ANALYSIS: Why Nigeria’s Sugar Master Plan must not be scrapped

The Nigerian Sugar Master Plan (NSMP) appears to have run into some form of controversy recently over the feud among sugar producers in the country.

NSMP was introduced in 2012 by the Nigerian government as a policy roadmap for attaining self-sufficiency in sugar production and to chart a course for the industry.

Nine years after, the country has made some appreciable level of progress in the industry. Sugar production in Nigeria has risen from 6,843 metric tons (MT) in 2012 to 38,597 MT.

Similarly, importation cost of raw sugar has reduced from a record $632.72 million in 2014 to $382.29 million in 2019, according to the National Sugar Development Council (NSDC).

The Sugar Master Plan has since produced Golden Sugar Company and Sunti Golden Sugar Estates – both of which were merged by the parent company, Flour Mills of Nigeria, in 2019.

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The company has invested N50 billion in sugar plantations in Sunti, Niger State, featuring 17,000 hectares of irrigable farmland and a sugar mill processing 4,500 metric tons (MT) of sugarcane per day.

At full capacity, the estate can produce one million tons of sugarcane which roughly translates into 100,000 MT of sugar yearly.

Before the merger, the Sunti Golden Sugar Estates had achieved its first development target of reaching 2,836 hectares of land under cane in July 2018.

It had also completed the construction of three drain pump stations with the heightening and strengthening of dyke along 10 kilometres on the North-Eastern side of the recurrent challenges of flood.

The sugar investment was commissioned by Nigeria’s President Muhammadu Buhari in March 2018 as a testimony that the sugar roadmap was working.

Currently, hundreds of workers are engaged at the plantations and other segments of the value chain, reducing unemployment in the country.

According to the Manufacturers Association of Nigeria (MAN) data, more than 80,000 jobs were created by manufacturers between 2016 and 2019, and Golden Sugar was one of those who led the job revolution.

The Sugar Master Plan has also produced Dangote Sugar, which in 2019 set aside N106 billion for investment in the sector in six years. Twenty percent of the fund was to come from equity, while the sugar factory was expected to produce 130 million litres of ethanol.

As at 2017, Dangote Sugar had pumped about N101 billion into equipment purchase, land studies, and survey, sensitisation campaign for the local communities, rehabilitation, and expansion of Savannah Sugar company.

This provides evidence that the Sugar Master Plan has supported the country’s quest for a virile sugar industry, and any interruption to this process would scuttle most of the ongoing backward integration projects initiated and executed by the companies.

Africa’s most populous country must learn from precedence and success stories from other climes. South Africa introduced a sugar master plan in 2020 after sugar imports devastated local manufacturers and upended expectations.

South African Sugar Association (SASA) executive director Trix Trikam said in December 2020 that the players were concerned about high volumes of sugar imports from Eswatini.

“India and Brazil have continued to be the main non-African countries importing sugar into South Africa. These issues are being addressed through the recently signed Sugarcane Value Chain Master Plan to 2030,” Trixam said, as reported by Independent Online.

Though sugar had been in Brazil as far as the 16th century, the 20th and 21st century Brazil has a plan that guides production, imports, and exports.

From the plan, the world’s second-largest sugar producer provides incentives such as North-East Sugar Grower Subsidy, Interest Rate Subsidy, Sugar/Ethanol Arbitrage Opportunities, and Economies-of-Scale from Government-Created Ethanol Markets, among others, to local producers.

As a result, the country has made remarkable progress. Sugar production in Center-South Brazil between the start of the 2020/21 season on April 1 (2020) and January 16, 2021, reached 38.19 MT, up by 44.2 percent, according to data from trade association UNICA in late January 2021.

The South American country earned over $8 billion from sugar alone in 2018/19, even with a 24 percent decrease in production.

That is three times Nigeria’s earnings from all of its non-oil export products in that year. About 1.2 million Brazilians work in sugarcane plantations and this number triples when the processing and refining segments are factored in.

“Nigeria should learn from Brazil, how it grew its agriculture by stimulating value addition and local demand for its agro commodities,” said Babatunde Shodipe, senior manager-export development financing, African Export-Import Bank (Afreximbank), at a 2019 First Bank agribusiness summit.

An important question for Nigeria’s policy-makers is, why did India recently overtake Brazil -world’s largest sugar exporter? The answer can be found in India’s clear-cut plan which incentivizes sugar production.

As of 2018, India was tapped to churn out a record sugar production of about 35 million tonnes in 2018/19 year starting in October.

The essence of a sugar master plan is to provide a strategic plan for growth and development of the industry.

The problem with NSMP is not in its design and structure but its lack of effective monitoring of sugar producers in the country.

Experts attribute some of the loopholes found so far to implementation of NSMP by the watchdog, as well as lack of commitment in the implementation of the policy by some players.

Weak monitoring of key deliverables by the NSMP watchdog has enabled sugar producers to take advantage of the policy for their interest and not for Nigeria.

The National Sugar Development Council (NSDC) in its midterm 2017 review of the three sugar-producing companies scored Golden Sugar Company – owned by Flour Mills 58percent in its target set. This was higher than any other company reviewed.

Flour mills’ owned Sunti Sugar Estates is considered the most productive backward integration programme in the industry.

Dangote scored 45.8 percent in the targets set in the backward integration plan, including several projects, new sugar factories, land developed, land under sugarcane, out-grower farms, sugar produced, and job creation, while BUA scored 17 percent.

Despite carrying out a mid-term review of the three main sugar-producing companies, NSDC failed to take any strategic actions against producers that fell short of key deliverables target for the period.

This action by NSDC created a window for integrating the policy for its gain and not for economic growth.

The Backward Integration Policy (BIP), which is a crucial aspect of the NSMP, has helped Nigeria to harness its sugarcane resources and create thousands of jobs it could have exported if the country had failed to tap into the production of the sweetener.

The three main sugar producers have created over 50,000 jobs since the BIP took effect in the sugar industry.

Smallholder farmers in major producing states, who abandoned growing sugarcane to cultivate other crops of higher demand, are now returning to the production of the commodity since the BIP was introduced in the sugarcane value chain.

It is believed with sustained investments by sugar producers under the backward integration policy, Nigeria would become the leading grower of the commodity in West Africa and among top producers in the continent within a matter of time.

The Manufacturers Association of Nigeria (MAN) and the Lagos Chamber of Commerce (LCCI) have both tapped policy inconsistency as a major hiccup to industrial development in Nigeria.

Typical examples of areas where policy inconsistencies have impacted negatively are automotive industry and the Export Expansion Grant. The sugar industry should never suffer such a fate as that will take Africa’s biggest economy 10 steps backward.

With the recent appointment of Adedeji Zacch as the executive secretary of NSDC, the country is on course to drive the Sugar Master Plan.

Adedeji’s proven track record of over 15 years of hands-on executive experience in strategy, accounting, financial management, financial analysis/reporting, internal controls, change management, and people management will be crucial in chatting a new course for the NSMP.

Industry players believe that he will sustain the NSMP and all the efforts made in the last nine years to place the country on the path of sugar development.