Economy and Business

How Dangote moved to “edge out” competition, demanded sanction against rival sugar business

Facts have emerged on how Nigeria’s biggest sugar producer, Dangote Industries Limited, alongside another producer, flour mills of Nigeria plc, approached the federal government to reprimand BUA, their rival in a bid to shut down its business.

Correspondences exchanged between the companies and the federal ministry of trade and investment were exclusively obtained by POLITICS NIGERIA.

Their grouse is against BUA’s most recent sugar refinery plant in the Bundu Free Trade Zone, Portharcourt, Rivers state capital, which they accused of importing raw materials against regulations and the National Sugar Master Plan (NSMP) hinged on the backward integration plan.

The development of NSMP commenced in 2008 under the administration of the late President Umaru Musa Yar’Adua but was approved and adopted in 2012 by the administration of former President Goodluck Jonathan.

The implementation of the plan took off in 2013 with an estimated target of producing 1.79 million tonnes of sugar locally by 2020 aimed at helping the sugar industry in Nigeria meet the national sugar demand through local production. Meanwhile, POLITICS NIGERIA’s findings have revealed that the somewhat malicious letter spearheaded and signed by the Chairman of Dangote Industries Limited, Aliko Dangote was targeted at stopping the new plant, which poses a threat to his business.

While the intent of his actions are not immediately clear, industry experts who spoke with our reporter posited that although BUA’s new plant is majorly for exporting refined sugar, it can intervene in the local market and pay relevant duties when there is an increase in price as there is a subsisting approval for companies operating in Export Processing Zones – a law which Dangote is also a beneficiary of in his Lagos Petrolchemical Refinery in the Lekki Free Trade Zone.

“This may not augur well with Mr Dangote who wields much influence in the sugar industry. He’ll not like a competitor that will checkmate him. We have seen this happen in the Cement industry and we hope they will realise that it is better they work together to expand the industry than bring anyone down,” an expert said.

With the new refinery, the country’s refining capacity goes from 2.75 million metric tons to 3.4 million metric tons per annum.

Alleged violation

In a letter addressed to the minister of trade and investment, Niyi Adebayo, the Chairmen of Dangote Industries Limited and Flour mills of Nigeria plc, Aliko Dangote and John Coumantaros respectively, on January 28, prayed that the government should sanction BUA. It should be noted that as part of their obligations to the NSMP, all refinery owners in Nigeria were expected to invest in significant local production through Backward Integration Project. Dangote bought Savannah Sugar, Flour Mills Golden Sugar bought Sunti Sugar and BUA bought Lafiagi Sugar.

The two companies – Dangote and Flour Mills, hinged their request on an alleged violation of the NSMP by their rival.

“As the Honourable Minister is aware, the Sugar Industry in Nigeria has been governed for a while now by the National Sugar Master Plan (NSMP) which is a well-designed policy to encourage Backward Integration in the Sugar Industry with the ultimate objective of attaining self-sufficiency in Sugar production locally.

Following the mid-term review of the NSMP, we recognize that there is a tremendous amount of work that is required by all stakeholders to achieve the intended objective behind the policy. It also became clear that if the policy is to have any chance of success, then efforts must be stepped up by the regulator, the National Sugar Development Council (NSDC) to ensure a disciplined and fair implementation of the policy

Honourable Minister, with this in mind we wish to humbly bring to your attention an important issue which we believe threatens and poses a threat to the attainment of the National Sugar Master Plan (NSMP) and the sustainability of Nigeria local sugar industry, of which our Companies are the best investors. Publicly available Information suggests that BUA International, one of the players in the Sugar Industry. has commissioned a sugar refinery plant in Port Harcourt, Rivers State. With the new refinery, the Country’s refining capacity goes from 2.75 million metric tons to 3.4 million metric tons per annum, or from 170 percent over capacity over the last year’s import quota to over 210 percent capacity,” the letter read.

According to Messrs Dangote and Coumatanros, the mid term review conducted by the national sugar development Council indicated that BUA has failed to invest substantively in local production or comply with its undertakings under its BIP.

“Even before this surreptitious investment in additional refining capacity Nigeria already has enough refining capacity to satisfy demand today and well into the future. So, the business logic behind this investment is clearly defective. BUA intends only on importing and refining raw sugar whilst claiming to to investing in developing sugar plantations in order to qualify for quotas to import raw sugar.”

“This investment in the Port Harcourt Refinery, was clearly done with the intention to undermine the NSMP We are particularly surprised by the brazenness as we believe that the choice of location and the publicity campaign behind the investment has been deliberately engineered to provoke public sentiment and pit the Federal Government of Nigeria against its people,” the letter further stated.

While seeking the intervention of the federal government, Messrs Dangote and Coumatanros, demanded a level playing field that provides for fair competition in the local sugar market.

“An investigation should be conducted to determine the quantity of Raw sugar imported by the Refinery in Port Harcourt and the appropriate penalty in terms of duty (60%) and level (10%) be levied on the company,” they demanded in the letter.

POLITICS NIGERIA learnt that BUA, apart from the new port harcourt refinery, has a 720,000 mt sugar refinery in Lagos and a 20,000 hectare Lafiagi Sugar Plantation and Ethanol Production Complex, all covered by the Backward Implementation Programme of the National Sugar Master Plan.

According to reliable sources, its flagship Lafiagi BIP project, despite being the last to be handed over by the federal government amongst the 3 producers, has seen significant progress which is measured at scheduled intervals by the Nigerian Sugar Development Council and also via peer reviews with the other players in question – In line with the dictates of the Nigeria Sugar Master Plan. The company recently completed an ethanol plant at the plantation and currently almost done with their sugar mill and refinery.

Although focused on exporting refined sugar, it could intervene in the local market following an arbitrary increase in price by the protesting companies as allowed by the laws of Nigeria. With its Nigerian Export Processing Zone Authority (NEPZA) licence, obtained by this newspaper, it can intervene locally in order to stabilise the price.

This newspaper could not immediately get the reaction of BUA as of the time of filing this report.

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