Nigeria’s ambition to quit being a net importer of sugar and becoming a major producer could remain a mirage, if the country continues to fail in effectively monitoring key deliverables in its backward integration policy for the sector, BusinessDay findings show.
The Nigerian sugar industry receives billions of naira in annual incentives in form of tax holidays, crop loans, tariffs and import quota among others, and in return, players are expected to make sizeable investments.
Also, sugar producers are expected to meet up with the following key deliverables: setting up sugar processing mills, investing in sugarcane cultivation, creating out-grower farms, producing raw sugar and creating jobs within 10years to guarantee self-sufficiency in the production of the sweetener.
Nine years after the Nigerian Sugar Master Plan (NSMP) was initiated, the country is yet to make any significant progress in sugar production, with local output accounting for only two percent of total demand.
“The sugar backward integration policy is yet to make substantial impact owing to poor monitoring by the regulatory body,” said a commodity expert who does not want his name to be mentioned on print.
“Some sugar players are leveraging on regulatory lapses to sabotage the policy to make quick gains while bleeding the national economy,” he said.
“If we are serious about boosting sugar production and creating jobs through the industry, the government must ensure effective monitoring of key deliverables and enforcement of sanctions for violators,” he added.
The backward policy is a critical part of the National Sugar Master Plan (NSMP), which was initiated in 2012 to harness Nigeria’s sugarcane resources, creating jobs and a ready market through the value chain, while bridging the country’s estimated 1.7 million metric tons of sugar demand.
Weak monitoring of key deliverables by the NSMP watchdog, BusinessDay learnt has enabled sugar producers to take advantage of the policy for their interest and not for Nigeria.
The problem with NSMP is not in its design and structure but in its lack of effective monitoring of sugar producers in the country that has made some players exploit the faults in the policy to make quick gains, experts say.
Despite carrying out a midterm review in 2017 of the three sugar-producing companies, the National Sugar Development Council (NSDC), appears to have failed to take any strategic actions against producers that fell short of key deliverables for the period.
In the review, Sunti Golden Sugar Company – owned by Flour Mills had a score of 58percent, higher than any other company reviewed for the period. 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.
However, the appraisal does not appear to have served as a push for players to ramp up on operations to meet, and even surpass targets for Nigeria to become self-sufficient in sugar production. Some industry watchers have also said that as it is cheaper to import the sweetener than to produce it locally, some companies have resorted to this instead of developing the local value chain.
“The backward integration policy in sugar has not made significant progress owing to a combination of factors,” Ayorinde Akinloye, investment analyst, United Capital said in a response to questions.
“Funding is a major issue for sugar players. It cost sugar makers four times more of the amount that was supposed to use in completing their projects when they signed the BIP document in 2012 owing to FX volatility,” Akinloye said.
He added that weak monitoring by the government has made some sugar manufacturers not fully committed to the policy.
Nigerian naira has continued to lose its value amid acute FX shortages that hit Africa’s largest economy, he stated.
According to data from the NSDC, Sugar production in Nigeria has risen from 6,843 metric tons (MT) in 2012 to 38, 597 MT in 2019. Similarly, importation cost of raw sugar has reduced from a record $517 million in 2012 to $382.29 million in 2019.