In 1989, I stumbled upon a study on sugar. It was stated then that, in 1986, France produced a ton of sugar at a cost of $700 but was selling same to African countrres at half the cost price. The question was how could France sell sugar at half its production cost per ton? In that study, it was revealed that the actual objective of setting up sugar factories in the advanced economies was not primarily to produce sugar. It was revealed that the by-products of sugar cane after extracting sugar molasses, filter-cakes and bargess are in turn raw materials for 18 different strategic industries such as industrial yeast, industrial alcohol, shoe polish, ceiling boards, glass lamination etc and these subsidiary industries were the actual reasons for setting up the sugar factories.

Thus, instead of the advanced economies allowing African countries to intensify domestic production and achieve multiplier effects, they sold sugar to our countries at rock bottom prices to discourage our nations from producing. They know the potentials of sugar are almost equivalent to oil in any serious economy. As at that year, 1989, Nigeria was producing only 4% of her consumption rate. In spite of the setting up of the Nigeria Sugar Development Council by the Abacha administration, little improvement was done. Instead, the richest Nigerian entrepreneur today, Dangote, owes his rise to the billionaire club largely on sugar importation at the initial stage.

Despite the global turbulence in commodity prices in the last 12 months, there has been one surprise star performer – sugar. Prices have risen 86% this year to reach a 28-year high at the end of August. Prices have, in fact, more than doubled since January 2008. With the market as a whole facing an estimated deficit of 7.8m tons this year – equivalent to 3.8% of global output – it is understandable that prices have risen. Many factors contribute to this. In Brazil, the world’s largest producer, there was too much rain, and the cold weather has not helped either.

Indian production fell from 28.6m tons to 16m tons due to a poor monsoon season, and restricted growth in planting due to weak prices last year. In 2008, India’s population consumed around 15% of global production. Indian production is not expected to meet demand before 2011 and problems in Pakistan, Russia and Thailand – not to mention the effects of a possible EI Nino – explain the steep rise in prices.

African producers, accounting for 6.4% of global production, and who among them have probably greater capacity than other current large producers to expand their output, may well be set to benefit from the high prices. Africa already does rather well with its sugar trading accounting for 7% of global exports. Its share of global consumption has swollen from 3.9% in 2000 to 4.9% in 2007. This share is likely to continue growing.

As a country’s income grows, there is a tendency for its sugar consumption to grow too, although this tends to plateau at around 35kg per capita year amongst middle-income countries. India’s rapidly growing appetite for sugar has meant that the country is now the world’s largest consumer of sugar, although Brazil remains the world’s greatest per capita consumer. Only Gambia (53.8kg) and Swaziland (97.4kg) consume more than this in Sub-Sahara Africa. Countries with per capita consumption substantially below the global average are likely to see that consumption rise.

Sugar still remains a cheap source of calories for consumers, so demand is likely to remain resilient globally, if static in the face of downturn and high prices. In Africa, consumption of sugar is expected to rise. The increasing significance of sugar as a source of ethanol for fuel is also driving demand. Brazil has had enormous success with this fuel source, a policy it pursued to improve energy security in response to the 1970s’ oil shock.

Other nations are also following suit. President Omar Hassan AI-Bashir has just opened Africa’s first sugar-to-ethanol plant in Sudan, utilizing sugar from one of Africa’s biggest sugar plants in Kenana. The plant was built with Kuwati support. Nigeria is also looking to emulate the Brazilian bio-fuel model, following a memorandum of understanding between the two countries in 2005 and the recent visit of President Yar’Adua to Brazil a few weeks ago.

With 30m/tons per hectare yields the global average, Nigerian 15m/tons per hectare yields have plenty rooms for improvement. Nigeria has 400,000 hectares of land suitable for high-yield sugar-cane production and the country is seeking to increase its production of sugarcane. Feasibility studies are looking along the course of rivers Niger and Benue. Some of the new production is scheduled for bio-fuels. Sugar production potentials is unlimited in the country. Recently, Nigeria’s biggest sugar refiner, Dangote Sugar, announced profits of N21.87bn ($149m) – up 2% on last year. The company is the major supplier of sugar to the nation’s beverage manufacturers. Indeed, the next major growth sub-sector in the economy may be sugar

Written by Abba Mahmood

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