Positioning Sugar Industry to Boost Economy

James Emejo writes that the federal government must enhance its support for the sugar sector in order to harness its huge potential as major source of foreign exchange as well as key employment generator in the country.

In September 2012, the Federal Executive Council (FEC) approved the Nigerian Sugar Master Plan (NSMP) including a regime of fiscal and investment incentives to provide a conducive environment for its implementation.

This was to reduce the country’s overreliance on importation to meet local consumption needs and reduce pressure on foreign exchange. Apart from this, the country has the capacity, if well harnessed, to meet the sugar needs of other neighbouring countries, thereby earning foreign exchange from export of the commodity.

Also, amidst the current unemployment challenges confronting the government, liberating the sugar sector will open up immense employment opportunities for Nigerians
The NSMP, designed by the Nigerian Sugar Development Council (NSDC), which has the mandate to accelerate the development and growth of the local sugar industry to achieve national self-sufficiency – presented a road map to help the country’s sugar sector transform into a world class multi-product sugarcane industry as well as rank Nigeria as one of the top 20 economies in the world by the year 2020 in line with the federal government’s Transformation Agenda.

Rationale behind sugar policy
Essentially, the sugar master plan seeks to among other things boost local production of the commodity to meet consumption demand locally and export to earn foreign exchange.
According to statistics from the Central Bank of Nigeria (CBN), sugar importation costs the country a whopping $1 billion annually, a situation which exerts undue pressure on the country’s fragile external reserves with all the attendant economic implications.

Although the Nigerian sugar industry was first established in the 1960s, it was only able to meet about two per cent of the country’s requirement despite its comparative and competitive advantages for sugar production, leading to annual losses in foreign exchange, as well as loss of millions of employment opportunities for skilled and semi-skilled labour and food insecurity from sugar import dependence.

The plan essentially sought to reverse the lackluster performance of the sector and urgently provide complementary investments in sugarcane plantations and entire sugarcane value chain in order to gain maximum benefits from the industry. It was particularly expected to halt the continued importation of raw sugar. Specifically, the NSMP aims to boost local production of sugar to attain self-sufficiency and reduce the tide of unbridled importation, create job opportunities and contribute to the production of ethanol and generation of electricity among others.

The plan estimated the country’s demand for sugar would breach the 1.7 million metric tonnes (MMT) mark by 2020 and stated that to be able to satisfy the huge consumption demand from domestic production, about 28 sugar factories of varying capacities needed to be established as well as bring about 250,000 hectares of land into sugarcane cultivation over the next 10 years while the bulk of the investment capital requirement is expected from private investors.

Backward Integration Programme
The sugar master plan also came with a BIP policy which is an import substitution strategy adopted by import-dependent countries to rapidly domesticate production of commodities for which they at least possess comparative advantage and/or whose continued importation is considered inimical to the economic well-being of the country. This was part of an array of policy instruments comprising mainly of fiscal incentives and tariff put in place by the government to incorporate global best practice in the industry as well as refocus a better funded Sugar Levy to provide the funds required for the execution of the much needed Research and Development (R&D) studies and essential infrastructures, all of which are designed to not only attract new investors but also protect both existing and new investments in the sector.

The companies granted approval for importation of sugar under the policy incentives are expected to immediately commence investing in backward integration projects and refineries are expected to begin sourcing their raw sugar requirement for their local production within three of plant commissioning.

NSMP implementation report
It is obvious that the master plan has recorded huge successes and challenges since the implementation commenced seven years ago. The increased number of major investors in the space as well as the resources so far committed to the sector by the private sector players showed that with faithful implementation, the country’s aspiration towards becoming a sugar sufficient country can be actualized.

Only recently, the Executive Secretary, National Sugar Development Council (NSDC), Mr. Zacch Adedeji, while giving an update of the NSMP said the implementation of the plan had attracted investments worth over N200 billion, especially through the commitment to the objectives of the BIP, adding that more investors have also expressed their willingness to commit their resources to development the sugar sector.

The 10-year sugar roadmap, now in its seventh year of implementation had been anchored on four major planks; to attain self-sufficiency in sugar production, stem the rising tide of sugar importation, create jobs for Nigerians and contribute to the production of ethanol and electricity generation.

