Gain Report - Nigeria: Sugar Annual

Report Highlights:

Nigeria depends almost exclusively on sugar imports in the form of brown sugar, largely imported from Brazil (98 percent) despite privatization of all government -owned sugar resources. The Nigerian sugar industry has been reinvigorated by privatization; however, production remains insufficient to meet Nigeria’s consumption needs. Sugar refining has flourished as new entrants increased competition in the sugar industry and refining capacity is estimated at 2.1 million tons while total demand is estimated at 1.45 million tons. The five percent duty on imported raw sugar continues to promote expansion and new investments in refining capacity, but not production.

Executive Summary

In order to improve Nigeria’s sugar subsector, the Nigerian government (GON) decided to privatize all its sugar estates. The National Sugar Development Council (NSDC) was set up in 1993 and its first task was to arrange the privatization of the country’s nationalized sugar companies. The rehabilitation of the estates has been very slow due largely to the huge capital required and lack of electricity/power to run sugar mills. The privatization process was completed in 2008 and the NSDC next aims to implement an out-grower program that will eventually run in all 14 sugar producing locations in the country. However, to date, the program has only been launched at the Savannah Sugar Company Limited, which is currently the only sugar producer in Nigeria, and also at Josepdam Sugar Company. The rehabilitation of the other sugar estates is at various stages of development.

Nigeria’s sugar requirements are mainly met through imports of raw sugar from Brazil (95%) that is refined locally. Currently, there are only two major companies refining sugar in Nigeria: Dangote Sugar remains the dominant player with an installed refinery capacity of 1.44 million tons; followed by the BUA Group with a capacity of 720,000 and they are also working on regenerating the infrastructure at Lafiaji in Kwara State; Flour Mills of Nigeria is doing the same in Sunti and has a second refinery coming on line in June 2012. The combined refinery capacity to date is 2.3 million tons of sugar per year, far exceeding national consumption needs estimated at 1.45 million tons. Despite the overcapacity, it is reported that two other investors are planning on establishing addition sugar refineries, potentially with the aims at export markets.

Because of Nigeria’s beneficial tariffs on raw sugar (subject to a duty of just 5% and exemption from the development levy) about 98 percent of all imports come in the form of raw sugar and refined locally while the remainder is imported is refined sugar.

Exchange Rate: $1 = 158 Naira

Commodities; Sugar, Centrifugal

Production

Nigeria’s domestic sugar production in MY2012/13 is forecast at 65,000 tons (raw value), up from the estimate 60,000 tons in MY2011/12. Dangote-owned Savannah Sugar has completed the first phase of its rehabilitation program, with about 6,700 hectares of newly planted sugar cane fields. Josepdam Sugar Company has embarked on an aggressive nursery establishment to produce enough sugar cane seeds for field expansion. Currently it has 1,250 hectares of seed cane; however, the available raw material is not adequate to start operations. It is expected that milling operations will begin during MY2012/13. Other sugar estates are in varying stages of rehabilitation. For example, Golden Sugar Company (Sunti) owned by Flour Mills of Nigeria (FMN) has developed 2,000 hectares of land and planted over 1,000 hectares of sugarcane (which uses a center-pivot irrigation) but also are not at the minimal level for the milling stage.

FMN also expects to start milling at a second refinery in Lagos during June 2012, but will utilize imported brown sugar.

Savannah Sugar reported a decrease in sugar cane yield from 66 tons per hectare in 2011/12 to 60 tons in 2010/11. The average yield of refined sugar from a ton of cane is estimated at approximately 0.961 or 9 percent.

With privatization completed, the NSDC has shifted its focus to support the development of the industry, including monitoring, research and development, promotion of mini plants, supporting an out-grower program, and establishing a price support mechanism to ensure that farmers receive a fair price from the newly privatized estates. The NSDC aims to implement an out-grower program that will eventually run in all 14-sugar producing locations in Nigeria. The NSDC, in collaboration with the private operations, aims to assist farmers in the acquisition of fertilizers, pesticides and improved seed cane with the help of the Central Bank of Nigeria (CBN) and local commercial banks. The out-grower program will deliver inputs and credits to cooperatives at a low interest rate -7 percent compared to up to 28 percent or at more traditional lending rates.

On April 2, 2012 the Minister of Trade and Investment, Dr. Olusegun Aganga, announced that that the long waited Nigerian Sugar Master Plan (NSMP) had been finalized. According to Minister Aganga, the NSMP policy will ensure an increased annual sugar production of 1.797 million tons of sugar. (Note sugar production in 2011/12 is estimated at 65,000 tons, Nigeria produces less than 2 percent of its total consumption). The Federal Government of Nigeria has not unveiled the details of the ambitious plan but it is expected that the policy document will target industrial infrastructure development, improvement of the business environment through simplified regulations, development of appropriate technologies, and the focus on creating a structure for institutionalized capacity building skill development that will provide jobs to youths….

Prepared By: Marcela Rondón, Regional Agricultural Attaché and Michael David, Agricultural Specialist

Approved By: Russ Nicely, Regional Agricultural Counselor

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