Required Report - public distribution

**Date:** 4/11/2005

**GAIN Report Number:** NI5004

NI5004

**Nigeria**

**Sugar**

**Annual**

**2005**

**Approved by:**

![](media/image1.wmf)Jamie Rothschild

U.S. Consulate, Lagos

**Prepared by:**

Ali Michael David

**Report Highlights:**

Nigeria depends exclusively on sugar imports to satisfy demand. In
2004/05, we estimate that at least 70 percent of the imports were
refined locally. The major suppliers are Brazil, Guatemala and the EU.
Sugar consumption is increasing steadily by four percent annually in
step with growth in population and in industries utilizing sugar as raw
material, such as food and beverages. Effective January 1, 2005, the GON
banned imports of sugar not fortified with Vitamin A. Technically, the
new directive prevents refined sugar from entering Nigeria legally. Coca
Cola Co. and other industrial users of sugar whose operations are
affected by the ban have requested import waivers from the GON. The duty
on raw sugar is five percent and on refined sugar 40 percent.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Annual Report

Lagos \[NI1\]

\[NI\]

Table of Contents

[Executive Summary 3](#executive-summary)

[PSD Table: Centrifugal Sugar 4](#psd-table-centrifugal-sugar)

[Production 4](#production)

[Consumption 4](#consumption)

[Trade 5](#trade)

[Policy 5](#policy)

# Executive Summary

Currently, there is only one sugar refinery operating in Nigeria. The
refinery is the sole importer of raw sugar. Current installed capacity
is 1.3 million tons per annum sufficient to supply total demand. The
company's dominance in the sugar sector is further strengthened by the
recent GON directive that all sugar consumed in Nigeria should be
fortified with vitamin A. Technically, the requirement prevents refined
sugar from being imported legally, since Vitamin A fortified sugar is
not traded internationally.

The GON privatized the Savannah Sugar Company in 2002. Post understands
that the rehabilitation of the estate by its new owners is nearing
completion. Production should begin in MY2005/06 with a modest output of
10,000 tons. The remaining sugar facilities are in the process of being
privatized and have negligible production. The GON views the
privatization of these poorly managed government-owned estates as a key
element of its goal of revamping the sugar industry.

Exchange Rate: US\$1 = 130 Naira

# PSD Table: Centrifugal Sugar

+---------------------+------+------+------+------+------+------+------+
| Nigeria             |      |      |      |      |      |      |      |
|                     |      |      |      |      |      |      |      |
| Sugar, Centrifugal  |      |      |      |      |      |      |      |
+---------------------+------+------+------+------+------+------+------+
|                     | **20 | **R  | **20 | **Es | **20 | **Fo | **U  |
|                     | 04** | evis | 05** | tima | 06** | reca | OM** |
|                     |      | ed** |      | te** |      | st** |      |
+---------------------+------+------+------+------+------+------+------+
|                     | **   | **   | **   | **   | **   | **   |      |
|                     | USDA | Post | USDA | Post | USDA | Post |      |
|                     | Offi | Esti | Offi | Esti | Offi | Esti |      |
|                     | cial | mate | cial | mate | cial | mate |      |
|                     | \    | \    | \    | \    | \    | \    |      |
|                     | [Old | [New | [Old | [New | [Old | [New |      |
|                     | \]** | \]** | \]** | \]** | \]** | \]** |      |
+---------------------+------+------+------+------+------+------+------+
| #####               |      | 09/  |      | 09/  |      | 09/  | MM/  |
| # Market Year Begin |      | 2003 |      | 2004 |      | 2005 | YYYY |
+---------------------+------+------+------+------+------+------+------+
| **Beginning         | 100  | 100  | 100  | 100  | 100  | 100  | (    |
| Stocks**            |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **Beet Sugar        | 0    | 0    | 0    | 0    | 0    | 0    | (    |
| Production**        |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **Cane Sugar        | 0    | 0    | 0    | 0    | 0    | 10   | (    |
| Production**        |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **TOTAL Sugar       | 0    | 0    | 0    | 0    | 0    | 10   | (    |
| Production**        |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **Raw Imports**     | 800  | 800  | 850  | 850  | 0    | 950  | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **Refined Imp.(Raw  | 350  | 350  | 350  | 350  | 0    | 300  | (    |
| Val)**              |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **TOTAL Imports**   | 1150 | 1150 | 1200 | 1200 | 0    | 1250 | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **TOTAL SUPPLY**    | 1250 | 1250 | 1300 | 1300 | 100  | 1360 | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **Raw Exports**     | 0    | 0    | 0    | 0    | 0    | 0    | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **Refined Exp.(Raw  | 100  | 100  | 60   | 60   | 0    | 50   | (    |
| Val)**              |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **TOTAL EXPORTS**   | 100  | 100  | 60   | 60   | 0    | 50   | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **Human Dom.        | 1050 | 1050 | 1140 | 1140 | 0    | 1210 | (    |
| Consumption**       |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **Other             | 0    | 0    | 0    | 0    | 0    | 0    | (    |
| Disappearance**     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **Total             | 1050 | 1050 | 1140 | 1140 | 0    | 1210 | (    |
| Disappearance**     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **Ending Stocks**   | 100  | 100  | 100  | 100  | 0    | 100  | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| **TOTAL             | 1250 | 1250 | 1300 | 1300 | 0    | 1360 | (    |
| DISTRIBUTION**      |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+