Adedeji, also hinted on the emergence of a new entrant into the industry – KIA Group Africa, which had recently completed the process of acquiring the defunct Nigeria Sugar Company (NISUCO) in Bacita, Kwara State. The KIA Group now joins existing major industry players including the Dangote Group, BUA Group and the Flour Mills to drive the BIP component of the NSMP.

The NSDC boss further disclosed that the KIA Group, had already sets its eyes on producing at least 300,000 metric tonnes of sugarcane, refining an estimated 204,000 metric tonnes of the sweet commodity, and generating N46 billion revenue by 2027, in additional to a workforce of about 20,000 employees which would be engaged to drive the company towards optimum production and ensure economic growth of the country.

He also said the Flour Mills Nigeria Limited recently signed a multi-millionaire agreement with the Niger State government to build a factory in Toto, Nasarawa State, pointing out that the new project is in addition to the company’s N50 billion Golden Sugar estate in Sunti Niger, which was commissioned in 2018 by President Muhammadu Buhari.

Adedeji, who insisted that the NSMP remained on course despite current limitations, reiterated the federal government’s commitment through the council to building a globally competitive sugar industry that would boost local economy, provide jobs for Nigeria’s teeming youth population and position Nigeria as a net exporter of the commodity.

He said, “We at the council aren’t resting on our oars in our resolve to revitalise the nation’s sugar sector as we have continued to come up with sound measures and strategies that would accelerate our drive to attain sugar self-sufficiency.”
“Without doubts, the sector has, even amidst natural and man-made challenges recorded some milestones, especially as it relates to attracting genuine and profitable investments to the once moribund sugar industry.

“We are not going to rest on our oars as an agency of government. We are quite determined and hopeful in our mission to turnaround the fortunes of the sector for the overall benefit of our dear country and citizens. The sugar sector holds enormous opportunities for Nigeria, Nigerians and even our foreign partners. The sector has and always enjoys the support of President Muhammadu Buhari.

“He has in more ways than one charged stakeholders in the sector to come forward with solution and result-driven measures that would fast-track our activities in the sector in our determination to make Nigeria a notable producer of the commodity within the continent.”

Challenges

According to Adedeji, despite the progress so far recorded in the sugar master plan initiative, operators are largely faced by their inability to access the required foreign exchange to import their machinery to set up their plants, pointing out that some sugar investors who opened a letter of credit for the purpose of brining in their machinery were yet to get foreign exchange 90 days after they had initiated the process.

He also said the existing challenges in acquiring land for cultivation of sugar estate was affecting the development of the industry, pointing out that less than 100,000 hectares of land are presently under acquisition compared to 250 hectares required to fulfill the NSMP.

According to him, even if the whole 100 hectares were to be fully cultivated, the country would still not achieve 1.7 million metric tons target.
Other limitations to the implementation of the Plan had been the adverse impact of the COVID-19 pandemic which slowed work progress on existing sugar estates, though the industry had shown some resilience, the wanton destruction of sugar farms by floods in recent times as well as the dearth of infrastructure in the sugar sector. The Council has had to also contend with operators who tended to compromise the NSMP implementation through their actions.

Master plan Timeline

Following the setback recorded in the implementation of the sugar policy Adedeji, had hinted on plans by the federal government to extend the implementation of the NSMP) which has been in operation for seven years, pointing out that if the country must achieve self sufficiency in sugar, “We would have to extend the implementation period if we would actually achieved that”. Specifically, he noted that despite attracting investments worth over N200 billion in the sugar industry since the plan was launched, there had been drawbacks, which would hamper the actualisation of the initial targets.

He identified the challenges to include the current predicament in procurement of foreign exchange required by sugar companies to import equipment and machinery to set up.
He gave an instance where one of the major operators in the industry had attempted to open Letter of Credit (LC) in the last 18 months without success.

The NSDC boss, nonetheless, said despite the challenges, the implementation of the plan had awakened government’s consciousness in reassessing the actual requirements for the attainment of self-sufficiency in sugar production in the country.

He said if the country is able to achieve success in the implementation of its Backward Integration Programme (BIP), it would have the capacity to bridge about 11 million metric tons shortage of sugar in Africa adding that there had been deliberation by the council in the past three years towards reviewing current assumptions on the NSMP and “whether that is what is required of not”.

