Reshuffle will not shift Nigeria's sugar production ambition
Agriculture Minister Sabo Nanono was one of two ministers that President Muhammadu Buhari sacked on 1 September in a limited cabinet reshuffle.[1] While Nanono held limited political influence as minister, he touted the president’s slogan to ‘grow what we eat and eat what we grow’. That slogan is expressed in the government’s ambition to achieve self-sufficiency in sugar production by the time Buhari’s final term ends in 2023.
Without Nanono, authorities will continue to pursue that ambition in the medium term through a stricter version of the National Sugar Master Plan (NSMP) that was first introduced in 2012 under Buhari’s immediate predecessor Goodluck Jonathan. For example, the central bank prohibited sugar imports in April this year when it ordered banks to stop selling foreign currency to the importers. Three months later, the central bank exclusively licensed Dangote and the two other top sugar makers[2] to import the product on condition that they would fast-track backward integration – a condition which was applied for cement in the past to some success.
Currently, these protectionist measures are being applied with the broader aims of import substitution and currency stability. However, the intended outcomes (at scale) are impeded by gaps in the enabling environment. These include but are not limited to uneven implementation and insecurity in key states.
Significance – Investing in supply chains
Nigeria imports around two million metric tons of sugar but grows only about 70,000 metric tons of sugar cane, mostly in northern Katsina, Kano, and Adamawa states.[3] Producing enough sugar to meet local demand has long been a major political goal. For example, a ten-year NSMP was developed in 2012 and the central goal of the policymakers at the time was to ensure that domestic output matches imports by 2023.[4] The backbone of this master plan was backward integration, which had been used to grow cement output by more than tenfold in the previous decade. The then-governing Jonathan-administration planned to set sugar import quotas and require companies to progressively grow their own supply chains. His successor has come to implement a stricter version of this plan in the context of dwindling petrodollar inflows, post-2015 currency depreciation and wider protectionist interventions.
Under President Buhari’s influence, the central bank prohibited the import of 41 items (including foods but not sugar) in June 2015[5] after the bank was forced to devalue the naira as oil output fell by about 30%.[6] It then launched an Anchor Borrowers Programme by which sugarcane and other farmers received loans at 9% interest rate (whereas standard interest rates were in double digits). Further, the government blocked all trade via land borders from August 2019 to December 2020 with the aim of stemming food smuggling and protecting local farmers. But these measures have not significantly raised output or improved supply. The US Department of Agriculture estimates that Nigeria’s sugar cane output will reduce by 7% this year compared to last year,[7] while food inflation has risen from 10.13% to 21% since 2015.[8]
Domestic sugar supply chains have been adversely affected not just by longstanding weaknesses in transport infrastructure but also by rising insecurity. Farming and distribution, particularly in northern states where sugar cane is grown, have been disrupted by unidentified armed groups that have frequently kidnapped locals for ransom. Around 40 people were kidnapped in May this year in Jibia, Katsina state, which is a key site for sugarcane farming and trade with neighbouring Niger Republic. Meanwhile, government programmes to boost local production have mostly been applied ineffectively. One example is the central bank’s Anchor Borrowers Programme, which has been widely qualified in the local press as political patronage.[9]
Outlook – Uncertainty
Elections and an impending transition of power are in view – as Buhari serves out his final term. But backward integration is supported by both the ruling All Progressives Congress and the main opposition Peoples Democratic Party. We can therefore assume that interventionist policymaking for agriculture will continue to feature requirements that companies cut imports and expand domestic production. However, the strictness with which such requirements are enforced will depend on the candidate who succeeds Buhari.
Meanwhile, insecurity continues to be a source of risk to private actors along the supply chain. The current trend shows that firms and development organisations should anticipate prolonged threats especially in the north. There is also substantial uncertainty with the foreign exchange regime and the central bank’s current governor Godwin Emefiele (whose tenure ends in 2024) is inclined to continually tighten import controls in response to ongoing macroeconomic distress.
[1] Formerly environment minister, Mohammed Abubakar is the new agriculture minister. Power Minister Sale Mamman was also removed to be replaced by the Minister of State for Works and Housing Abubakar D. Aliyu.
[2] Dangote, BUA and Golden Sugar
[3] Nigeria: sugar annual (May 2021). US Department of Agriculture.
[4] Nigerian Sugar Master Plan (October 2012). National Sugar Development Council.
[5] Central Bank of Nigeria (June 2015). Inclusion of some imported goods and services on the list of items not valid for foreign exchange in the Nigerian foreign exchange markets.
[6] Nigeria in recession (September 2016). London School of Economics.
[7] Nigeria: sugar annual (May 2021). US Department of Agriculture.
[8] Inflation rates. Central Bank of Nigeria.
[9] Apathy, distrust hamper Anchor Borrowers Programme, say North Central farmers (June 2021). Guardian.
*Photo by John Cutting
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