Economic Update

Published 30 Jun 2017

A spate of new investments in Nigeria’s sugar sector should help move the country closer towards its objective of self-sufficiency, although current production is lagging behind government targets.

In early June Dangote Sugar Refinery and the Nasawara State Government signed an agreement to build an N217bn ($700m) integrated sugar complex in Tunga. 

In its first phase, the complex will include 60,000 ha of plantations and two sugar-refining factories with a combined capacity of 430,000 tonnes per year. The final phase will expand the plantation area to 100,000 ha, making it the largest operation of its kind in the country. 

The Tunga deal follows on the heels of a revised agreement Dangote signed in May with the Taraba State Government for the 36,000-ha Lau Sugar Company. Initially proposed 13 years ago, the multimillion-dollar sugar factory had been set back by disagreements on local compensation and equity structure. 

Under the amended proposal, Dangote is to pay Taraba about N1.2bn ($3.7m) for 16,000 ha of land. In addition, the local government will have a 6% equity share in Dangote Group, Yusufu Akirikwen, the state’s commissioner for justice, told local media. 

Sector development plan

Both projects are part of Nigeria’s Sugar Master Plan (SMP) 2013-23 aimed at attaining self-sufficiency in sugar by raising output from its current 70,000 tonnes per year to 1.7m – roughly even with local annual consumption.

The gap between production and consumption saw the country’s sugar import bill rise from $113m in 1993 to over $550m in 2015, according to the latest figures from the National Sugar Development Council (NSDC). 

The SMP is supported by a federal “backward integration” programme, which looks to improve value addition and local sourcing of inputs from the country’s three sugar producers, Dangote Sugar Refinery, BUA Group and Golden Sugar, a subsidiary of Flour Mills of Nigeria. 

The programme – which was launched in 2013 and is one of several focused on different agricultural commodities – aims to not only boost fixed capital formation in the sugar industry but also to create up to 117,000 jobs. 

The SMP has some very ambitious objectives. Dangote, for example, aims to raise production to 1.5m tonnes a year by 2023 by acquiring 150,000 ha of sugar plantations in the states of Adamawa, Taraba, Nasawara, Kwara, Kogi and Niger. 

In addition to the expansion of Dangote’s production, Golden Sugar’s Sunti Estate was tested last year and aims to reach output of 100,000 tonnes by 2018, while the BUA Group is expected to start planting sugar canes this year at its 20,000-ha plantation. 

The Savannah Sugar Refinery in Numan, in which Dangote bought a 95% equity stake in 2013, has also doubled its production this year, to 12,000 tonnes. 

Broader goals and challenges

However, the government is hoping to accelerate progress under the SMP, following a June mid-term review meeting for the programme. According to the NSDC, in spite of the increases in output and new land acquisitions, the plan has achieved only 40.3% of its production target thus far.  

The limited success comes in part from a number of underlying structural issues, including difficulties over land acquisition, lack of private sector participation, scarcity of foreign exchange and a need for better risk management. To mitigate these, in February the industry called for a new partnership with the Nigeria Agricultural Insurance Corporation to reduce losses from natural disasters, while the government has pledged to provide fresh incentives to boost public-private partnerships.