Backward integration: Revisiting the sugar value chain

Nigeria imported N689.39 billion worth of sugar between 2020 and 2021. The breakdown of the import figure is as follows: N44.30 billion in Q1 2020; N43.27 billion in Q2 2020; N73.77 billion in Q3 2020, and N102.45 billion in Q4 2020, which amounted to N263.79 billion. In 2021, the nation imported N90.83 billion in Q1; N114.09 billion in Q2; N135.37 billion in Q3, and N85.31 billion in Q4, which amounted to N425.60 billion.

A decade ago, specifically in 2011, Nigeria expended N101.9 billion on the importation of sugar, signalling that between 2011 and 2021, Nigeria’s sugar import bill grew by an astonishing 577 percent.

Meanwhile, in September 2012, the Nigerian government, at the Federal Executive Council meeting approved the Nigerian Sugar Master Plan (NSMP) with implementation date set for 2013. A number of targets were set before the different agencies involved in its implementation of which the prominent ones were to raise local production of sugar for self-sufficiency, address the unbridled importation, create a huge number of job opportunities, and contribute to the production of ethanol and electricity generation.

The sugar value chain presents itself to Nigeria as a viable platform to address youth unemployment, climate change, and improved foreign exchange earnings

At this point in time, with almost a decade in the life of NSMP, what concrete results have been achieved? As of late 2021, the National Sugar Development Council (NSDC) put the total investment inflows into the sugar industry at N250 billion. One of the landmark investments in the sector was the recent acquisition of the defunct Nigeria Sugar Company (NISUCO) in Kwara State by the KIA Group. The KIA Group aims to produce 300,000 metric tons of sugar, refine 204,000 metric tons and with likelihood to generate N46 billion revenue as early as 2027.

Flour Mills of Nigeria, which owns the N50 billion Golden Sugar Estate in Niger State, has also concluded plans to construct another multi-billion-dollar sugar factory in Nasarawa State.

Just lately, Flour Mills of Nigeria completed the maiden training for farmers and communities involved in its out-growers’ scheme through which it plans to produce 150,000 tons of sugar annually. The motive behind the out-growers’ scheme is to convince the farming community that the sugar cane plant is both easy to grow and lucrative to boot.

According to the Observatory of Economic Complexity (OEC), Brazil accounted for 57.8 percent of the world’s sugar exports in 2020, translating to $7.5 billion. Thailand exported $927 million worth of sugar to account for 7.14 percent of the global exports; Australia, $716 million; India, $619 million, and Mexico, $408 million.

In Africa, Eswatini and South Africa led others with $374 million and $232 million worth of sugar exports, representing 2.88 percent and 1.79 percent of the world’s sugar exports.

In terms of imports, China led the chart as it imported $1.57 billion worth of sugar in 2020, which accounted for 12.1 percent of world’s sugar imports. Indonesia imported $1.3 billion; United States of America (USA), $1.19 billion; Bangladesh, $679 million; Algeria, $669 million; South Korea, $591 million; Malaysia, $559 million, and India, $493 million.

As the world’s population increases, the demand for sugar will increase. The global sugar demand is expected to rise from 185 million tons from 2021 to 206.6 million tons by 2027. Also by 2030, the world population is expected to rise to 8.54 billion people. Asia will be unrivalled with 4.97 billion people, representing 58.2 percent of the global population. Africa’s own population of 1.68 billion will be driven by population growth from Nigeria, Africa’s most populous nation.

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By 2029, Indonesia, China, United States, Malaysia and Korea will be the top users of sugar across the world, according to the projections made by the OECD-FAO Agricultural Outlook 2020-2029. This is just to establish that the opportunities in the sugar value chain are increasing.

But Nigeria needs to address the underlying and fundamental challenges of the sugar industry before the nation can enjoy some of the emerging opportunities in the global sugar industry. According to industry stakeholders, sugar is the most smuggled commodity into Nigeria after rice.

The sugar master plan is also challenged by limited funding, weak infrastructure, and insecurity as well as lack of political will. The challenges also include high transport and production costs.

The sugar value chain presents itself to Nigeria as a viable platform to address youth unemployment, climate change, and improved foreign exchange earnings. Nigeria must not miss these opportunities. This is because the industry, if and well fully nurtured, has the capacity to lift the country out of its current economic doldrums.