the likes of business mogul, Alhaji Aliko Dangote and a few others are brave enough to venture into sugar industry which is capital intensive.
Busari said implementation of the masterplan was “still work in progress” largely as a result of the peculiar nature of sugar production which deters investors, who want quick returns.

He explained, ”This is the peculiar nature of the industry but you see, a lot of the time when people ask these questions, they expect that since you started implementing, now we should see this: it’s not that.

“I mean look at what government has achieved in rice production, what we are calling the rice revolution now: you can’t achieve that kind of thing in sugarcane or sugar production not because you don’t want to: you can plant rice twice in a year in many places in Nigeria. And if you have the mill and the mill depending on your capacity: the cost of rice mill does not even begin to scratch the surface of anything in sugar production.”

He added: “And to give you an idea, Mr. President commissioned the Sunti Sugar mill in March this year. It’s a factory that will produce just 50,000 tons of sugar and don’t forget, our journey is to about 2 million tons of sugar. That factory that will produce just 50,000 tons costs N50 billion and the bulk of the funds of course is on the machinery. And that was even before the devaluation of 2016: imagine what that kind of plant will cost with today’s exchange rate.

“So, very few people will go into our sector and so when people wonder why is it Dangote and a few… those are the only people that have the financial muscle to go into sugar production because it’s highly capital intensive.
“Not only that, how many people can muster that amount of money and wait for five years for it begins to yield? That’s another thing that makes it difficult to attract investors to the sector.”

The NSDC boss further identified smuggling as major constraint to the development of the sugar sector, stressing that operators were not able to sell because “smuggling has taken over their market.”

He regretted that the ban on sugar importation in past five years has had little or no effect as a result of the menace of smuggling to the economy- practically leading to loss of jobs.

According to Busari, Smuggling is taking up a lot of the market from our operators. We gave out about 1.55 billion metric tons of quota last year, but we added up what they have been able to import so far which is less than 800,000 tons, just a little around 50 percent. Why? Two major factors- sugar is there for them to import, but they are not even able to sell what they have produced because smuggling has taken up a lot of their markets.”

“Another one is the problem with the Apapa road and all the refineries operate at Apapa Tin Can axis and so they are not able to push out products and even the little they are able to push out, smuggling is not allowing them to sell.

“So, it’s a huge problem. And within the year, we did a number of things to combat it: apart from talking to customs and customs said they are trying the best they can because Nigeria has a long porous border.
“And I think Nigerians are not helping matters because all these smugglers are Nigerians not foreigners. So customs is doing its best, but apparently that best is not good enough.

“The impact of the ban on sugar in the last five years is almost zero,” he also explained.
Nevertheless, the NSDC boss said some achievements had been recorded so far with the programme now fine-tuned to delivery results.
“We are not where we are supposed to be and that clearly came out during the mid-term review held in June last year.

“And that’s why we have to now re-strategise and roll out new guidelines and also asked the PIP operators to re-submit commitments: so you can say that so far, this 2018 is the baseline for the next five years of the project that will take us to the ten-year programme that we set for ourselves.

“And what we have seen in this baseline year gives us a lot of cheer. We are very happy with the development. ”
However, it is therefore evident that the mode of intervention in the sugar industry may need to be reviewed including incentivising potential investors to make the industry more attractive.