# Production

Nigeria's domestic sugar production in MY2005/06 is forecast at 10,000
tons, up from the zero level recorded in the last three years. Following
the privatization of one of Government-owned sugar estates in 2002, the
new owners have embarked on the rehabilitation of the estate. Sources at
the company indicate that the facility will be back in operation during
MY2005/06. The privatization of the other sugar estates in Bacita, Sunti
and Lafiaji earlier scheduled for 2004 has been delayed. The delay is
because the GON is unable to get core investors to take over the
estates.

The stated policy of the Nigerian government is to move Nigeria quickly
from dependence on imports to at least 70 percent self-sufficiency in
domestic sugar production by 2010. The privatization of the existing
government-owned, fully integrated sugar companies is a key element of
GON's overall strategy of achieving self-sufficiency on the long run.
Privatization will undoubtedly improve the management of these estates
and stimulate new investments in the industry. However, it is unlikely
that Nigeria will attain 70 percent self-sufficiency by 2010.

# Consumption

Nigeria's overall sugar consumption requirement in MY2005/06 is forecast
at 1.2 million tons, up from 1.1 million tons in 2004/05. The forecast
is based on population growth and increasing industrial demand. Trends
in the industries utilizing sugar as a processing input, suggest that
sugar demand will continue to rise. The major users are the
confectionary, pharmaceutical, and soft drinks industries.

# Trade

Post forecasts Nigeria's raw sugar imports in 2005/06 at 950,000 tons,
up from 850,000 tons in 2004/05. The sole importer of raw sugar is
Dangote Group, the owner of a sugar refinery in Lagos. Capacity of this
refinery is expected to increase by this summer to 1.5 MMT. Refined
sugar imports are forecast at 250,000 tons, down from 300,000 tons in
2004/05. Importers of refined sugar are ED&F Man, an international
trading company and Jeodam an indigenous trading company. The bulk of
Nigeria's sugar imports, both raw and refined, come from Brazil, the EU
and Guatemala. Informal trans-border sugar exports to the land-locked
countries of Niger and Chad will decline in MY2005/06 because of the
higher duty on refined sugar imports.

# Policy

The import duty on refined sugar is 40 percent. When other taxes such as
the port surcharge (7% of duty), development levy (10%), VAT (5%), CISS
(1% of FOB) and the ECOWAS trade Liberalization Scheme Tax (0.5% CIF)
are assessed, the effective duty is about 60 percent. Raw sugar imports
attracts a lower duty of five percent and is exempt from payment of
sugar development levy. Under existing investments laws, investors in
local sugar production are exempt from the payment of the GON's sugar
development levy for raw sugar imports and they also enjoy a
significantly lower import duty. Post understands that some of the
importers of refined sugar are planning to establish sugar refineries.
The GON requires all sugar consumed in Nigeria have a minimum of 45
ICMSA

Effective January 1, 2005, the GON banned the importation of sugar not
fortified with Vitamin A as part of efforts to eradicate Vitamin A
Deficiency in the country. Coca Cola and other industrial users of sugar
have indicated that the directive is inimical to the health of their
businesses. In particular, fortification will induce undesirable changes
in color, taste and appearance of internationally recognized brands. It
could also reduce the shelf life of the final product. Industrial users
of sugar under the umbrella of the Association of Food and Beverage
Employers have requested a waiver to import unfortified sugar for their
exclusive use. The request is currently under GON review.