BUA has 15,000 hectares of land in Lafiagi, Kwara State, but the company has only done little in terms of plantations and backward integration.
In 2008, BUA Group acquired Lafiagi Sugar Company from the federal government with a promise to build a refinery and conclude plans to make Nigeria a sugar-producing hub.
Twenty-three years before that transaction, the facility had been in the hands of Mehta Group of India, which, like BUA, failed in most of the agreements entered into with the government.
For many years, BUA did not develop the nursery, nor did it have plans to establish plantations or invest in backward integration projects from where it would source its raw sugar. Its plan has focused mainly on importation of raw sugar and refining it to make huge profits, while leaving the nation continuously dependent on Brazil and other countries for raw sugar.
Seeing the import-inclination of the likes of BUA, then-Minister of Trade and Industry Olusegun Aganga developed Nigeria Sugar Master Plan (NSMP) to chart a course for the industry.
In the words of Aganga, “The Plan has estimated that our demand for sugar would breach the 1.7 million metric tonnes (MMT) mark by 2020. To be able to satisfy this from domestic production, we will need to establish some 28 sugar factories of varying capacities and bring about 250,000 hectares of land into sugarcane cultivation, over the next 10 years.”
True, BUA has 15,000 hectares of land in Lafiagi, Kwara State, but the company has only done little in terms of plantations and backward integration.
This was why the Minister of Industry, Trade and Investment Adeniyi Adebayo visited BUA Sugar in Kwara State in December 2019, the outcomes of the visit were mostly promises – which the company has been dishing out since 2008.
“What we are trying to do is to produce not only plantation of raw sugar but also refined sugar. So, as you saw when we went round the factory, you will see that we have all the equipment for us to be able to complete this project by December next year, God willing. We have the equipment that will make us produce 10,000 tons per day,” Abdul Samad Rabiu, BUA chairman, had told the minister.
Fifteen months after the visit, the backward integration project is still at an inchoate stage, and no meaningful development and announcement have emanated from it.
The usual excuse for the likes of BUA is the emergence of COVID-19. But, was there COVID-19 between 2008 and 2019?
The reality is that BUA is taking advantage of poor monitoring of the Sugar Development Plan targets set for producers under NSMP to abuse the policy and ensure that the target is not achieved.
Despite that BUA’s work on its sugarcane plantation is still some way behind others currently, the company opened a new export-focused sugar refinery in Bundu Free Zone in Port Harcourt to perpetuate importation of raw sugar.
The company performed poorly in the backward integration objectives, yet it is requesting to increase its import quota of sugar in 2021 by 66.7 percent from 360,000 MT it was allocated in 2020 to 600,000MT.
In fact, as pointed out earlier, it took the company up to eight years to begin work on its Lafiagi site. Even at that, most of the work is at the nursery stage. Its 15,000 hectares of land are still fallow, with excuses of community conflicts, which other players also have.
The key question again is: should BUA be talking of sugar export when the country still has a huge supply-demand gap? In 2012 when the NSMP was developed, Nigeria only produced two percent of its sugar needs. Nine years down the line, the gap is still huge.
No doubt, the new export-focused sugar refinery by BUA is a good feat as it will create jobs for thousands of Nigerians and help the country earn the much-needed foreign exchange.
But the bigger question is whether Nigeria really needs to start exporting sugar at a time it still has a huge demand-supply gap.
Sugar consumption in Africa’s most populous nation has been declining since 2016 due to consumers’ health consciousness and low purchasing power. Yet, the country spends millions of dollars yearly importing the sweetener —a narrative NSMP was targeted to change.
Africa’s most populous nation spent a whopping N263.8 billion in 2020 importing sugarcane mainly from Brazil amid acute FX shortage, data from Nigeria’s Foreign Trade Report said.
The National Sugar Development Council (NSDC), in its midterm 2017 review of the three sugar-producing companies, scored Golden Sugar Company – owned by Flour Mills 58 percent in its assessment, which was higher than the other companies reviewed.
