The issue raised in the refined petroleum products story above, relating to the need to protect local industries, was equally raised in this sugar story dug out from Archives Siaka-Momoh. It was Citi Journalistic Excellence Awards (CJEA) 2011 edition winning story in 2011. There were two awardees that year – Siaka Momoh, Industry Editor for BusinessDay and Anthony Osai-Brown, BusinessDay’s Contributing Editor. The story is being republished here to emphasize the passionate need for protection of our local industries.
Siaka MOMOH
In recent times, the Nigerian industrial sector has suffered some set-backs. We have witnessed the demise of some key plants and the industry is agog with talks of plants moving to Ghana because they find the cost of doing business here impossible. The IFC/World Bank Ease of Doing Business 2011 rating ranked Nigeria 137 out of 183 countries.
To be specific, we have witnessed the demise of Michelin and Dunlop. We are watching the open onslaught on Nigerian farmers as typified in unfavourable government policies on agricultural commodities like cassava and palm oil. Michelin and Dunlop were killed by government’s punitive policies. If we must recap, inconsistency in government policies, lack of protection of home industry due to globalization and liberalization policies, high interest rate, power crisis and high cost of fuel which have led to sharp rise in cost of production, are said to be responsible for the problem in Nigeria’s industrial sector.
The plague also caught up with the manufacturers of Coca Cola, the popular soft drink in Nigerian foods/beverage sector. The company’s concentrate supply facility, Commercial Product Supply (CPS) plant, located in Ota, Ogun State was shut down because it was found to be uncompetitive as a result of high cost of doing business.
Now the plague has crept into the sugar industry sub-sector – the sugar cubing segment. BusinessDay’s investigation has revealed that of the six sugar cubing plants operating in Nigeria, only two – Dantata Foods & Allied Products Limited and McNichols Consolidated Plc are in business now, producing at 6 per cent and 3 per cent respectively. The four others – Kano Sugar processing Company limited, Paastra Industries Nigeria Limited, and Lange & Grant Commodities Limited have shut down.
Affected industry sources are vexed that the Federal Government does not allow sugar cubing factories to import the raw material required for production of cube sugar whereas importation of finished cube sugar is unrestricted. This, they argue, is unfair and robs Nigerians of highly deserved jobs, stating the figure of job loss as 4000. They argue Nigeria’s current sugar importation policy is inconsistent with the Federal Government’s policy direction of restricting importation of basic food items where there is local capacity to produce these products citing the current absolute ban on importation of biscuits, fruit juice in retail packs, spaghetti, noodles, bottled water, vegetable oil, wheat flour, sugar confectioneries, cocoa butter, cocoa powder and cakes.
The sugar cubing plant owners, no doubt have a good argument. The federal government is yet to purge itself of its policy inconsistency trait which has become its strong and glaring culture. There are currently two sugar refineries in the country, Dangote Sugar Refinery Plc and BUA Sugar Refinery. These two produce refined sugar in bulk of 50 kilogramme bags. A few other companies such JOF Limited and Josepdam have approval from Standards Organisation of Nigeria (SON) to import refined granulated sugar in bulk. In the spirit of looking inwards, ordinarily, one would expect the six cubing plants to source granulated sugar from the existing sugar refineries in the country. In that case, they would serve as spin-off industries to these refineries. They do.
If government is sincere with its policy of supporting local capacity development for basic food items, it should not allow the influx of cube sugar from outside our shores. The Federal Government has consistently restricted importation of other manufactured food items where local capacity to produce such goods exists. Why should the rule not apply to sugar?
Importation of sugar in retail packs results to loss of revenue to local refineries and erosion of Nigeria’s hard earned foreign exchange earnings. Permitting importation of cube sugar (which is a finished product) and restricting local producers of retail packs of sugar from importing granulated sugar which is 99 per cent of their raw materials is strange and does not support the objectives of the Federal Government of Nigeria in encouraging local production of sugar.
Again, allowing importation of retail packs of sugar from the international market and disallowing local cube sugar factories from importing bulk sugar as raw material has killed and is still killing local producers. Decrease in sugar prices in the international market is not reflected in the local market largely due to high cost of production in Nigeria. Consequently, local price of sugar is not competitive with the price of St Louis which is imported. For instance, between January and April 2010, there was about 35 per cent price decrease internationally whereas price increase in the local market in the same period was about 2 per cent.
It makes economic sense that the federal government should ban importation of granulated sugar as well as cube sugar so that both the granulated sugar producers like Dangote Sugar Refinery and BUA Sugar Refinery can be protected and savings in foreign exchange achieved. A symbiotic relationship between our local sugar refineries and our six cube sugar manufacturing plants means looking inwards and by extension creating jobs in this era of job losses that have come with global credit crunch. More progress will be made later when our sugar refineries become fully dependent on local sugarcane plantations for raw materials.
According to Afrinvest, Dangote Sugar Refinery Plc for instance, imports raw sugar from Brazil, refines it at its Apapa factory and sells Vitamin A refined sugar under the brand name DSR. The sugar factory has an installed capacity to process 1.44 million metric tonnes of raw sugar per annum. The factory’s capacity utilization is currently above 75 per cent, making it the largest sugar refinery in sub Saharan Africa and one of the largest in the world.
But a 100 per cent ban may not be advisable now taking into consideration the fact that Nigeria currently has an installed capacity of 2.1 million metric tonnes (between Dangote Sugar Refinery and BUA Sugar refinery). This covers approximately 60 per cent of the country’s needs. It therefore makes sense that this 40 per cent shortfall should be allowed to come in pending when we can produce enough to meet local consumption. But the tonnage to be imported must attract import tax that prevents it from having that advantage of price over local plants’ products. And our Customs Service operatives should be up and doing and crack down on smugglers.
According to the Federal Ministry of Commerce and Industry, a total sum of N30 billion is spent on sugar importation into the country annually. Nigeria’s annual consumption is currently put at 1.3 million metric tonnes and accounts for 50 per cent of West African consumption. What this means is that we must take more seriously the issue of backward integration and by so doing save foreign exchange by growing fully into exporting our sugar into the West African sub-region.
