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Lessons Nigeria can learn from Brazil’s ethanol opportunity in sugar

Brazil’s ethanol opportunity in sugar
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The impact of Nigeria’s lack of capacity to produce a self-sufficient amount of sugar is not totally captured by ample foreign exchange expended on importation. The capacity dearth also manifests in the opportunities Nigeria loses in areas like ethanol production, a biofuel alternative to petroleum, which demand is also on the uptick.
Just as Nigeria’s sugar supply deficit positions it as one with the largest annual import bill of approximately $100 million in sub-Saharan Africa, ethanol appears worse on the record, gulping about $480 million annually on importation.
Ethanol in Nigeria has recently received more attention from a number of private investors focusing on the establishment of plants, and has boosted efforts in the production of cassava, which serve as the predominant source.
Yet, local ethanol production barely hovers over 4 percent of total demand. Nigeria’s sugar output, on the other hand, accounts for 7 percent of its demand, estimated at 900,000 tons.
The meagre local production of ethanol does not equally have it smooth as private players also complain their capacity is limited by the poor supply of cassava.
With these issues, the need for Nigeria to achieve its Sugar policy goals becomes expedient not only to whet the appetite for the sweetener but also necessary to diversify the resource-base for ethanol production through sugar.
The policy highlights the need to establish about 28 sugar factories of varying capacities and bring about 250,000 hectares of land into sugarcane cultivation by next year. The bulk of the investment capital will come from private investors. Government has yet to deliver on this mandate among several others outline to achieve import substitution.
However, a Financial Derivatives Company, an integrated research firm’s analysis of the opportunities in sugar production despite health driven decline in consumption, shows Nigeria has bright prospects of achieving economic diversification in the non-oil sector if it will adopt Brazil’s style of capitalising on sugar in leading the world ethanol market.
Brazil, a leading producer of sugar, has relied on its export earnings from sugar for over five decades. Its output has more than doubled from 122.08 million metric tons in 1965 to 671.4 million metric tons in 2009, fetching the country revenue of approximately $10 billion annually.
Sugar production for ethanol has helped Brazil to remain relevant, producing more than 30 billion litres between 2015 and 2016. Projections further show that Brazil’s annual ethanol capacity could be on track for over 50 billion litres by 2030.
Brazil somewhat compares with Nigeria in terms of it has used agriculture to absorb oil price shock. After the oil price shock of 1973, the South American country, sugar cane became the country’s main agricultural crop, serving as the feedstock for ethanol refineries. In the last two decades, renewable liquid fuel became a replacement for gasoline in powering internal combustion engines.
Nigeria’s current challenges with sugar and ethanol output were once Brazil’s major bone of contention. But Brazil successfully confronted its problems, protecting its sugar industry.
In 2017, the Brazilian government introduced the RenovaBio programme to encourage ethanol producers. The program is expected to double the use of ethanol by 2030 from its current level of 26 billion litres by fuel distributors.
The programme is structured to reward producers who invest in manufacturing clean biofuels, encouraging fuel distributors to buy the clean biofuel produced through a credit-trading programme.
FDC sees this project being useful in modifying the Nigerian Sugar Master Plan, with the structure expected to attract new investment in the ethanol sub-sector.
Another lesson herein for Nigeria is how Brazil handled the concern of biofuel expansion diverting land meant for food production towards energy processing.
The expansion of Brazil’s ethanol output resulted in 14 percent of total agricultural land in the country being used to grow sugarcane. However, the boost in Brazil’s ethanol output in the last two decades has not resulted in a drop in the country’s food production.
“The replication of the Brazil model would require a substantial amount of land space in order to attract investors. It is important for the Nigerian government to engage communities on the long-term benefits of sugar plantations in the Nigerian economy,” FDC said.
“This would help to reduce the clashes between the government and local people who lay traditional claim to the land and often demand compensation ahead of land development. Compensation for affected families can also be used to encourage them to release the land to the government and prevent disputes.”
Ethanol can either be produced by direct fermentation of cassava, corn, cane juice or any agricultural product that has starch contents, which is a by-product of the sugar manufacturing process.
In Nigeria, ethanol is majorly produced from cassava whereas, in India molasses is used and mills in Brazil produce ethanol directly from sugarcane juice. Ethanol can be raw material for potable alcohol industry, chemical industry and as a biofuel in vehicles.
Allied Atlantic Distilleries Limited, manufacturers of ethanol in Africa, targets an expansion of their plants which will see its production capacity of Extra Neutral Alcohol (ENA) surge to 22 million litres before 2025.
As part of its backward integration drive, leading distiller firm, Euro Global Food and Distilleries Limited, a member of Sona Group of Companies has also completed a critical phase of its $3 billion Ethanol plant.

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