‘Sugar sub-sector needs N51 bn seed money from FG’

Dr. Abdul-Latif Demola Busari is the Executive Secretary, National Sugar Development Council, NSDC.

Interview-2In this interview with Favour Nnabugwu, Busari talks about the need for Nigeria to check importation of sugar and support the sugar sub-sector with $310m to encourage local sugar production in order to help grow the sugar industry and help it not only so attain self-sufficiency in sugar but to sustain it. Excerpts:
What stage is the national sugar master plan?

Well, you will recall that the implementation of the sugar master plan took off January 2013, so we are just about 22 months into the implementation. Coming to the master plan itself, in section 12 subsection 3, the first two, three years are mainly for acquiring land.

Don’t forget we are talking about thousands of portions of land that need to be acquired, then developing the land, acquiring the machineries. We will also have to come up with designs, financing models that will be used.

Those are what we are currently engaged in. We have said that we already have about 17 sites earmarked and about seven investors. Dangote is the leading investor having about seven to eight various sites for the company.

So they are acquiring the land, doing some feasibility study after which they will come up with a design for both the field and factory development and they will go into talks with their technical partners, mobilizing the resources required to do both field and factory development and they start business.

The only thing I can say is that we are on track, two years into the project we are on track, we are doing exactly according to the timeline in the master plan.

What is the expected impact of this master plan on the Nigerian economy?

We won’t know the impact now until we have concluded the implementation of the plan itself. But of course, we can have an idea of what the impact will be from the deliverables that the master plan states itself.

It states that at the end, even before the end of the 10 year plan period, we should begin to see some noticeable things on the impact on our economy. For instance, it plans to generate about 114,000 jobs.

When you consider that Nigeria currently has about 23.7 percent unemployment rate of 170 million people, that is a lot of unemployed people and 114,000 may not amount to much but if you add up all the jobs to be created from the various sectorial policies like the sugar policy, the automobile policy, the textile and all other policies in the Nigerian industrial revolution plan then you know we are set to have the manufacturing sector of the economy making substantial changes.

I fact, we are going to increase the contribution of manufacturing to GDP from the current 4 or 5 percent to 15 percent, that is on jobs.

If we are able to implement the sugar master plan as programmed, we will be saving the country $750 million in foreign exchange.

Definitely that is going to have an impact on the economy. If we are going to be able to do that, in spite of all the giant effort of the government in providing power for industries for domestic use, we still have some challenges in terms of power and the master plan is set to generate within 400-650 MegaWatts of electricity.

So all those are definitely going to have an impact on the Nigerian economy in terms of jobs, electricity generation, in terms of saving in foreign exchange. If we are able to implement it as planned, it should have a lot of impact on the economy.

What are the constraints facing the sugar master plan?

I want to look at the constraints in three ways. Firstly, we have the general constraints that affect everything and anything in Nigeria regardless of what you are doing. Then we have the constraint that affect the agricultural industry as well as the manufacturing sector of the economy because we operate in both segments.

Then you have sugar sector specific constrain. In terms of the general constrains, we have the issue of security; we have had some investors that have indicated interest in coming but they are a bit concerned about the current security situation in the country and want to wait to see what happens.

So I think on that there isn’t much we can do as a council than to support our government to ensure that we are able to bring the insurgency to an end as early as possible to allow investors to really come into the country.

Then, when you come to the manufacturing and agricultural sector, we do have certain constraints that affect operation.

For us in the Sugar industry, I want to look at the issue on some incentives that the master plan promises investors for which we are having some challenges at delivering. I will give two examples – the master plan says there should be a ban on importation of package sugar, so far one particular brand, St Louis, is still coming into the country and defiles the effort of all who are engaged in that fight. Unfortunately as it is now, it is beginning to create the job prospect of the new sugar package companies that we have when the master plan started.

If you saw our report on what happened on June 13, about 440 jobs were created in sugar packaging segment of the sugar value-chain.

Now if we are unable to stop St Louis from entering the country, those jobs are lost and that is part of the idea of banning package sugar importation because we believe to package sugar and cube sugar is something that Nigerians can do, so why do we want to import.

And we have all the raw materials we need to get the sugar we want to package or cube from our refineries.

So people can be gainfully employed at that segment of the Sugar value-chain. We also have another incentive which says that all machineries that are going to be used in both the cube and packaging development, we refer to them as sugar machineries, can come in at zero percent duty.

We have challenges getting the Customs to implement this, they are regarding some of the machineries as outside the sugar industry and we are making them understand.

For instance, they pick some heavy duty outmoving equipments as such that shouldn’t be regarded as that of sugar but you can’t develop 5,000 to 10,000 hectares of land without this out-moving equipments, we need all these huge outmoving equipments to be able to develop on such a large scale.

Well, we are still engaging with the Ministry of Finance as well as the Customs because the danger in that is that it undermines the government.

The government makes a promise and they are unable to deliver and it is going to discourage other investors from coming because they will easily point at the promises which haven’t been kept, so when the government makes a pronouncement, I think the least we can do is to ensure that the government is able to live up to that pronouncement.

Is the FG not shooting itself on the foot by still allowing St Louis to come into the country after the ban on retail sugar?

The way out is simple. We need political will to stop it. We are not saying Nigerians shouldn’t patronize St Louis sugar, what we are saying is, come to Nigeria and set up St Louis sugar because they were telling us that this particular sugar has been in Nigeria for over 51 years and Nigerians are used to it.

