Sugar War: The need for urgent intervention by relevant regulatory agencies

Now, that  the Federal government has confirmed  that  there is no scarcity  of sugar in the country, perhaps , the time has come when the government and other relevant bodies  should  begin enforcing regulations and rules guiding the  production and marketing of sugar  in the  country.

This has become very necessary in view  of the  recent publication  by BUA Foods Plc.   BUA Foods had published a disclosure on Monday  claiming  that the company has distanced itself from every arrangement to create artificial scarcity of sugar in the country through the decision of two major sugar producers to suspend sales.

The notice also read, “We have been inundated with calls from our customers that Dangote Sugar and Flour Mills have both suspended sales of Sugar, seeking to know if BUA will follow suit. We would like to reassure our customers that BUA is not joining the suspension of sales of sugar”.

But on Wednesday, the Federal Government  refuted claims of imminent sugar scarcity in Nigeria as alleged by BUA Foods , and stressed that there was also no reduction in the production of the commodity, warning  operators in the sector to desist from making unnecessary propaganda capable of distorting the progress being recorded in Nigeria’s sugar production industry.

Reacting to  the allegation by BUA Foods , in Abuja at the public presentation of the approved 2022 presidential raw sugar quota allocations to representatives of refineries in the sector, the Executive Secretary, National Sugar Development Council (NSDC), Zacch Adedeji, warned operators to stop raising false alarm.

He said, “Only yesterday, the attention of the council was drawn to a publication in some sections of the media credited to BUA Foods on the suspension of sugar sales.

 “Given the strategic importance of the sugar value chain to the Nigerian economy, the council wishes to state that there is no known stoppage in sugar production by any of the operators as a result of compliance issues or on the council’s mandate.”

Adedeji said: “Let me make it clear that there is no suspension of sales or production of sugar in the country. As a matter of fact, we only consume 1.7 metric tonnes, which is less than five per cent of what we have in stock. The stock we have is far enough even to meet the Holy Ramadan period as well as the Christian Lenten season, so, there is no scarcity of sugar, people should not resort to panic buying.”

 Nigeria’s sugar production war as reported by  the Premium Times,  first  came to the fore in early April of  2020, when two of the industry’s biggest merchants, Dangote and BUA, squabbled over import quotas and the construction of a new refinery.

 The row obviously  started in January when Dangote Sugar Plc and Flour Mills of Nigeria Plc accused the BUA Group of undermining the government’s National Sugar Masterplan  (NMSP) by setting up a sugar refinery in Port Harcourt when it has not invested enough in sugar cane plantations.

The NSDC mandates sugar companies to invest in sugar farming and increasingly use locally produced extracts for their refineries, a process called backward integration (BIP). In the meantime, the companies are allowed to import extracts based on the scale of their plantation investment.

The Premium Times report  said in  January 28, 2020, a  letter to the Minister of Industry, Trade and Investment, Niyi Adebayo, Dangote Sugar Plc and Flour Mills of Nigeria Plc said BUA did not fulfil the government’s BIP  requirement to build a new refinery.

“Under the revised guidelines released by the NSDC, it makes it absolutely clear that the allocation of quotas henceforth, shall be based on quantitative and verifiable improvements in the Backward Integration Programmes of players in the industry,” they wrote.

“The mid-term review conducted by the NSDC was clear in its conclusions – BUA has failed to invest substantively in local production or comply with its undertakings under its BIP.”

The letter, signed by Alhaji Alike  Dangote and John Coumantaros, chair of Flour Mills of Nigeria Plc, alleged that BUA’s only intention was to use its claimed backward integration achievements to obtain importation quota.

 They said “the impunity with which BUA has contravened the provisions of the NSMP has placed the other players, who are abiding by the regulations, not only at a significant disadvantage but has discouraged them from undertaking the huge investments that would deliver the desired objective of 100% local production of sugar, unless of course, the ministry wades in and addresses the situation.”

Dangote Sugar said its backward integration programme began with a 10-year sugar development plan to produce 1.5 million metric tonnes per annum of sugar from locally grown sugarcane. The project commenced with the acquisition of a large expanse of land in strategic locations such as Taraba, Adamawa and Nasarawa States.

“To this end, three   BIP sugar companies; Dangote Taraba Sugar Limited, Dangote Adamawa Sugar Limited, Nasarawa Sugar Company Limited were incorporated,” it said.

The BUA Group denied the claims, saying the company has invested well in the local production of sugar cane, citing its three sugar holdings in Nigeria: a 720,000 metric tonnes sugar refinery in Lagos, a 20,000-hectare Lafiagi Sugar Plantation and Ethanol Production Complex and an 850,000mt export-focused sugar refinery in Port Harcourt.

BUA argued that its project in Port Harcourt was approved by President Muhammadu Buhari, under Nigeria’s free trade zone law, the NEPZA Act, and accused Dangote Sugar and Flour Mills of attempting to “sabotage” the country and its institutions to get rid of the competition.

The company said its Port Harcourt refinery is focused on exports, not the Nigerian market. It, however, said it would intervene if Dangote and Flour Mills “try to increase prices with wanton abandon locally.”

 Unfortunately, and regrettably,  instead of the minister and officials of NSDC to visit BUA Sugar Refinery in Rivers State, to ascertain the level of breach as alleged in the petition, he was alleged to  have  sat in his office without action. He was  also alleged to literally outsource his job of regulation to BUA Sugar Refinery, when he asked the company to write a rejoinder, without doing his due diligence as a regulator.  According to experts, this is the catalyst that exacerbated the crisis.

Supposed confidential letters of official correspondences got leaked to the media. What the Minister of Trade and Investment would have resolved by exercising his constitutional regulatory mandate got shifted to court of public opinion. Why the copies of the letters began flying in the social media, the minister and his office kept mute. Foot-dragging on such an important national issue is tantamount to economic sabotage and official laxity.

 The question , now , is  : between Dangote, Flour Mills and BUA, who is actually fighting for Nigerians: BUA Foods that is promoting endless importation by paying lip service to investment in local production capacity or Dangote  Sugar  that discourages indefinite importation by enriching local production capacity? And it was even Dangote and Flour Mills that drew the attention of a sleeping regulator, yet the supposed referee is still cluelessly undecided while the crisis linger.

 Dangote Sugar and Flour Mills  Nigeria  denied the allegations , saying  there is no iota of truth in them. According to the statement filed with the Nigerian Exchange Limited (NGX), the Dangote Sugar  expressed the belief that the allegations by BUA Foods Plc is not only worrisome but appears to conflict with the anti-competition rules.

It said, “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”.

Market share is the percentage of total sales in an industry generated by a particular company. It is calculated by taking the company’s sales over the period and dividing it by the total sales of the industry over the same period. This metric is used to give a general idea of the size of a company in relation to its market and its competitors. The market leader in an industry is the company with the largest market share.

It is surprising  that a company that is more interested in importation of raw sugar for refining; a business approach that weakens our local production capacity, puts pressure on the nation’s strained foreign exchange, and deny Nigerians opportunities for new jobs, is creating a flawed impression that it is fighting for the masses against price fixing and arbitrary increment.

The Nigerian Stock Exchange  and Federal Competition  and  Consumer Protection Council ( FCCPC) must intervene  quickly to address this menace.  Competition has rules guiding it  and which should be followed to the letter by competitor. Any competitor that goes against  them should be sanctioned .