Feature- Backward Integration Plan in the Sugar Industry: BUA battling the coveted monopoly of Dangote and Flour Mills’

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by Abolade Adewale

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The companies in the Sugar Industry in Nigeria had been at loggerheads over the back Integration Plan within the sector. The major players are BUA Group, Dangote Industries Limited and Flour Mills of Nigeria PLC. All these companies have been looking for ways to edge each other out but now, it is through a petition to the Minister of Trade and Investment, Otunba Niyi Adebayo, CON.

The petition titled ‘Re: troubling Developments in Nigeria Sugar Industry’ jointly signed by Alh Aliko Dangote and Mr John Coumantaros states that the sugar refinery of BUA Group located in the Bundu Free Trade Zone in Port Harcourt, Rivers State is not a part of the Backward Integration Plan of the Federal Government of Nigeria. Thus praying that the Minister should ensure that all players within the industry have a fair competition in the local sugar market in order that the companies stay on course to achieve the goals of the Sugar Master Plan.

Also that the Honorable Minister should engage the Comptroller General of the Nigerian Customs Service and the Governor of the Central bank of Nigeria not to give additional quota for Raw, VHP or refined sugar for the Sugar Refinery in Port Harcourt for local market production and that no allocations are issued or applications considered for quota intended for re-export of Sugar as this would be difficult to monitor and may be open to abuse.
Dangote and Flour Mills accused BUA of operating with impunity by contravening the laws as laid down in the National sugar policy by selling its products locally instead of producing for export alone.
In her response to the Honorable Minister, BUA showcased her commitment to the Federal Government of Nigeria by following all the extant laws made for the Sugar Industry. The company which currently has three refineries in Nigeria located at Apapa, Lafiagi focused on local production and the Port Harcourt refinery built for export purposes. The Port Harcourt refinery is governed under the NEPZA act and the Free Zone approved by President Muhammadu Buahri, GCFR and is duly empowered by the constitution.

The company also attached all the enabling permits and approval BUA stated that because of the connivance of the two major sugar manufacturers to hike the price of Sugar during the upcoming Ramadan, the law allows it to sell locally.

BUA explicitly explained the role of her competition in the market as not been involved in any backward integration project, rather they depend on 80% raw sugar allocation which is detrimental to the Nigerian economy in long-term analysis. BUA on the other hand has been involved in the backward integration project with BUA’s Lafiagi Sugar BIP set to be completed in 2022.

BUA’s investment in the Sugar Industry is over 250million dollars and it is believed to have been spent on the export-focused BUA Sugar Refinery already and it has also employed over 1,000 Nigerians. It is evident that Dangote and Flour Mills are very concerned and ready to engage BUA in a price war.

For instance, last year, sugar sold for around 18,000 Naira per bag until the commencement of Ramadan. But as Ramadan fasting started the price increased to about 30,000 per bag. The people had no choice but to buy it because they needed a lot of it during the period. BUA Group noticed the trend and decided that it had to change. There was no reason to increase the price during Ramadan simply because the demand is high.

Currently, BUA is the only sugar company in Nigeria with a plantation, a sugar mill for crushing canes, a refinery to produce White sugar, and an Ethanol plant. The other players only have sugar mills thus producing only brown sugar without refining. This is quite detrimental to the National Sugar Master Plan.

From the foregoing, Dangote Group and the Nigerian Flour Mills PLC have benefitted more as far as concessions, wavering and exemptions are concerned. Both companies enjoy 80% of the raw sugar allocation (Dangote-55% and Flour Mills-25%) without commensurate investments in their BIP to actually warrant this huge allocation.

Will the customers and the Nigerian economy be the ultimate beneficiaries of the backward Integration Plan? Time will tell

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