Free Trade Zones

Extending the gains of upstream integration to sugar production


The Central Bank of Nigeria (CBN) yesterday gave its support to the Dangote sugar refinery, the BUA sugar refinery and the Golden Sugar Company to import sugar into the country, ordering no other company to have access foreign currency to import the product.

According to the apex bank, this is in line with the upstream integration policy as enshrined in the National Sugar Master Plan (NSMP) as designed by the federal government under the National Sugar Council ago 13 years.

The term backward integration describes a situation in which a company moves to produce certain segments of its supply chain. This involves the expansion of a business towards the production of specific inputs or raw materials that would eventually be used in the production of its commodity. For example, a sugar factory that is expanding its business and starting to develop a sugar cane plantation has adopted upstream integration.

Giving the reasons for its decision, CBN in a circular signed by the Director of Commerce and Trade Department, Dr OS Nnaji said that Dangote, BUA and Golden Sugar had “made reasonable progress in achieving integration in upstream in the sector will only be allowed to import sugar into the country.

“In view of the above, authorized dealers should not open M forms or access foreign currency in the Nigerian foreign exchange market for any business, including the three listed above for importing sugar without approval. prior and express of the Central Bank of Nigeria as the Bank is in charge of the mandate of monitoring the implementation of the upstream integration programs of all companies

The journey towards the development of the NSMP began in 2008 under the administration of the late President Umaru Musa Yar ‘Adua. It was approved and adopted in 2012 by the administration of former President Goodluck Jonathan. But its implementation took off in July 2013 with an estimated target of producing 1.79 million tonnes of sugar locally by 2020, among other targets.

The then Minister of Industry, Trade and Investment, Olusegun Aganga, who celebrated the signing ceremony that marked its opening in Abuja, said during the ceremony that the NSMP would mark the start the nation’s journey towards industrialization, in accordance with the Industrial Revolution Plan (PNIR).

The NSMP was established to encourage and incentivize sugar refining companies in their Upstream Integration Program (PIF) for local sugar production. This is an effort to conserve scarce foreign currency, as the country in 2019 spent $ 545.536 million importing sugar, according to Trend Economy data.

The 2019 figure is far lower than the $ 1.55 billion the country spent on importing sugar in 2011. This is one of the reasons the central bank insisted that its foreign exchange ban on certain items remain. unchanged. Despite this, in the first quarter of 2021, the country spent 88.9 billion naira to import cane sugar from Brazil.

In April of this year, the federal government banned the import of refined sugar and its derivatives from the country’s free zones (FTAs) as part of its efforts to protect the sugar industry which is governed by the Nigerian Sugar Master Plan. (NSMP).

The letter from the Nigerian Ports Authority (NPA), Lagos Port Complex, Apapa, Lagos to one of the terminal operators at the Lagos Port Complex reads: “We have for reference a letter from the Honorable Minister of ‘Industry, Trade and Investment ref: HMIT1 / GEN / CORR / 008 / VOL. I, dated February 15, 2021, on the above subject.

“We recently learned that due to the recent location of a sugar refinery in a free trade zone, refined sugar is being imported into the Nigerian customs territory under the concession granted to companies in the zones. free trade to export 100 percent. of their production to Nigerian customs territory, and this is a real potential threat to the objectives of the Nigerian Sugar Master Plan (NSMP).

Earlier this year, the Minister of Industry, Trade and Investment, Mr. Niyi Adebayo, during the presentation of the National Sugar Institute, noted that the investments already made by the federal government and the private sector in the sugar industry are capable of creating thousands of jobs in agriculture and manufacturing.

“The government recognizes the need to deepen partnership with the private sector to promote access to skills development, research and development in a way that promotes competition, productivity, profitability and sustainability in the industry. ‘sugar industry,’ he said.

Congratulating the sugar industry stakeholders for their support, Adebayo pledged that the expectations of a manly and competitive sugar industry for the country through the NSMP would be met.

According to Nigerian American Chamber of Commerce (NACC) vice president Ehi Braiman, implementing the local content initiative in Nigeria would attract more than $ 5 billion to the economy.

Braiman added that besides the influx of foreign exchange, upstream integration will also create massive employment opportunities for young people as there is an abundance of natural and mineral resources in the country.

Braiman postulates that Nigeria has already achieved a significant level of upstream integration in the cement sector, as more than 80 percent of its raw materials are locally sourced. He also said that the policy is seen as a strategy to increase the participation of local businesses in the value chain of various sectors.

He argued that if sustainable economic development is achieved in Nigeria, the local content policy must be extended to other sectors of the economy.

Although efforts have been made by the government to promote the local content initiative in Nigeria, such as the forex ban on 41 items that encouraged the production of toothpicks using locally sourced raw materials, the policy of Local content needs to be extended to more sectors so that the inherent gains will be maximized.