Required Report - public distribution

**Date:** 5/5/2006

**GAIN Report Number:** NI6009

NI6009

**Nigeria**

**Sugar**

**Annual**

**2006**

**Approved by:**

![](media/image1.wmf)Ali A. Abdi, Agricultural Attaché

U.S. Consulate, Lagos

**Prepared by:**

Michael David, Agricultural Specialist

**Report Highlights:**

Nigeria is expected to resume sugar production this year with a modest
40,000 tons after four consecutive years of depending exclusively on
imports. Savannah Sugar Company, which was privatized in 2002, is
expected to resume milling operations in May 2006 under a new
management. Nigeria\'s sugar consumption is increasing steadily in step
with growth in population and in industries utilizing sugar as raw
material. The bulk of Nigeria\'s sugar requirement is imported raw and
refined locally. Brazil is the dominant supplier of brown and refined
sugar to Nigeria.

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 5](#consumption)

[Trade 5](#trade)

[Policy 5](#policy)

# Executive Summary

The Government of Nigeria (GON) has privatized all its four sugar
estates after several years of mismanagement. The new investors have
taken over the management of these estates and have embarked on the
rehabilitation and expansion of the cane fields and the mills. According
to the GON, the privatization of these estates is a key element of
revamping the sugar industry and increasing local production.

Local production has been at zero level since 2001 when the GON
commenced the privatization of government-owned sugar estates. In what
appears to be a major success story for Nigeria's privatization
exercise, Dangote Group, the new owner of Savannah Sugar Company has
completely rehabilitated the cane fields and the mill. Field visits by
the Agricultural Affairs Office to the estate site in Numan in the North
Eastern State of Adamawa revealed that the facility has been completely
revamped and milling operation is expected to resume in May 2006. The
other sugar estates in Bacita and Sunti have all been privatized but are
yet to resume operation.

Now that virtually all government-owned sugar estates have been
privatized, the National Sugar Development Council (GON's sugar sector
development agency) has shifted focus to research and development,
supporting a uniform development of the out-grower scheme and
establishing a price support mechanism to ensure that farmers receive a
fair deal from the estates. The NSDC has two seed cane location in
Hadejia and Kano to support small-scale farmers.

At present, the bulk of the sugar consumed in the country (about 80
percent) is imported as brown sugar and refined locally. The remainder
is imported in refined form. Nigeria has only one sugar refinery
operating with an installed capacity of 1.5 million tons per annum,
sufficient to satisfy total demand. Another investor plans to commission
a second refinery later in 2006. The GON makes it mandatory for all
sugar directed at household consumers to be fortified with vitamin A.
Non-fortified sugar imports are exclusively for industrial use.

