A Regulated Sugar Industry and Nigeria’s Economy
One of the landmark achievements of the 7th National Assembly was the eventual amendment of the National Sugar Development Council’s Act, No. 78 LFN, 2004 which was later assented to by former President Goodluck Jonathan, GCFR. Emerging issues in the global sugar market necessitated the need to effect a few changes in the law governing the nation’s sugar industry to enable it compete favourably at the global stage. The purpose of the amendment is to strengthen and enable the National Sugar Development Council (NSDC), discharge its functions more effectively in view of the present realities which bordered on the implementation of the National Sugar Master Plan approved by the Federal Executive Council in September, 2012.
The world over, sugar is regarded as a strategic product. Some analysts go as far as describing sugar as a political commodity on account of its sensitivity and criticality to national food security. The raison d’etre for investment in sugar production stems from its potential to generate employment in the hundreds of thousands, save foreign exchange, enhance rural industrialization, create wealth and alleviate poverty. It is equally important to stress that the use of sugar is widespread and covers both domestic and industrial applications, such in the pharmaceuticals, confectionery, soft drinks, breweries, dairies, bakeries etc. With the world turning “Green” for energy, power and fuel, sugarcane provides a basic raw material in the production of fuel ethanol and the generation of electricity from bagasse.
That there are lots of potential in the nation’s sugar industry is to state the obvious. Proceeds from exportation of sugar can contribute significantly to the running of our economy if the sector is given her due recognition and accorded much priority. An estimated 25 million Indians and 6 million Kenyans derive their livelihood from the sugar industry which directly supports 5.5 million and 250,000 farmers respectively in the two countries respectively. Fuel ethanol from sugarcane is currently used to power over 86 percent of Brazil’s fleet of light vehicles. Also, Mauritius generates 40 percent of its total electricity requirement through bagasse co-generation. It is equally noteworthy to state that over 56 derivatives can be manufactured through several spin-off industries from the by-products of the sugar industry.
The sugar industry is too important a sector to be neglected. From the foregoing discourse, unarguably, Nigeria and Nigerians stand to benefit maximally should government accord priority to the sector. A number of countries are already taking advantage of modern cuttingedge technologies to take the lead in sugar production. To realize her overall economic targets, government cannot afford to leave the sugar sector unregulated. Most countries across the world have put in place laws or stringent fiscal measures that will protect their local economies. Nigeria cannot afford to act differently in this regard. This is simply why stakeholders in the sugar industry have continued to harp on the need for proper regulation of the industry. Even Brazil, which is the number one sugar exporting country in the world strictly regulated the sector beginning in the 70s with its ‘ALCOOL’ programme and only ended it in 2001 after attaining global dominance. Brazil is now planning an export tax on ethanol to boost local supplies and stabilize prices.
Also, the United States government strictly regulates sugar imports into its market and deliberately keeps sugar prices high to enable growers repay their loans and remain in production. Specific sugar regulation policies of the U.S government include: policy to support prices well above world market levels, price support regime administered by USDA to sugar producers, restrictive import policy through Tariff Rate Quota (TRQ) system, Duty-free imports from Mexico and preferential supplies under WTO-agreed TRQ etc. These measures are aimed at protecting the economic interest of sugar producers and by extension, that of the country at large.
India, one of the world’s leading sugar producers is not left out in terms of restrictive laws and policies to protect her local sugar economy. India doesn’t allow the export of a grain of sugar until after DIWALLI festival, even in surplus years; this is to ensure food security and prevent social upheaval. It also fixes prices at which sugarcane and sugar is sold in the domestic market, determines the time and amount of sugar to be exported or imported at times of surplus or lean production as well as allows duty-free imports of both raw and refined sugar and imposes limits on stocks to be held by merchants when supply is tight.
Sugar-producing countries like Pakistan and Indonesia have also put in place stringent measures that will protect their economies. Both countries deemed it necessary to saddle two separate government agencies the sole responsibility of sugar importation. This measure gives their governments the control over the source and quantity of sugar imports.
Unfortunately, up until 2012, in contrast to all the above commendable examples seen in other climes, Nigeria virtually has no operational sugar policy that offers any realistic protection to investments in the sugar industry. The few policies in place then were ineffective and could not make production in the sugar sector competitive enough to attract private investment particularly, for ‘’Green Field Sugar Project’’. This, without doubt remains the biggest challenge confronting the industry. However, stakeholders in the sugar industry heaved a huge sigh of relief recently when the 7th National Assembly, after a thorough assessment, passed the Amended Bill of the NSDC which was subsequently given assent by the President.
Nigeria currently consumes some 1.3 million metric tonnes (MMT) of sugar annually but produces only 30,000 – 50,000 tonnes, which is less than 5 percent of its annual consumption. The huge supply gap is bridged through imports of sugar mainly from Brazil. Nigeria spent approximately N30.0 billion annually on the average, on sugar importation in the last decade in order to meet the nation’s sugar requirement. Indeed, according to annual returns, from the Nigerian Customs Service. Over 98 percent of the imports however, are raw sugar which is refined by the three existing refineries in Lagos. In the 80s at the peak of production by the two local sugar factories (in Bacita, Kwara State and Numan, Adamawa State), over 60,000 people were working on the farms and the factories, besides, hundreds of outgrower farmers and their families who earned their livelihood from the factories.
Sadly today, the industry employs less than 3,000 people. It is important to stress that Nigeria has the capacity to produce enough sugar locally and conserve the huge foreign exchange expended annually on imports. The nation could even produce excess sugar for export especially to neighbouring West African countries to generate substantial foreign exchange and enhance the country’s speedy attainment of her vision 20:2020 objectives in the area of resourced-based industrialization.
With a few sections of the sugar law now amended, the sugar industry is favourably positioned to function optimally. For instance, section 3 that deals with the functions of the Council was enlarged and modified to include new provisions on the Backward Integration Programme, administration of sugar export quota benchmarked on BIP performance and other regulatory functions as captured in other sub-sections all designed to enhance the effective performance of the National Sugar Development Council in the discharge of its statutory role especially with regards to the effective implementation of the NSMP.
Another area of amendment which also derives from the provisions of the Nigeria Sugar Master Plan is the levy charged on imported sugar. The implementation stipulates, not less than 10% levy is to be paid on all categories of imported sugar. As part of the measures to protect local producers, government opted to increase the tariff on imported sugar as a way of discouraging imports. Rates between 50% -80% total tariffs were approved and may be reviewed once self-sufficiency is achieved.
Without doubts, with the eventual amendment of a few critical sections of the National Sugar law, it is indeed safe to conclude that the entire sugar industry is set to witness a major turnaround in terms of policy formulation, direction and implementation. We equally suggest that the President Muhammadu Buhari led government should accord the sector the priority it deserves as it settles down for business.