Inside BUA, Dangote, FMN battle for sugar market

A raging war in Nigeria’s sugar industry could leave a sour taste in the mouths of consumers of the sweetener if it is allowed to fester.

One of the big players in the sugar value chain, BUA Foods, alleged that there is a scarcity of the commodity in the market, but said it is artificial and is created by its peers, whom it accused of suspending sales to force prices up in order to make abnormal profit and perhaps blackmail the government to review some compliance issues.

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The allegation implied that the other players in the industry were working against the objectives of Nigeria’s policy on sugar development in the country. The National Sugar Development Council has set a target of producing locally at least 70 percent of Nigeria’s sugar consumption, which is currently put at about 1.7 million metric tons a year.

This is one of the objectives of the National Sugar Master Plan that is being superintended by the National Sugar Development Council (NSDC). It aims to raise local sugar production to attain self-sufficiency, which will lead to the next objective, to stem the tide of high importation. Quite remarkably, one of the means by which the second objective is to be achieved is through “high graduated tariff structure on sugar importation,” according to the NSDC.

One of the key amendments in the Finance Act 2021 was the introduction of an Excise Duty of N10/litre imposed on all non-alcoholic, carbonated & sweetened beverages. The dust raised by this sugar tax is yet to settle, with so many segments of the Nigerian society, including the Manufacturers Association of Nigeria, decrying the imposition of the excise duty.

NSDC sees sugar beyond its picture as the sweetener that people put in their tea or ogi or any other liquid to improve its taste. Its uses cut across so many industrial sectors such as pharmaceuticals, soft drinks, confectionery, food & beverage, dairy, says the Council, which perhaps explains the fact, also acknowledged by the NSDC, that it has the potential to generate jobs in hundreds of thousands. Now, for a country that is battling the scourge of unemployment, the cultivation of such crops should be given top attention in industrial policy formulation.

Perhaps, more relevant to Nigeria is the fact that “Sugarcane is now an ‘energy crop’ used in the production of fuel ethanol and generation of electricity besides so many other spin-off industries.”

Nigeria’s challenge with sugar consumption has always been the difficulty to close the gap between domestic supply and demand. From just about 43,000tonnes in 1955, consumption rose to about 50,000tonnes in 1974, climbing to about one million tonnes in 1982. But local production was only about 40,000tonnes or just 4 percent. Since sugar is such an important commodity, this shortfall in supply has always been met through importation.

This high dependence on imports made sugar one of the key consumers of Nigeria’s foreign exchange, the others being wheat and rice.

Whilst Nigeria currently has over 3million sugar refining capacity, the sugarcane beats are still largely imported. Notwithstanding, the Backward Integration Programme for local sugar production and the fact that the CBN was charged with the mandate of monitoring the implementation of the three major companies – BUA Sugar, Dangote Sugar and Golden Sugar (a subsidiary of Flour Mills of Nigeria Plc), which account for over 95 percent of sugar supply in the country, there has not been much progress.

Interestingly, BUA’s allegation has led to a flurry of rebuttals from the other industry participants, who deny the accusation by BUA. Those who have responded to the allegation are Dangote Sugar Refinery and Flour Mills of Nigeria Plc.

The assertion by BUA “is incorrect and indeed capable of creating a false impression in the market, which is contrary to the interest of consumers,” Flour Mills of Nigeria Plc said in its response dated February 16, 2022.

“Being the preferred brand for millions of Nigerian households, Golden Penny Sugar is still available, affordable, and accessible in the market,” FMN said.

As one of Nigeria’s leading foods and agro-allied groups, with over 61 years of operations in the food industry, the company declared that millions of Nigerian families trust it for its quality nutritious and affordable foods.

“To safeguard that trust, FMN will continue to expand its investments in backward integration and the sustainable development of the critical aspects of the food value chain, including Grains, Starch, Feeds and Proteins, Oils and Fats, and Sugar,” it said in the statement signed by its company secretary, Joseph A.O. Umolu.

In its own response, Dangote Sugar Refinery “strongly” refuted the claims by BUA “in their entirety as these false allegations may mislead the market and may give an undue competitive edge to BUA.”

They describe the behaviour exhibited by BUA as worrisome and in conflict with the anti-competition rules.

“Last year, just before the commencement of the Ramadan (the Islamic holy month of fasting), BUA made similar false allegations against the company that it was engaged in ‘price-fixing’ and not honestly pursuing the Backward Integration Project. In response to this, we published a Press Release (published on the Issuers’ Portal on April 14, 2021) to refute the false allegations and made a formal complaint to the Anti-Competition Commission,” it said in a statement signed by Company Secretary, Mrs Temitope Hassan. 

“Another formal complaint was made to the Commission on February 14, 2022, and we await their actions to address the situation,” it added.

DSR said in line with its plan, it has continued to supply sugar to meet the market’s demand and has made the necessary supply chain and logistics investments/arrangements to ensure there are no risks to our ability to meet the current market demands.

According to the company, it remains the highest sugar supplier in the market today, with over 1.44m MT installed capacity at its Apapa Refinery, adding “we are the only company producing sugar from own grown sugarcane under the Nigeria Sugar Master Plan (NSMP) at the Numan operations in Yola, Adamawa State.”

On its part, FML said it has a total landmass of over 21,000 hectares, including a world-class sugar refinery, and has continued to expand its operations at Sunti Golden Sugar Estate, including an additional $300 million in Nasarawa State and a commitment to investing another 70 billion (did not say whether dollar of naira) over the next three years to develop the upland area of the Sunti Sugar Estate.

“This will further cement our commitment to Nigeria’s vision of self-sufficiency in sugar production and complement the Federal Government’s commitment to economic diversification, food security, and the transition.”

BUA is currently developing its fully owned subsidiary, LASUCO, which has 20,000 hectares of land in Lafiagi, Kwara State.

“When fully completed, the over $300m integrated sugar factory will comprise of a sugar mill with a capacity of 10,000 tons of cane per day, a sugar refinery with an annual capacity of 220,000metric tonnes, a 35 megawatts (MW) power generating plant to fuel the factory with potential to supply the national grid, and a 20 million litres per annum ethanol production plan,” BUA said.