• Thursday, March 28, 2024
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Apapa gridlock, smuggling dampen sugar sales in 2018

Sugar

The persistent gridlock in and around Apapa port environment and the high rate of smuggling of cheap unlicensed sugar into the country combined to affect the sales revenue of Nigeria’s top local sugar producers in 2018.

The three major sugar producers in the country are Dangote Sugar Refinery plc, a subsidiary of Dangote Industries Limited, Golden Penny Sugar, a subsidiary of Flour Mills of Nigeria (FMN), and BUA Sugar Refinery Limited.

Proceeds from Dangote Sugar’s sales dropped by 26 percent to N150.4 billion in 2018, from N204.4 billion in 2017, according to the company’s full-year 2018 financial report.
Similarly, Golden Penny Sugar’s sales declined by 13.5 percent to N9.6 billion in the first nine months of 2018, from N68.9 billion in the same period of 2017.

Dangote Sugar noted in an email presentation last week that its sales were affected by the challenges from illegal, low-quality imports which put pressure on its selling price and a traffic jam around its production site in Lagos which hampered delivery to customers.

Access roads to Apapa, Nigeria’s premier port, have been riddled with perennial traffic which continues to cause delays and add to the cost of doing business in the port city.
But not only Dangote – analysts in the consumer space said Golden Penny Sugar also faced similar challenges.

Ayorinde Akinloye, a consumer goods analyst at Lagos-based CSL Stockbrokers, said the influx of smuggled sugar into the country has negatively affected most sugar processing companies.
“A lot of these confectionery companies use these unlicensed sugars because it is cheaper. Dangote Sugar and Golden Penny are more expensive than those ones. And that is why Dangote had to cut prices last year,” Akinloye said.

“Also, smuggling and the Apapa gridlock were big issues for them last year. They had issues with their distribution network owing to the gridlock. So it affected distribution which also affected their volumes and sales,” he said.

Although Nigeria banned packaged-sugar imports to protect local industries and diversify the economy, importers take advantage of the nation’s porous borders to bring in the product.
“Apart from smuggling and the Apapa gridlock, the new challenge that we noticed is that some of the smuggled sugar will be re-bagged into Dangote or Golden Penny packages and sold. The money is not going into the producer’s pocket but they are selling it to the consumers as that,” Yinka Ademuwagun, a consumer analyst at United Capital, said.

Ademuwagun suggested that the Nigerian borders need to be tighter so that they will be less tolerant to smuggling.

Last year, Aliko Dangote, president of Dangote Group, urged the Federal Government to intensify actions against dumping of goods on Nigeria smuggled through the Republic of Benin. Also, FMN said it would partner with regulatory agencies to help curb smuggling.

Smuggling has always been an issue in Nigeria as it affects local production. It robs the nation of revenue and so affects provision of social services to entire community. Nigeria smuggles a lot of products such as textiles, sugar, pasta, vegetable oil, arms, ammunition, etc. And most of these items are banned in the country.

Dangote Sugar Refinery plc, the largest sugar refining company in sub-Saharan Africa, was founded in 2000. The company manufactures and sells refined sugar to consumers and industrial markets in Nigeria. Golden Penny Sugar Company was commissioned in 2013. Both firms are located in Apapa, Nigeria’s economic gateway.

As at the close of trading session yesterday, Dangote Sugar’s share price traded at N13.75 with market capitalisation of 165 billion on the Nigerian Stock Exchange (NSE). FMN traded at N17.00 with a market capitalisation of 69.70 billion. Golden Penny is not trading on the NSE.

BUNMI BAILEY