With over N7 trillion annually going into the importation of rice, wheat, vegetable oil, fish, furniture, petroleum products and sugar among others, it was only a matter of time before the nation’s voracious consumption of imported items began to strangle its largely unilateral revenue source.

Analysts have now made it abundantly clear that if status quo persists, Nigeria will not only run out of foreign reserves but may no longer be able to achieve the fundamental obligation of independently financing its national budget without support from international donor agencies.

Unfortunately, with most western nations also going broke and Nigeria’s notorious international image of graft and corruption looming large, it certainly would be an uphill task to find reliable foreign support, should the predicted dark days actually creep in.
This gloomy picture notwithstanding, one policy made popular by the former President Olusegun Obasanjo regime’s foray into the cement sector but actually implemented by the Yar’Adua and Jonathan administrations towards ensuring that all the cement utilised in Nigeria are actually produced locally, may be an essential route, through which the nation’s economy would be bailed out.

The policy known as backward integration certainly did the business in the liberation of Nigeria’s cement sector from the stranglehold of foreign nations. This policy involves a company or country taking charge of the process related to the supply of the raw materials it needs to churn out its finished products, so as to improve the efficiency of its production process, as well as enhance independence and profitability.

 It helped to move Nigeria from a nation, which required imports to make up for the short fall in its cement needs, to one that has a marketable surplus in its cement sector, which is currently being exported to nations in west, Central Africa and beyond.

Upon the implementation of the policy, the local production of cement in Nigeria from limestone to clinker and then to finished cement after the addition of gypsum grew from as low as 3million tonnes per annum to as high as 25million tonnes yearly in about 10 years.

With the cement sector serving as an eloquent example of the success that can result from backward integration, therefore, a desirable bandwagon effect appears to have set in. The federal government now appears to be prodding Dangote Group, the main company, which led the charge in the case of cement, to lead the way again in replicating the cement success story in the sugar sector. 

Government’s Momentum
The federal government has disclosed that it has prepared special incentives for investors in the sugar industry, especially those that have taken advantage of government’s Backward Integration Policy in the sector by investing not just in the refining of raw sugar imported from South America but producing sugar from sugarcane from the field.

The Minister of Industry, Trade and Investment, Mr. Olusegun Aganga, said the incentives would be similar to what was given to investors who had keyed into government’s Backward Integration Policy in the cement industry, adding that the move would help the country to achieve self-sufficiency in sugar production for both domestic consumption and export.

“We are fully aware that the processes of optimising the whole value chain, in terms of moving from sugarcane to pure refined sugar, take quite some time and require huge investment. That is why we have asked the operators of sugar refineries to provide us with their strategic and detailed action plans on backward integration in terms of what they want to do in 2013, 2014, 2015 and 2016. In addition, we want to see the practical demonstration of their commitment to the implementation of the policy.

“So, based on their demonstration of commitment to those things in their backward integration plans as it relates to moving from sugar cane to refined sugar production, we will give them special incentives. This is similar to what we did during the implementation of the Backward Integration Policy in the cement sector until we got to the point where we saw a significant increase in local cement production and we tied importation to production to bridge gap between supply and demand.

“By so doing, local production increased and importation was reduced drastically. That was how we were able to move from a country that was producing about two million metric tons of sugar to a country that has the capacity to produce 28.6 million metric tonnes of cement. It is the same principle and approach that we want to apply in the sugar sector.”

Aganga said the development of the National Sugar Master Plan by the National Sugar Development Council had opened the sector for fresh local and foreign investments, adding that the Ministry of Industry, Trade and Investment was committed to working together with the state governments and the private sector to ensure the successful implementation of the Backward Integration Policy in the sugar industry.

He said, “The new sugar policy has opened up the sector for new investors to come in to invest in the sugarcane to sugar value chain. Currently, we have a number of interested investors from Brazil that are partnering with local investors and we already have two new green fields in addition to other interested investors that are doing their feasibility studies. This shows that the implementation of our policy of Backward Integration in the sugar is gaining momentum, and is in the right direction.

