Upstream integration: revisiting the sugar value chain

Nigeria imported 689.39 billion naira of sugar between 2020 and 2021. The breakdown of the import figure is as follows: 44.30 billion naira in the first quarter of 2020; 43.27 billion naira in the second quarter of 2020; 73.77 billion naira in the third quarter of 2020 and 102.45 billion naira in the fourth quarter of 2020, or 263.79 billion naira. In 2021, the country imported N90.83 billion in the first quarter; N114.09 billion in the second quarter; 135.37 billion naira in the third quarter and 85.31 billion naira in the fourth quarter, or 425.60 billion naira.

Ten years ago, specifically in 2011, Nigeria spent N101.9 billion on importing sugar, reporting that between 2011 and 2021, Nigeria’s sugar import bill increased by 577% .

Meanwhile, in September 2012, the Nigerian government at the Federal Executive Council meeting approved the Nigerian Sugar Master Plan (NSMP) with an implementation date set for 2013. A number of objectives have been fixed before the various agencies involved in its implementation, the main ones of which were to increase local production of sugar for self-sufficiency, to fight against unbridled importation, to create a large number of opportunities for employment and to contribute to the production of ethanol and the production of electricity.

The sugar value chain stands in Nigeria as a viable platform to tackle youth unemployment, climate change and improved foreign exchange earnings

At this point, with nearly a decade in the life of the NSMP, what concrete results have been achieved? By the end of 2021, the National Sugar Development Council (NSDC) estimated the total investment in the sugar industry at N250 billion. One of the landmark investments in the sector has been the recent acquisition of the defunct Nigeria Sugar Company (NISUCO) in Kwara State by KIA Group. KIA Group aims to produce 300,000 metric tons of sugar, refine 204,000 metric tons and with a probability of generating revenue of 46 billion naira as early as 2027.

Flour Mills of Nigeria, which owns the N50 billion Golden Sugar Estate in Niger State, has also concluded plans to build another multi-billion dollar sugar mill in Nasarawa State.

Recently, Flour Mills of Nigeria completed the first training for farmers and communities involved in its smallholder program through which it plans to produce 150,000 tonnes of sugar per year. The motive behind the smallholder program is to convince the farming community that sugarcane is both easy to grow and lucrative.

According to the Observatory of Economic Complexity (OEC), Brazil accounted for 57.8% of global sugar exports in 2020, or $7.5 billion. Thailand exported $927 million worth of sugar, representing 7.14% of world exports; Australia, $716 million; India, $619 million and Mexico, $408 million.

In Africa, Eswatini and South Africa lead with $374 million and $232 million in sugar exports, accounting for 2.88% and 1.79% of global sugar exports.

In terms of imports, China tops the rankings as it imported $1.57 billion worth of sugar in 2020, accounting for 12.1% of global sugar imports. Indonesia imported $1.3 billion; United States of America (US), $1.19 billion; Bangladesh, $679 million; Algeria, $669 million; South Korea, $591 million; Malaysia, $559 million, and India, $493 million.

As the world’s population grows, the demand for sugar will increase. Global demand for sugar is expected to increase from 185 million tonnes in 2021 to 206.6 million tonnes by 2027. Also by 2030, the world population is expected to reach 8.54 billion people. Asia will be unrivaled with 4.97 billion people, or 58.2% of the world’s population. Africa’s population of 1.68 billion will be driven by population growth in Nigeria, Africa’s most populous country.

Also Read: BUA Foods Acquires First of Two Transport Vessels for Sugar Exports

By 2029, Indonesia, China, the United States, Malaysia and Korea will be the world’s largest users of sugar, according to projections from the OECD-FAO Agricultural Outlook 2020-2029. It’s just about establishing that the opportunities in the sugar value chain are growing.

But Nigeria needs to address the underlying and fundamental challenges in the sugar industry before the country can take advantage of some of the emerging opportunities in the global sugar industry. According to industry players, sugar is the most smuggled commodity in Nigeria after rice.

The sugar master plan is also challenged by limited funding, weak infrastructure and insecurity as well as lack of political will. Challenges also include high transportation and production costs.

The sugar value chain stands in Nigeria as a viable platform to address youth unemployment, climate change and improved foreign exchange earnings. Nigeria must not miss these opportunities. This is because the industry, if properly nurtured, has the ability to pull the country out of its current economic slump.

Rachel J. Bradford