Required Report - public distribution

**Date:** 4/13/2004

**GAIN Report Number:** NI4005

NI4005

**Nigeria**

**Sugar**

**Annual**

**2004**

**Approved by:**

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

U.S. Embassy, Lagos

**Prepared by:**

Ali Michael David

**Report Highlights:**

Nigeria\'s overall sugar demand in MY2003/04 is estimated at 1.2 MMT,
all imported. The major suppliers are Brazil and the EU. The percentage
of raw sugar imports have been steadily increasing since the
establishment of a private sugar refinery in 2000.. In CY2003, about 60%
of total sugar imports entered the country in raw form, up from zero
level in 1999. The privatization of government-owned sugar companies is
progressing slowly. While the Savannah Sugar Company was privatized in
March 2000, there have been delays in privatizing the other three sugar
companies. It is hoped that the exercise will be concluded this year.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Annual Report

Lagos \[NI1\]

\[NI\]

Table of Contents

[Executive Summary 3](#executive-summary)

[Production 4](#production)

[Consumption 4](#consumption)

[Trade 4](#trade)

[Tariffs 5](#tariffs)

[Policy 5](#policy)

# Executive Summary

At present, Nigeria's sugar consumption requirement is exclusively
satisfied through imports. The GON's privatization of government-owned
and operated estates has disrupted local production of sugar. Nigeria's
domestic sugar production in 2004/2005 is forecast to remain at zero
level, as the rehabilitation of the privatized estates will take a while
to be completed. The estates yet to be privatized have stopped cane
production.

In March 2002, the GON concluded the public sale of Savannah Sugar
Company (NISSUCO), Nigeria's largest sugar estate. Dangote Group emerged
as the core investor and has since then assumed the management of the
estate. Sources at NISSUCO indicate that the company will not resume
cane production until MY2005/06. The privatization of the other sugar
estates in Bacita, Sunti and Lafiaji earlier scheduled for 2003, will
now be concluded 2004. The GON views the privatization of these poorly
managed government-owned estates as a key element of its goal of
revamping the sugar industry.

The bulk of Nigeria's sugar imports are shipped into the country in raw
form. Raw sugar imports are forecast to increase to 850,000 MT in MY
2004/05, up from 800,000 MT estimated for the current year. Dangote's
sugar refinery has a production capacity of about 1 million tons of
refined sugar annually.

