The Nigerian government has increased custom duty on sugar from 5 percent to 10 percent, with an additional 50 percent levy, to protect investments in the local sugar refineries.
The 60 percent tax which has been effected at all entry points in the country, is disrupting the operations of manufacturers who use the product.
BusinessDay gathered that importers like “Dangote Sugar Refinery Plc and BUA have stopped delivery of sugar to their distributors and other buyers, while those who now have lean stock are rationing and selling at over 10,000 naira ($63) per 25 kilogramme bag.”
However, major sugar buyers like the most valuable company on the Nigerian bourse Nestle Nigeria and alcoholic beverage giant Nigerian Breweries, are yet to be affected by the new tariff due to outstanding supply commitments.
“We do not buy directly. We have commitments with suppliers who are still meeting these commitments.” Yusuf Ageni, Nigerian Breweries’ public relations adviser, said.
According to the government’s National Sugar Master Plan (NSMP), a 5 percent duty and 0 percent levy be placed on sugar importation in 2012, which is to be increased beginning from 2013. 10/50 percent in duty and levy be charged in 2013, 10/70 percent in 2014/2015, 10/80 percent in 2016-2018 but a decreased 10/30 percent charge for 2019/2020.
According to BusinessDay, “President Jonathan, in his budget speech, stated that these policies were to provide supporting fiscal policies to help agriculture and the local industry, and to protect investments in the local sugar refineries and sugar estates, as well as encourage new investments in local refining capacity.”
The public fear is that plants may shutdown and jobs lost as the country’s current local sugar production cannot meet the demand for raw sugar.
In January, a meeting was held between the government and industry stakeholders, and the respective stakeholders, and an agreement was reached for a 50 percent tariff which will be introduced at 10 percent annually over time. According to report, a formal documentation is yet to be presented to the private sector to substantiate the agreement.
Nigeria imports about 90 percent (about 1.5 million tons in 2012) of its raw sugar from Brazil, which is then refined by the local sugar industry. Dangote Sugar and BUA Sugar Refinery stand as the major sugar refiners in the country, with a refinery capacity of 1.44 million tons, and 720,000 tons per year, respectively.
Having a population of 160 million people, Nigeria’s sugar consumption is estimated at 1.4 million tons.