Flour Mills-owned Sunti Sugar Estate is considered the most productive backward integration programme in the industry.
This is not surprising, considering the level of investments made by FMN in the last three years.
Nigeria President Muhammadu Buhari commissioned FMN’s N50 billion Sunti Golden Sugar Estates in March 2018, featuring 17,000 hectares of irrigable farmland and a sugar mill processing 4,500 metric tons of sugarcane per day.
At full capacity, the estate can produce one million tons of sugarcane with roughly translates into 100,000MT of sugar yearly.
Dangote scored 45.8 percent in the target 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.
Dangote Group, which operates Savannah Sugar, is investing $3.8 billion in sugar and rice and promises to produce enough sugar to satisfy the country’s demand in 10 years.
Latif Busari, former executive secretary of NSDC, had revealed in the mid-term review that BUA produced zero ton of sugar out of the 15, 600 metric tons promised by the company during the period under review.
Dangote produced 20, 200 metric tonnes, being 28 percent of the 72, 000 metric tons it promised to produce, while Golden Sugar produced 800 metric tons, being one percent of the 57, 750 metric tons the company ought to have produced during the period.
BUA’s lackluster performance in the NSDC performance review document is a testament that the company is abusing the backward integration policy for its gain and not for economic growth.
To curtail Nigeria’s heavy import reliance and reduce the deleterious effects of excessive sugar importation, the Federal Government, in 2012, introduced the NSMP as a policy roadmap for attaining self-sufficiency in sugar production.
Under the NSMP, investors would make sizeable investments in the industry within 10 years to guarantee self-sufficiency in the production of the sweetener.
In return, investors in the sugar industry who participate in the backward integration programme will receive incentives in form of a five-year tax holiday, a three-year concessionary import duty tariff of five percent, with a five percent levy, on imported raw sugar for their refineries.
The Backward Integration Policy (BIP), which is a crucial aspect of the NSMP, was introduced as a way of harnessing Nigeria’s sugarcane resources, creating jobs and a ready market through the value chain, while bridging the country’s 1.7 million metric tons of sugar demand.
Through NSMP, Nigeria has begun boosting its sugar production steadily while gradually reducing the importation of the commodity.
Africa’s biggest economy now produces an average of 16,791MT of raw sugar per annum since the NSMP took effect, according to the analysis of National Sugar Development Council (NSDC) data. But this is down to the progress made by Golden Sugar and Dangote Refinery – as earlier acknowledged by the Sugar Council.
Checking Abuse, Making NSMP a success
Experts believe that the NSMP is going to liberate the country’s economy for heavy import reliance as sugar remains the second most imported agricultural commodity after wheat in the country.
However, they stress that the policy must be well implemented for it to be successful and translate to economic growth.
According to them, allowing saboteurs to abuse the policy will not only pose threat to the sugar industry but other commodities where the BIP is replicated.
Hence the federal government must go back to the Sugar Plan and monitor the level of backward integration progress made by each company.
Henceforth, allocation of raw sugar importation should be done on the basis of progress done in backward integration programme. Companies that have nothing on ground should get little or no allocation for raw sugar imports, while those making investments in BIP projects should be able to bring in sugar for refining.
This is not a strange model. It worked in the cement industry, which has made the likes of BUA Group a conglomerate today. The then President Olusegun Obasanjo granted Dangote and Lafarge import allocations based on their BIP projects. The advantage of the policy was that it forced all the players to invest in its own raw materials locally, which is the summary of what backward integration entails.
Nigeria still has a long way to go before it attains self-sufficiency in sugar production. However, with the right investment and effective monitoring of the backward integration, the country can become a net exporter of this commodity and a key player in the global market.
Exporting refined sugar may look economically sound and can tempt policy makers due to the FX-earning opportunity, but it is like robbing Peter to pay Paul as the same FX would still be used to import raw sugar. Who then gains from the whole transactions?
This article was sponsored by Mr. Ojewale. See our editorial policy to learn more about how we treat commercial content.
SOURCE: PEOPLES GAZETTE
Leave a Reply