Exchange Rate: US\$1 = 135 Naira

# Production

+-------------+------+-------+------+-------+------+-------+-------+
| Nigeria     |      |       |      |       |      |       |       |
|             |      |       |      |       |      |       |       |
| Centrifugal |      |       |      |       |      |       |       |
| Sugar       |      |       |      |       |      |       |       |
+-------------+------+-------+------+-------+------+-------+-------+
|             | **20 | *     | **20 | **    | **20 | **    | **    |
|             | 03** | *Revi | 04** | Estim | 05** | Forec | UOM** |
|             |      | sed** |      | ate** |      | ast** |       |
+-------------+------+-------+------+-------+------+-------+-------+
|             | **   | *     | **   | *     | **   | *     |       |
|             | USDA | *Post | USDA | *Post | USDA | *Post |       |
|             | Offi | Est   | Offi | Est   | Offi | Est   |       |
|             | cial | imate | cial | imate | cial | imate |       |
|             | \    | \[Ne  | \    | \[Ne  | \    | \[Ne  |       |
|             | [Old | w\]** | [Old | w\]** | [Old | w\]** |       |
|             | \]** |       | \]** |       | \]** |       |       |
+-------------+------+-------+------+-------+------+-------+-------+
| ##          |      | 11    |      | 11    |      | 11    | MM    |
| #### Market |      | /2002 |      | /2003 |      | /2004 | /YYYY |
|  Year Begin |      |       |      |       |      |       |       |
+-------------+------+-------+------+-------+------+-------+-------+
| **Beginning | 100  | 100   | 100  | 100   | 100  | 100   | (1000 |
| Stocks**    |      |       |      |       |      |       | MT)   |
+-------------+------+-------+------+-------+------+-------+-------+
| **Beet      | 0    | 0     | 0    | 0     | 0    | 0     | (1000 |
| Sugar       |      |       |      |       |      |       | MT)   |
| P           |      |       |      |       |      |       |       |
| roduction** |      |       |      |       |      |       |       |
+-------------+------+-------+------+-------+------+-------+-------+
| **Cane      | 0    | 25    | 0    | 0     | 0    | 0     | (1000 |
| Sugar       |      |       |      |       |      |       | MT)   |
| P           |      |       |      |       |      |       |       |
| roduction** |      |       |      |       |      |       |       |
+-------------+------+-------+------+-------+------+-------+-------+
| **TOTAL     | 0    | 25    | 0    | 0     | 0    | 0     | (1000 |
| Sugar       |      |       |      |       |      |       | MT)   |
| P           |      |       |      |       |      |       |       |
| roduction** |      |       |      |       |      |       |       |
+-------------+------+-------+------+-------+------+-------+-------+
| **Raw       | 600  | 600   | 800  | 800   | 0    | 850   | (1000 |
| Imports**   |      |       |      |       |      |       | MT)   |
+-------------+------+-------+------+-------+------+-------+-------+
| **Refined   | 400  | 400   | 350  | 350   | 0    | 350   | (1000 |
| Imp.(Raw    |      |       |      |       |      |       | MT)   |
| Val)**      |      |       |      |       |      |       |       |
+-------------+------+-------+------+-------+------+-------+-------+
| **TOTAL     | 1000 | 1000  | 1150 | 1150  | 0    | 1200  | (1000 |
| Imports**   |      |       |      |       |      |       | MT)   |
+-------------+------+-------+------+-------+------+-------+-------+
| **TOTAL     | 1100 | 1125  | 1250 | 1250  | 100  | 1300  | (1000 |
| SUPPLY**    |      |       |      |       |      |       | MT)   |
+-------------+------+-------+------+-------+------+-------+-------+
| **Raw       | 0    | 0     | 0    | 0     | 0    | 0     | (1000 |
| Exports**   |      |       |      |       |      |       | MT)   |
+-------------+------+-------+------+-------+------+-------+-------+
| **Refined   | 100  | 125   | 100  | 100   | 0    | 60    | (1000 |
| Exp.(Raw    |      |       |      |       |      |       | MT)   |
| Val)**      |      |       |      |       |      |       |       |
+-------------+------+-------+------+-------+------+-------+-------+
| **TOTAL     | 100  | 125   | 100  | 100   | 0    | 60    | (1000 |
| EXPORTS**   |      |       |      |       |      |       | MT)   |
+-------------+------+-------+------+-------+------+-------+-------+
| **Human     | 900  | 900   | 1250 | 1250  | 0    | 1300  | (1000 |
| Dom.        |      |       |      |       |      |       | MT)   |
| Co          |      |       |      |       |      |       |       |
| nsumption** |      |       |      |       |      |       |       |
+-------------+------+-------+------+-------+------+-------+-------+
| **Other     | 0    | 0     | 0    | 0     | 0    | 0     | (1000 |
| Disa        |      |       |      |       |      |       | MT)   |
| ppearance** |      |       |      |       |      |       |       |
+-------------+------+-------+------+-------+------+-------+-------+
| **Total     | 900  | 900   | 1050 | 1050  | 0    | 1140  | (1000 |
| Disa        |      |       |      |       |      |       | MT)   |
| ppearance** |      |       |      |       |      |       |       |
+-------------+------+-------+------+-------+------+-------+-------+
| **Ending    | 100  | 100   | 100  | 100   | 0    | 100   | (1000 |
| Stocks**    |      |       |      |       |      |       | MT)   |
+-------------+------+-------+------+-------+------+-------+-------+
| **TOTAL     | 1100 | 1125  | 1250 | 1250  | 0    | 1300  | (1000 |
| DIS         |      |       |      |       |      |       | MT)   |
| TRIBUTION** |      |       |      |       |      |       |       |
+-------------+------+-------+------+-------+------+-------+-------+

Nigeria's domestic sugar production is forecast to remain at the current
zero level due largely to disruptions caused by the on-going
privatization exercise. Although the privatization of NISSUCO was
concluded in March 2002, the new management indicated that production is
not expected to resume until MY2005/06. The privatization of the other
government-owned estates in Bacita, Lafiaji and Sunti originally
scheduled for 2003 is delayed till the second half of 2004. The GON did
not disburse operational funds to these estates because the
privatization exercise was underway.

## 

# Consumption

Nigeria's overall sugar consumption requirement in 2004/05 is forecast
at 1.3 million MT, up from 1.2 million MT in 2003/04. The forecast is
based on increased demand for both industrial and direct human
consumption. Trends in industrial activity utilizing sugar as a
processing input, such as for soft drinks, pharmaceuticals, beverages,
and in the manufacture of confectionary products, suggest that sugar
demand will continue to rise.

## 

# Trade

Dangote's sugar refinery was established in 2000 to convert imported
brown granulated sugar into plantation white sugar. From that time, raw
sugar imports have been steadily rising. Post forecasts Nigeria's raw
sugar imports in 2004/05 at 850,000 MT, up from 800,000 MT in 2003/04.
Refined sugar imports are forecast at 350,000 MT.(raw sugar equivalent),
same level as 2003/04. The bulk of Nigeria's sugar imports, both raw and
refined, comes from Brazil and to some extent, the EU. Trans-border
sugar exports will decline in MY2004/05 because of the higher duty on
refined sugar imports.

## Tariffs

In the last quarter of 2003, the GON increased the duty on imported
refined sugar from 30 percent to 40 percent despite agitations by the
key importers of refined sugar. Sugar Development Levy was also
increased from 5 percent to 10 percent to support local production. When
VAT (5%), port surcharge (7% of duty) and other charges are added, the
effective duty rises to more than 50 percent. Dangote Group is exempted
from payment of the duty and levy under existing investment laws.

# 

# Policy

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 is expected to improve the management of these estates and
stimulate new investments in the industry. Additionally, under existing
investments laws, investors in local production are exempted from the
payment of import duty and the sugar development levy for raw sugar
imports. The GON requires all sugar consumed in Nigeria to be fortified
with Vitamin A and must have a minimum of 45 ICMSA