But to package, cube and process sugar is something that Nigerians can do, bring your factory here, set it up and produce here, Nigerians will still love it but we are losing jobs by importing sugar that we can easily produce here and that is why the government in its wisdom allowed the banning of packaged sugar and it is not only for sugar, it is done in vegetable oil, in noodles, in juices, so all those packaging are things that Nigeria has the capacity at this point in time to engage in and there is no point allowing importation just to cube and package sugar.

Aside the ugly side of insecurity, what are the mouth-watering incentives for investors?

We do have a number of them, I already mentioned the fact that anybody that is going to invest in the sugar sector today, is on pioneer status that means he is going to be on tax holiday for the first five years of operation.

All the machineries that you bring in either for the field development or factory development are going to come in duty-free.

Also, if an investor invests in public infrastructure – public infrastructures are those we expect the government to take care of – if because it is not avaliable and an investor puts his money on it, he is entitled to 30 percent tax rent credit beside the fact that we also have some incentives in terms of protection of the sugar industry.

These ones I mentioned, are to attract the investors, so when you bring the investors you need to protect their investment, the issue of packaging sugar is one of them.

Then the high tarrif on sugar import is another of such incentive that is meant to protect the local sugar investors.

Then for the agricultural end of sugar production, we have a scheme of outgrowers, don’t forget that the master plan says that 40 percent of all the sugarcane used in the industry should come from the rural population around the sugar industry and you know that the people at the level of the sugar production don’t have a lot of means to do that so there is a provision in the master plan to collateralize the cost of their production so that they can produce sugar cane.

We do that through the Bank of Agriculture and the Bank of Industry, and they will provide the funds for their operations but the master plan of the sugar council or the government shares the reap by putting down 50 percent of the collaterals and once they produce they sell, make back their money and pay their loans. So these are some of the things in the master plan to encourage the investors to invest.

How have you dispensed the N2bn from the Bank of Agriculture?

It’s not long we signed the MoU with the Bank o Agriculture. We also signed one earlier with the Bank of Industry. Like I told you about the stage we are now; people are at this stage of acquiring their land, talking to their technical partners, at the stage of talking to their financiers, they are at the stage of designing their projects, it is when they do all that, that they have a clear picture of what it is going to cost them then they think of how are we going to source these funds and then apply.

Though, we do have some applications currently, especially for the SMEs that are with the Bank of Agriculture and even one or two with the Bank of Industry of industry. We have outgrowers farmers that also want to acquire mini sugar plants to produce sugar.

We have in Oyo state, we have in Zamfara, we have in Kebbi, Sokoto, Osun state and one small farm in Papalanto in Ogun State. So we have two or three of them particularly in Oyo, Sokoto and Kebbi that their applications have been forwarded to the Bank of Agric.

The mini plant in Markashi and another one in Ilawo all have their applications in the Bank of Industry. The bank has to carry out the process diligently even though it is going to be cheap and have very liberal terms but the bank should still be convinced itself that it is a viable project and that hey will be able to pay back the loans. So that is the stage we are in now, they need small loans to develop nurseries and crop growth.

How much did they take?

They took N48 million early this year and they are processing another N54 million for them at the moment and they have sent in an application for N430 million for their machineries and the Zamfara people have brought in their application for about N28 million for crop loan.

The major ones are coming in but like I said, they are still in the stage of designing and coming up with their total financial cost before they start sourcing for funds.

Have you realized the $3.1bn needed for the implementation of the sugar master plan?

I need to first say the bulk of that fund is not supposed to be put down by the government. It is just the total cost of implementing the master plan, the bulk of it will come from private investors but having said that, the sugar industry also need seed money from the government just like the kind of thing that the government did for the SMEs, N250 billion.

We need something like that. Originally, we proposed 10 percent of the total cost of the master plan implementation which is $3.1 billion.

We said that government should give us at least N51 billion (about US $310 million) which we refer to as seed money to assist some of the investors because anywhere in the world, part of the way government demostrates its commitment besides giving that enabling envirnoment, besides reeling out good policy that everybody can buy into which we already have, is also by showing its commitment by putting in some money which gives the investors some comfort to ensure that the project doesn’t fail because his own money is tied to the project.

So we believe the sugar industry also needs seed money for investors to show more interest.

How much do you generate from sugar levy?

The total from sugar levy for the one or two years is N5 billion per annum, what is N5 billion to a capital intensive industry like ours. N5 billion is not sufficient for one single plant to do its field development, because they look at what we have; with Bank of Agriculture, we have N2 billion, with Bank of Industry, we have N10 billion.

We have actually N5 billion, the Bank of Industry have N5 billion to create a N10 billion pool. In Bank of Agriculture, we put down N1 billion down, the bank put another N1 billion to march it making the total N12 billion.

N12billion is a thing that a huge company can just wipe off. So we still think that the sugar industry still needs substantial fund injection in form of seed money that will give comfort to investors.

We have seen the policy is very good and if the government demonstrates political will which so far they are doing, if you ask all the people that have invested so far, they will tell you that everything they need from the sugar council has provided except for the few ones that I mentioned and we are still engaging with other government agencies to deliver on that.

- Culled from: http://www.vanguardngr.com