“The government has a national sugar master plan, the NSMP. They’re aiming to make Nigeria self-sufficient in sugar production and there is a huge amount of investment going on at the moment in sugarcane plantations,” Ecobank’s head of soft commodities research Edward George told CNBC Africa.
“Nigeria is the largest sugar importer in Africa. It’s one of the largest consumers as well so if you’re investing in sugar in Nigeria, you have a market sitting there for you.”
The Nigerian Sugar Master Plan (NSMP) estimates that Nigeria’s demand for sugar will breach the 1.7 million metric tonnes mark by 2020, and aims to raise local production of sugar and to stem the tide of unbridled importation.
It also aims to create job opportunities and to contribute to the production of ethanol and generation of electricity.
George explained that another component of this plan is to reduce the amount of imports coming in from Brazil, one of Nigeria’s major sugar suppliers.
“They first of all banned packaged refined sugar, they then effectively banned refined sugar. They are now trying to reduce the amount of raw sugar coming in from Brazil, which is refined in place.”
In order to cope with the sugar demand, Nigeria will have to establish at least 28 sugar factories to cultivate about 250,000 hectares of land into sugar over the next 10 years.
“We’ve seen heavy investment from Dangote in sugar production, I think basically it’s a bright future but there’s still a way to go,” George added.
He also believes that Kenya, another African sugar producer, is running out of time to reform its sector and needs to acquire foreign investment to take over its mills soon.
“When we look at Kenya, I think there’s a real crisis in the sugar sector there. They have been trying for many years to reform the sugar sector and the problem is they have very high costs in Kenya – it’s between 700 and 800 dollars a tonne to produce sugar there. That’s more than double the cost in Zimbabwe, Malawi, Sudan, Zambia – which are the major competitors in the region,” George said.
“They need to have major reform of the sector in Kenya and the problem is that in March, the special safeguards that they have from COMESA are due to expire, and that’s when there could be a flood of cheap imports coming in. It just goes to show that generally the sugar sector in East Africa and Southern Africa is facing a watershed moment.”