Exchange Rate: US\$1 = 128 Naira

# PSD Table: Centrifugal Sugar

+-----------------------+-----+-----+-----+-----+-----+-----+-----+
| **Nigeria**           |     |     |     |     |     |     |     |
|                       |     |     |     |     |     |     |     |
| **Sugar,              |     |     |     |     |     |     |     |
| Centrifugal**         |     |     |     |     |     |     |     |
+-----------------------+-----+-----+-----+-----+-----+-----+-----+
|                       | **  | **  | **  | **E | **  | **F | *   |
|                       | 200 | Rev | 200 | sti | 200 | ore | *UO |
|                       | 5** | ise | 6** | mat | 7** | cas | M** |
|                       |     | d** |     | e** |     | t** |     |
+-----------------------+-----+-----+-----+-----+-----+-----+-----+
|                       | **U | **P | **U | **P | **U | **P |     |
|                       | SDA | ost | SDA | ost | SDA | ost |     |
|                       | Of  | Es  | Of  | Es  | Of  | Es  |     |
|                       | fic | tim | fic | tim | fic | tim |     |
|                       | ial | ate | ial | ate | ial | ate |     |
|                       | \[O | \[N | \[O | \[N | \[O | \[N |     |
|                       | ld\ | ew\ | ld\ | ew\ | ld\ | ew\ |     |
|                       | ]** | ]** | ]** | ]** | ]** | ]** |     |
+-----------------------+-----+-----+-----+-----+-----+-----+-----+
| ###                   |     | 0   |     | 0   |     | 0   | M   |
| ### Market Year Begin |     | 9/2 |     | 9/2 |     | 9/2 | M/Y |
|                       |     | 004 |     | 005 |     | 006 | YYY |
+-----------------------+-----+-----+-----+-----+-----+-----+-----+
| **Beginning Stocks**  | 100 | 100 | 100 | 100 | 100 | 100 | (1  |
|                       |     |     |     |     |     |     | 000 |
|                       |     |     |     |     |     |     | MT) |
+-----------------------+-----+-----+-----+-----+-----+-----+-----+
| **Beet Sugar          | 0   | 0   | 0   | 0   | 0   | 0   | (1  |
| Production**          |     |     |     |     |     |     | 000 |
|                       |     |     |     |     |     |     | MT) |
+-----------------------+-----+-----+-----+-----+-----+-----+-----+
| **Cane Sugar          | 0   | 0   | 0   | 40  | 0   | 80  | (1  |
| Production**          |     |     |     |     |     |     | 000 |
|                       |     |     |     |     |     |     | MT) |
+-----------------------+-----+-----+-----+-----+-----+-----+-----+
| **TOTAL Sugar         | 0   | 0   | 0   | 40  | 0   | 80  | (1  |
| Production**          |     |     |     |     |     |     | 000 |
|                       |     |     |     |     |     |     | MT) |
+-----------------------+-----+-----+-----+-----+-----+-----+-----+
| **Raw Imports**       | 800 | 800 | 850 | 850 | 0   | 1   | (1  |
|                       |     |     |     |     |     | 100 | 000 |
|                       |     |     |     |     |     |     | MT) |
+-----------------------+-----+-----+-----+-----+-----+-----+-----+
| **Refined Imp.(Raw    | 350 | 350 | 350 | 350 | 0   | 300 | (1  |
| Val)**                |     |     |     |     |     |     | 000 |
|                       |     |     |     |     |     |     | MT) |
+-----------------------+-----+-----+-----+-----+-----+-----+-----+
| **TOTAL Imports**     | 1   | 1   | 1   | 1   | 0   | 1   | (1  |
|                       | 150 | 150 | 200 | 200 |     | 400 | 000 |
|                       |     |     |     |     |     |     | MT) |
+-----------------------+-----+-----+-----+-----+-----+-----+-----+
| **TOTAL SUPPLY**      | 1   | 1   | 1   | 1   | 100 | 1   | (1  |
|                       | 250 | 250 | 300 | 340 |     | 580 | 000 |
|                       |     |     |     |     |     |     | MT) |
+-----------------------+-----+-----+-----+-----+-----+-----+-----+
| **Raw Exports**       | 0   | 0   | 0   | 0   | 0   | 0   | (1  |
|                       |     |     |     |     |     |     | 000 |
|                       |     |     |     |     |     |     | MT) |
+-----------------------+-----+-----+-----+-----+-----+-----+-----+
| **Refined Exp.(Raw    | 100 | 100 | 60  | 100 | 0   | 100 | (1  |
| Val)**                |     |     |     |     |     |     | 000 |
|                       |     |     |     |     |     |     | MT) |
+-----------------------+-----+-----+-----+-----+-----+-----+-----+
| **TOTAL EXPORTS**     | 100 | 100 | 60  | 100 | 0   | 100 | (1  |
|                       |     |     |     |     |     |     | 000 |
|                       |     |     |     |     |     |     | MT) |
+-----------------------+-----+-----+-----+-----+-----+-----+-----+
| **Human Dom.          | 1   | 1   | 1   | 1   | 0   | 1   | (1  |
| Consumption**         | 050 | 050 | 140 | 140 |     | 380 | 000 |
|                       |     |     |     |     |     |     | MT) |
+-----------------------+-----+-----+-----+-----+-----+-----+-----+
| **Other               | 0   | 0   | 0   | 0   | 0   | 0   | (1  |
| Disappearance**       |     |     |     |     |     |     | 000 |
|                       |     |     |     |     |     |     | MT) |
+-----------------------+-----+-----+-----+-----+-----+-----+-----+
| **Total               | 1   | 1   | 1   | 1   | 0   | 1   | (1  |
| Disappearance**       | 050 | 050 | 140 | 140 |     | 380 | 000 |
|                       |     |     |     |     |     |     | MT) |
+-----------------------+-----+-----+-----+-----+-----+-----+-----+
| **Ending Stocks**     | 100 | 100 | 100 | 100 | 0   | 100 | (1  |
|                       |     |     |     |     |     |     | 000 |
|                       |     |     |     |     |     |     | MT) |
+-----------------------+-----+-----+-----+-----+-----+-----+-----+
| **TOTAL               | 1   | 1   | 1   | 1   | 0   | 1   | (1  |
| DISTRIBUTION**        | 250 | 250 | 300 | 340 |     | 580 | 000 |
|                       |     |     |     |     |     |     | MT) |
+-----------------------+-----+-----+-----+-----+-----+-----+-----+

