The average price of sugar in Nigeria has surged 41 percent in one year on FX scarcity, data from the National Sugar Development Council (NSDC) shows.
The average price of sugar rose by 44.2 percent to N835,400 per metric ton in July 2023 from N579,400 in the corresponding period in 2022, according to the data.
Nigeria imports about 98 percent of its sugar needs, with local production accounting for the remaining percent. Globally, sugar prices are surging as India – top grower and exporter of the commodity is grappling with drought, which has led to a drop in production, thus affecting supply.
The situation is worse for Nigerian consumers owing to FX volatility. The naira has depreciated by 61.4 percent against the dollar since the government floated its currency to unify the rates.
The naira exchanged for N747.87/per dollar on Monday from N463.38 as of June 13th, 2023 at I and E window. While at the parallel market, the naira depreciated by 20.1 percent to N917 on Monday from N762 in June.
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“Exchange rate is definitely the biggest factor. The rate at which the naira has weakened over the last year is almost double. Official rate a year ago was around N400, today, the official rate is over N700, that’s almost double,” Muda Yusuf, chief executive officer at the Centre for the Promotion of Private Enterprise, said.
According to the NSDC, the average price of sugar in the week ending July 29, 2022, was N579,400 per metric ton. Comparing this with the N835,400 per metric ton price in the week ending July 28, 2023, (which is the latest data at the time of writing), it had jumped 44.2 percent, a far cry from its value a year ago.
Also, seasonal/climatic conditions have inherently limited sugar production in other top sugar-producing countries: Brazil, Thailand, China, and the United States.
El Nino conditions set the stage for surges in global temperatures and disruptive weather and climate patterns. This can mean dry conditions in India, Thailand, Indonesia, the Philippines, and northern Australia, all major sugarcane-growing regions.These conditions have also impacted the prices of sugar globally.
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Ayodeji Ajilore, investment manager at ARM Investment Managers, said the surge in the global surgar price is largely tied to the dual concerns of demand and supply.
While demand has continued to rise as the global economy aims for pre-pandemic levels, the encumbrance coming from climate issues in India for one, has impaired the supply side of the balance.
“This coupled with the FX issues among other things has contributed to elevated ordering costs for firms that use sugar as input in their processes. Worth mentioning that this ordering cost is significantly FX dependent,” Ajilore said.
