BUA Cement declares N90bn profit in audited 2021 results

BY EMEKA EJERE

There seems to be no end in sight to a raging war among Nigeria’s sugar industry leaders over accusations and counter accusations of seeking undue market advantage by undermining the country’s plan towards self-sufficiency in the commodity.

The latest pointer to the battle emerged last week when one of the big players in the sugar value chain, BUA Foods, accused Dangote Sugar Refinery Plc (DSR) and Flour Mills of Nigeria Plc (FMN) of causing artificial scarcity of sugar by suspending sales to force prices up in order to make abnormal profit and perhaps blackmail the government to review some compliance issues.

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 Master Plan (NSMP) was crafted by the National Sugar Development Council (NSDC) in 2008 for the development of a roadmap for the country’s sugar sub-sector. The road map was designed to make the Nigerian sugar industry transform into a world class multi-product sugarcane industry that would meet the national sugar demand through local production.

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 locally at least 70 percent of Nigeria’s sugar consumption, which was put at about 1.7 million metric tons a year by 2020 amongst other objectives.

Looking Back:

Official correspondences seen by BusinessHallmark showed that the Nigeria’s sugar production crisis started in January 2021 when DSR and FMN accused the BUA Group of undermining the government’s national sugar master plan by setting up a sugar refinery in Port Harcourt when it had 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. In the meantime, the companies are allowed to import extracts based on the scale of their plantation investment.

In a January 28, 2020 letter to the Minister of Industry, Trade and Investment, Niyi Adebayo, DSR and FMN said BUA did not fulfill the government’s Backward Integration Policy (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 Mr. Aliko Dangote, President of Dangote Group and John Coumantaros, chairman of Flour Mills, alleged that BUA’s only intention was to use its claimed backward integration achievements to obtain importation quota.

“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,” the document said.

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 (3) BIP sugar companies; Dangote Taraba Sugar Limited, Dangote Adamawa Sugar Limited, Nasarawa Sugar Company Limited were incorporated,” it said.
However, the BUA Group denied the claims, saying the company had 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 stated that 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.”

The latest allegation may be one of those interventions threatened by BUA. But the accused companies have put up strong rebuttals.

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,” FMN 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,” it said.

With over 61 years of operations in the food industry, the company is confident 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, DSR 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.”

It described 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.

“The fight is good for the consumers; imagine what would have happened if one company had the monopoly of production and supply of sugar in this country, an observer, Michael Ike, told our correspondent.

“The sugar master plan is a good one but it cannot yield the desired result if government lacks the political will to enforce compliance no matter whose ox is gored”, said Yinka Abayomi, a market analyst.

Self-appraisal

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 its 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 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 N70 billion 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 said it 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.

Below the Target

Unfortunately, Nigeria produced far less sugar in 2020 than it did in 1990 and repeatedly failed to meet its production targets, allowing massive importation to flourish for decades as domestic demand grew.

While the country produced 41,478 MT of sugar in 1990, the figure fell to 38,597 MT in 2019. However, imports rose astronomically from 603,000 MT in 1990 to 1.6 million MT during the period, according to data. generated by the NSDC.

The data revealed that despite the government’s professed efforts to boost local production of sugar, the nation has relied almost entirely – over 98 per cent — on the importation of raw sugar for the last 30 years.
The implication is that successes recorded by industry leaders like Dangote, BUA, and Flour Mills of Nigeria have been anchored more on bringing raw sugar into the country where it is refined and sold, an economically costly model with negative implication for the Naira, job creation, and government revenue.

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