# Production

Nigeria's domestic sugar production in MY2006/07 is forecast at 80,000
tons, up from 40,000 tons this year. Field visit by the Agricultural
Affairs Office to Savannah Sugar Company in Adamawa State, the first
estate to be privatized in 2002, revealed that the Dangote Group, the
new owners of the estate have completely rehabilitated the cane fields
and the mills. Currently, the company has 3,000 hectares of cane fields
at varying stages of maturity. Harvesting and milling operations are
expected to commence in May 2006. Savannah (Dangote) Sugar Company has a
total of 32,000 hectares of land available with excellent irrigation
facility and plans to expand very quickly to use all the land. Also, the
company in partnership with the National Sugar Development Council is
developing a robust out-grower scheme to provide economic support to the
local community around the estate. The first phase of the out-grower
scheme will involve 400 farmers with average farm size of two hectares.
Under the scheme, Savannah sugar will prepare the land, provide
irrigation water, seed cane and other inputs on a cost recovery basis.
The other estates in Bacita and Sunti are at varying stages of
rehabilitation under new managements and could resume milling operations
in 2006/07.

The privatization of government-owned, fully integrated sugar companies
is a key element of GON's overall strategy of achieving self-sufficiency
in the long run. Privatization will undoubtedly improve the management
of these estates and stimulate new investments in the industry.

# Consumption

Overall sugar consumption in MY2006/07 is forecast at 1.3 million tons,
up from 1.1 million tons in 2005/06. The forecast is in line with growth
trends in population and industrial demand. Trends in industrial
activity utilizing sugar as input, such as for soft drinks,
pharmaceuticals, beverages and confectionary products, suggest that
demand for sugar will continue to rise. Industrial usage accounts for
almost 35 percent of the total sugar consumption in Nigeria. Soft drink
production alone accounts for about half of total industrial usage.

## 

# Trade

Post forecasts Nigeria's raw sugar imports in 2005/06 at 1.1 million
tons, up from 850,000 tons in 2005/06. Dangote Group, the owner of a
sugar refinery in Lagos is the sole importer of brown sugar. The
refinery has an installed capacity of 1.5 million tons. Another investor
is expected to commission the second sugar refinery in late 2006.
Refined sugar imports are forecast at 300,000 tons (raw equivalent),
down from 350,000 tons in 2005/06 due to increasing refining capacity.
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 are projected at 100,000 tons
annually.

# 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. However, following complaints by industrial
users of sugar that fortified sugar will induce undesirable changes in
color, taste and appearance in their products, the GON approved imports
of non-fortified sugar exclusively for industrial use. All sugar for
household consumption is required to be fortified with vitamin A. At
present, Dangote refinery is the only supplier of fortified sugar in
Nigeria.