What private investments in sugar mean for Nigeria

The big pocket investor Dangote Group cheered the investment world last week when it signed a Memorandum of Understanding (MoU) with the Niger State government for the establishment of a N166 billion fully integrated sugar complex.

Africa’s richest man and president of the group Aliko Dangote said the project, when completed, would generate over 15,000 jobs in the state and bring about a complete economic turn-around.

The deal will see the company producing raw sugarcane on 16,000 hectares of land at Lavun Local Government through an out-grower scheme.

“The Dangote’s Integrated Sugar Project in Niger State will also include the establishment of integrated sugar mills, generate power, produce molasses, ethanol fuel, biomass and produce animal feeds,” Dangote said.

Dangote said his investment was informed by his company’s firm belief in the potential of the Nigerian economy, stating that the new outlay will add value and create jobs for Nigerians.

Sugar production in Nigeria rose from 13,488 metric tonnes per annum (mt) in 2015 to 25,000 mt in 2016, representing 85.34 percent increase over the period, according to the National Sugar Development Council (NSDC).

Consumption rose 4 percent to 1.56mmt in 2016 from 1.50 mmt obtained in 2015.

Most of the raw sugar needs are imported from Brazil. Sugar importation into the country between January and December 2016 was 1.55 million metric tons, amounting to $516.2 million in 2016. Per capita consumption in the country rose to 9.1 kg from 8.6kg and 8.7 kg in 2014 and 2015 respectively.

This shortcoming is what Aliko Dangote plans to stem, having pumped over N38billion into the Savannah Sugar Company Limited it acquired from government in 2003. Savannah Sugar, this year alone, has produced 20,000MT of raw sugar from its plantation.

Dangote has also signed agreements with various states with a view to ramping up backward integration projects.

Almost $3 billion are being pumped into sugar, with Dangote as the biggest investor.

Flour Mills of Nigeria’s Golden Sugar Company is pumping $300 million into the development of its sugar estate at Sunti. In fact, observers see Golden Sugar as a serious investor, considering the manner in which it has developed its sugar estate.

HoneyGold Group and Crystal Sugar Mills are investing $300 million and $30 million respectively to produce 200,000 mt and 60,000mt respectively.

Similarly, Confluence Sugar Company is investing $240 million in Kogi State to produce 200,000 tonnes sugar per annum on about 37,000 hectares of land at Ibaji.

BUA is also developing its nursery in Kwara State. There are other players who are investing vigorously in the industry.

What this implies for Nigeria is a gradual end to sugar importation, according to Latif Busari, executive secretary of the National Sugar Development Council (NSDC).

Nigeria mainly imports raw sugar from Brazil and then refines locally.  This has cost the country a lot in terms of foreign exchange.

For instance, Nigeria spent $516.15 million on sugar imports in 2016, $552 million in 2015 and $633 million in 2015.  This, to analysts, can only end if more attention is paid to backward integration.

Analysts underscore the importance of expanding the backward integration projects as this was the only way to ensure meeting the sugar sufficiency target in 2023.

Busari recently said that backward integration target was below average, but added that community strife and politics were affecting the policy.

The NSDC boss said BUA produced zero tonnes of sugar out of the 15, 600 metric tonnes of sugar the company promised to produce during the period under review, Dangote produced 20, 200 metric tonnes, being 28 per cent of the 72, 000 metric tonnes it promised to produce, while Golden Sugar produced 800 metric tonnes, being one per cent of the 57, 750 metric tonnes the company ought to have produced during the period.

 

ODINAKA ANUDU

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