The Central Bank of Nigeria (CBN) yesterday gave its backing to Dangote Sugar Refinery, BUA Sugar Refinery and Golden Sugar Company to import sugar into the country, directing that no other company be given access to foreign exchange to import the produce.
This according to the apex bank is in line with the backward integration policy as embedded in the National Sugar Master Plan (NSMP) as conceived by the federal government under the National Sugar Council 13 years ago.
The term backward integration describes a situation in which a firm moves to produce certain segments of its supply chain. It involves the expansion of a firm towards producing specific inputs or raw materials that would eventually be used in the production of its core product. For instance, a sugar factory that expands its business and starts growing a sugar cane plantation has adopted backward integration.
Giving reasons for its decision, CBN in a circular signed by the director Trade and Exchange department, Dr O.S. Nnaji said Dangote, BUA and Golden Sugar had “made reasonable progress in achieving backward integration in the sector shall only be allowed to import sugar into the country.
“In view of the forgoing, Authorised Dealers shall not open Forms M or access foreign exchange in the Nigerian foreign exchange market for any company including the three listed above for the importation of sugar without the prior and express approval of the Central Bank of Nigeria as the Bank is charged with the mandate of monitoring the implementation of the backward integration programmes of all the companies
The journey to the development of the NSMP commenced 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 amongst other objectives.
The then Minister of Industry, Trade and Investment, Olusegun Aganga, who performed the signing-off ceremony that heralded its commencement in Abuja, had stated during ceremony that the NSMP would mark the beginning of the nation’s journey towards industrialisation, in line with the Nigerian Industrial Revolution Plan (NIRP).
The NSMP had been instituted to encourage and incentivise sugar refining companies in their Backward Integration Programme (BIP) for local sugar production. This is in an effort to conserve scarce foreign exchange as the country in 2019 spent $545.536 million on sugar importation, according to data on Trend Economy.
The 2019 figure is much lower than $1.55 billion that the country spent in importing sugar in 2011. This was one of the reasons the central bank insisted that its ban of foreign exchange for some items remained unchanged. Inspite of this, in the first quarter of 2021, the country spent N88.9 billion to import cane sugar from Brazil.
In April this year, the federal government banned the importation of refined sugar and its derivatives from the country’s Free Trade Zones (FTZs) as part of its efforts to protect the sugar industry which is governed by the Nigerian Sugar Master Plan (NSMP).
The letter by the Nigerian Ports Authority (NPA), Lagos Port Complex, Apapa, Lagos to one of the terminal operators in the Lagos Port Complex read: “We have for reference a letter from Honourable Minister of Industry, Trade and Investment ref: HMIT1/GEN/ CORR/008/ VOL. I, dated February 15, 2021, on the above subject.
“It has recently come to our notice 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 enterprises in the Free Trade Zones to export 100 per cent of their output to the Nigerian Customs Territory, and this is real potential threat to the goals of the Nigerian Sugar Master Plan (NSMP).”
Earlier this year, Minister of Industry, Trade and Investment, Mr Niyi Adebayo, while speaking at the commissioning of the National Sugar Institute, noted that 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 sectors.
“The government recognises the need to deepen the partnership with the private sector to drive access to skills development, research and development in a manner that promotes competition, productivity, profitability and sustainability in the sugar industry,” he stated
Commending the stakeholders in the sugar industry for their support, Adebayo pledged that the expectations of a virile and competitive sugar industry for the country through the NSMP would be realised.
According to the vice president of the Nigerian-American Chamber of Commerce (NACC), Ehi Braiman, the implementation of the local content initiative in Nigeria would attract over $5b into the economy.
Braiman added that asides the inflow of forex, backward integration will also create massive employment opportunities for youths as there is an abundance of natural and mineral resources in the country.
Braiman posits that Nigeria has already achieved a significant level of backward integration in the cement sector as over 80 per cent of its raw materials are sourced locally. He also said the policy is seen as a strategy to increase the participation of local firms in the value chain of various sectors.
He argued that if sustainable economic development would be achieved in Nigeria, the local content policy needs to be extended to other sectors of the economy.
Although efforts have been made by the government in promoting local content initiative in Nigeria such as the forex ban on 41 items which promoted the production of tooth-picks using locally-sourced raw materials, the local content policy needs to be extended more sectors so that the inherent gains will be maximised.