Only recently, Adedeji, had urged investors in the country sugar industry to remain committed to the faithful implementation of the BIP this remained crucial to the attainment of self-sufficiency in sugar production and job creation.

According to him, the BIP roadmap constituted a major component of the NSMP, which has the capacity to tackle the soaring unemployment level and address other socio-economic issues currently bedeviling the country.

The council in August 2020, raised the alarm that the N60 billion sugar investment project in Sunti Golden Sugar Estate (SGSE) had been threatened by floods occasioned by the sudden release of water from the Kainji Hydro Power Dam in Niger State.

The sugar project is owned by the Flour Mills Nigeria Limited, which is one of the three major players currently implementing the BIP. The floods, which reportedly swept through the sugar estate, destroyed flood protection dykes, factory equipment and submerged, cane fields, pulling down office and residential buildings and halted activities at the estate.

Boost to sugar infrastructure
However, relief came the way of sugar sector operators with the recent inauguration of a $73 million- infrastructure intervention project by President Muhammadu Buhari, to drive development and accelerate the growth of the sugar sub-sector.

The move was in line with the federal government’s determination to diversify the base of the economy through the formulation of favourable policies, provisions of technical support, creation of a business-friendly environment and provision of incentives to attract more investments into the industry.

The president, at the formal commissioning of the “Presidential Intervention on Irrigation Infrastructure to Accelerate Sugar Backward Integration Programme Projects”, the goal of the intervention was to support the development of irrigation infrastructure on 10,000 hectares of sugar plantations located at six Backward Integration Programme (BIP) sites.
These included Numan-Adamawa State; Sunti-Niger State; Lafiagi-Kwara State; Bacita-Kwara state; Toto and Tunga-Nasarawa State.

Buhari, stressed that the objective of the programme was to significantly improve the country’s performance on cane yields as well as reduce the negative impacts of the COVID-19 pandemic on the industry’s progress in achieving self-sufficiency.

He pointed out that the strategic intervention would also enable the country’s leading sugar producers namely Dangote, BUA and Flour Mills to expand capacity and capitalise on the import substitution opportunity within the sugar market to further reduce the country’s import bill.
Buhari said, “The implementation structure considered enhancing rural jobs and hence the recommendation that 10 per cent of the total allocation to each BIP operator would be reserved for sugarcane out-grower farmers within the community.

However, Adedeji, on his part, explained that the intervention was part of government’s determination to provide an enabling environment for private investments to thrive and flourish in the country.

He said, “Preliminary activities, including identification of the specific project sites for each operator which include framework for design and engineering services for the in-field and bulk water supply systems, project management and maintenance specifications, adoption of a business model and costing, among others have been concluded long before the formal commissioning of this laudable initiative”.

Determination to Actualize NSMP

According to Adedeji sugar sector operators should be mindful of engaging in practices that could jeopardise the whole policy, adding that for the NSMP to be successful, operators needed to carry out their activities in strict compliance with the provisions of the master plan.

He said without doubt, the country had all it requires to become a top player in the league of sugar producing nations, noting that the council is making efforts to address challenges which had incapacitated the sector over the years and remarked that the council was aware of some operational challenges that operators are confronted with in their efforts to fulfill their own part of the bargain.

He assured that government would continue to offer the operators necessary technical assistance and policy support to enable them overcome most of these challenges.
The NSDC boss said the council as a responsible and responsive agency of government is committed to delivering on its core mandate, which hinges largely on attaining self-sufficiency in sugar production for local production, and subsequent export.

He said: “The federal government is serious and determined to realise its objectives as far as the sugar sector is concerned. We hope to be the largest exporter of sugar in Africa in the nearest future. To achieve this lofty goal, we must all roll up our sleeves and accord priority to our backward integration programme, which is the bedrock of our mission as an agency of government.

“Only recently, the Central Bank of Nigeria said it would soon begin to restrict access to foreign exchange to producers of some commodities in the country, including sugar. This is clearly an indication that government cannot continue to expend its scarce forex on things that we have all it takes to produce locally. Let’s take this as a challenge and work towards ensuring that the BIP policy succeeds for the benefit our dear country”.