According to USDA, Nigerian sugar production for 2013 was 65,000 tonnes, while consumption was 1.3 million tonnes. However, Nigeria “has a land potential of over 500,000 hectares of suitable cane fields”, with a production capacity of 5 million tonnes of sugar cane. Currently, Dangote Sugar Refinery (DSR), with 70% of the market and an installed sugar refining capacity of 1.44 million tonnes, dominates the sugar sector – its nearest rival BUA has an installed refining capacity of 0.72 million tonnes.
DSR has plans to invest US$1.5 billion on sugar cane development in the next 5 years, with a target of increasing annual plant capacity to 200,000 tonnes, according to Dangote Group Managing Director Graham Clark. This is largely taking place through rehabilitation of the estate and factory managed by the DSR subsidiary, Savannah Sugar. Mr Clark commented: “unlike before, where we import raw sugar for refining, the economic model of the sugar plantation is profitable when examined from the value-chain process. We will change the whole process and seek partnerships with communities and state governments in order to aid the land acquisition for sugar plantation.” DSR aims, through its “backward integration master plan”, to produce “1.5 million tonnes of sugar per annum locally from its subsidiaries”, with plans for a further five sugar refineries across the country.
In the first quarter of 2014 DSR is “planning to resume exports to selected West African countries”.
Dangote’s investments are taking place against the background of a government incentive programme that has eliminated import duty on machinery and spare parts for use in the sugar sector, maintained a 10% duty and 50% levy on raw sugar imports, and a 20% duty and 60% levy on refined sugar imports. The government is also reported to be providing credit to sugar cane growers and supporting infrastructure development in potential sugar cane growing areas.
More broadly, Nigeria’s National Sugar Development Council is organising meetings with stakeholders to mobilise communities for the implementation of the National Sugar Master Plan (NSMP), which envisages a multi-product, sugar-cane-based industry. According to a statement issued after one of the consultation meetings, out-grower schemes will be “an integral part of NSMP implementation”.
In response to government incentives and sugar tariff increases, a wave of investment is now under way in the Nigerian sugar sector. Big sugar companies like DSR and BUA are already acquiring wide expanses of farmland on which to boost production.
However, the absence of a specific legal framework to regulate the acquisition of such lands, particularly from local communities, complicates corporate efforts to develop sugar production and, despite the companies’ best efforts, can lead to allegations of abusive “land grabs” and violations of indigenous people’s rights. This potential for land disputes could create problems in working towards the goal of a globally competitive sugar cane farming sector. This suggests an urgent need to clarify the legal situation with regard to land rights in areas with potential for sugar cane development and a parallel need to draw existing communities into any sugar cane development plans.
The scale of land acquisition by DSR in the six northern states in Nigeria is already giving rise to fears that smallholder farmers will not only be denied a role in the development of a local Nigerian sugar cane farming sector, but will also increasingly be denied access to land. Currently, smallholder farmers lack the resources to initiate sugar cane production, and fear that current government incentive programmes are biased towards the large-scale private sector.
One solution to this challenge would be to support the formation of smallholder sugar farming organisations that could provide the institutional framework not only for the implementation of government support measures to develop the physical infrastructure required, but also for the implementation of measures to strengthen the functioning of supply chains from plantation to sugar mill.
Potentially, the mandatory inter-professional agreements set in place in the EU sugar sector could provide some pointers on how to effectively regulate supply relationships, to the benefit of all stakeholders, while the experience in ACP countries such as Mauritius on the pooling and sharing of revenue streams from all aspects of sugar cane and processing could also hold important lessons.