A drop in the output of sugar in Brazil, the world’s biggest producer, could lead to price increases in the commodity in Nigeria, a BusinessDay investigation shows. Already, the price has risen by 25 percent, some consumers say.
Data from Rome, Italy-based Food and Agriculture Organisation (FAO) shows that its Sugar Price Index averaged 183.1 points in November, an increase of 7.7 points or 4.4 percent from October. That marked the third consecutive monthly gain by the index, it said.
The FAO attributed the three-month consecutive price increase to the low production output from Brazil, the world’s largest producer and supplier of the sweetener.
“The increase in sugar price quotations mostly reflects production developments in Brazil, where according to the latest estimates, sugar output in the Center-South region is heading to a 27 percent decrease from last year,” FAO explained.
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It added that the share of sugarcane used to produce sugar has fallen to 35.8 percent from 47.4 percent in 2017, with the bulk of the cane harvest directed to ethanol production.
“However, the cut in Brazilian gasoline prices last month prevented sugar prices from rising even further, by diverting some sugarcane away from ethanol production.”
The Central Bank of Nigeria (CBN) said in May last year the country imports $100m worth of sugar yearly.
Nigeria imported N45.7billion worth of cane sugar, meant for its sugar refineries from Brazil in the third quarter of 2018, the National Bureau of Statistics said in its foreign trade report for the period.
A 2017 United States Department of Agriculture Foreign Agricultural Service report said Nigeria’s sugar requirements are mostly met through imported raw sugar refined locally. Brazil is the largest supplier (over 80 percent share) with an estimated value at $500 million.
Nigeria has made efforts to raise local production of sugar, but these are yet to make impact on the level of imports of the sweetener.
“Even though there have been a lot of efforts from major sugar companies like Flour Mills of Nigeria, BUA Group, and Dangote Group trying to cultivate huge expanse of land for sugar production, they are yet to fully produce the sugar that we need, so they import,” Ayo Akinwunmi, Head of Research, FSDH Merchant Bank, said in a telephone interview with BusinessDay.
Emmanuel Ijewere, vice president of the Nigerian AgriBusiness Group (NABG) said that the low production volumes in Brazil are already having an impact on sugar prices in Nigeria.
“Brazil is having El Nino weather situation at the moment. As at today, the price of sugar is going up because of the reduction in the production capacity of Brazil.”
El Nino is a weather condition that alters the level of precipitation and temperature thereby disrupting output of agricultural commodities.
Consumers of sugar are feeling the impact on local prices.
Adenike Olaniyi, a Lagos-based businesswoman, confirmed that the price of sugar has risen in recent times. According to her a 250g of Dangote sugar which she used to buy for N200 now sells for N250.
Africanfarmer Mogaji, CEO of X-Ray Farms Consulting, said the price at which the country purchases sugar will be higher. “Indirectly, companies will not import like they used to before because they want to maintain profitability and the bulk of sugar is not consumed by people but by confectionaries, they are the ones that use it the most not the day to day consumers.”
BUNMI BAILEY