“Currently, Nigeria produces only about three per cent of our local demand but our objective is not only to achieve self-sufficiency in sugar production but to become a major exporter in the global market. But most importantly, I want to see more commitment of the part of Sugar companies in terms of aggressive implementation of our Backward Integration Policy for the sector which entails moving up in the entire value chain from sugarcane to sugar, production of ethanol and generation of power, among other things. We will do everything possible to assist them to succeed because they are very critical for job creation, revenue generation and economic diversification.”

The minister said the successful implementation of the Backward Integration Policy in the sugar industry would unlock the potentials of the sector in terms of job creation, and wealth generation, stressing that the federal government was committed to providing the enabling environment for the growth and development of the manufacturing sector in line with the Nigeria Industrial Revolution Plan.
He said, “If we successfully implement our Backward Integration Programme, which is a very important component of the National Sugar Master Plan developed by the Ministry of Industry Trade and Investment, the sugar sector will be able to create more than 20 times the number of jobs they have already created. Today, an average sugar refinery employs about 1, 400 people but if the Backward Integration Policy is well implemented; they can employ an average of about 100,000 people.

“This is what makes sugar sector different from other sectors of the economy. It is in recognition of the importance of the sector that the government has introduced the Backward Integration Policy for the sector. But for the policy to be successful, we all have to work today as partners. Our job is to make sure that we create the enabling environment for them to do well through consistent manufacturing-friendly policies.”

Dangote Sugar Refinery Response
Dangote Group, through its subsidiary, Dangote Sugar Refinery (DSR), has since begun to act in the direction of full implementation of the integration policy in its production process.

The first step taken by DSR is the recaliberation of the management structure of the DSR. The Board of Directors recently announced the appointment of Graham Clark as the new Group Managing Director.

Clark who until his move to DSR was the Managing Director of Illovo Sugar Limited, Africa’s biggest sugar producers, with operations in six African countries is expected to lead the way by bringing his experience in managing the sugar production process across the entire value chain to bear.  He served on the Illova board since 1997 and as managing director since 2009 he led the company through its most significant period of growth, positioning it well for the future.

In making the announcement, DSR Chairman Aliko Dangote said: “At the cusp of industrial revolution in Nigeria and with our acquisition of Savannah Sugar Company, located on 32,000 hectares in Adamawa State, and planned development of other sugar fields across the country estimated at over 300,000 hectares, critical enablers such as innovation, talent and skills are key levers to put us on a competitive trajectory growth path.”

According to Dangote, “Clark brings the experience and expertise to meet these big picture aspirations through a proven record of operational leadership, problem solving, strategy development and team playing. These traits and abilities will serve him well in the days and years ahead.”

Dangote, Kwara Sugar Collaboration
The Kwara Government has indicated that it would assist the Dangote Group in acquiring a 50-hectare sugar cane plantation and rice mill in Patigi, in the Edu Local Government Area.

Director-General, Kwara State Bureau of Lands, Alhaji Yusuf Abdulwahab, said: “In an effort to promote investment opportunities in the state, the state government has called on the general public, companies and individuals, to come and invest in Kwara.” The statement noted that the state had promised to cooperate with Dangote to acquire the land, and that the property would be monitored by the state’s Surveyor-General.

As is always the case when Dangote takes on an endeavour, several other investment heavyweights would naturally come along. In the case of cement, once Dangote took the unprecedented leap to massively produce the essential commodity locally at the time when the treasures of the cement industry resided only with importers, other manufacturers including Ibeto, BUA and Flour Mills appeared to have moved cautiously to see if government’s commitment was genuine. When it became clear that there was no going back on the government’s decision to fully prohibit the importation of cement on account of the success of the backward integration policy, these other cement moguls started to jostle for space in the industry. But by then, Dangote and Lafarge, who started first, had already made the home run.

Dangote’s control of almost 60 per cent of the Nigerian cement market is unequivocal proof that the company’s foresight has paid off.

As for sugar, however, industry observers are now watching keenly to see if Dangote can be outpaced in the ongoing race towards the finish line, which is now assuming a frantic and pulsating tempo.