The Chairman of Dangote Group, Aliko Dangote, has moved to stop the BUA Group from running a sugar refinery in Nigeria.
Backed by the Chairman of Flour Mills of Nigeria Plc, Mr. John Coumantaros, Dangote said in a letter sent to the Trade Ministry that the establishment of a new sugar refinery plant in the country poses a threat to the attainment of the National Sugar Master Plan (NSMP) as well as sustainability of the country’s local sugar industry.
The letter dated 28 January argued that the country currently had enough refining capacity to meet national demand, demanding that BUA Group’s Sugar Refinery be shut down.
“The mid-term review conducted by the NSDC (National Sugar Development Council) was clear in its conclusions – BUA has failed to invest substantively in local production or comply with its undertakings under its BIP,” Mr Dangote said in a petition jointly signed with John Coumantaros.
“BUA intend only on importing and refining raw sugar whilst claiming to be investing in developing sugar plantations in order to qualify for quotas to import raw sugar,” the petition added.
Dangote said that when the BUA Sugar refinery was opened, he warned the government about the company contravening the rules of the National Sugar Policy, which forbids BUA from selling locally, giving it right to produce for export only.
In reaction, BUA said in a rejoinder to the sugar policy contravention indictment: “BUA takes serious exception to the ludicrous claims by its two major competitors that it aims to circumvent the BIP of the sugar industry – an initiative in which it has invested billions of Naira and is almost nearing completion.
“To thus claim that the BUA PH export focused refinery in an Export Zone will amount to an undermining of the NSMP (National Sugar Master Plan) is false,” it said.
The squabble is more like a continuation of what started in their cement division back in June 2020, over ownership of cement site, when BUA Cement got a restraining order against Dangote Cement, after the police invaded its three sites in Obu Okpella, Edo State.
While it appears to be about infringement on NSMP, BUA said it’s actually more about who controls the Nigerian sugar market.
Chairman, BUA Group, Alhaji Abdulsamad Rabiu, said his investment in Port Harcourt did not in any way pose a threat to the country’s sugar policy, adding that it will rather checkmate arbitrary price increase by the major players among other benefits to the country.
A typical example of arbitrary price increase cited by BUA happened last year, during Ramadan, when the price for a bag of sugar shot up to N30,000 from N18,000 before Ramadan. All due to monopoly, even though Dangote Group and Flour Mill claim that Nigeria’s refining capacity, due to NSMP, had increased to 3.4 million metric tons per annum from 2.75 million metric tons per annum, enough to serve the country.
In their petition, the duo are demanding that BUA Port Harcourt sugar plant be shut down in order for the country to realize the sugar master plan.
“We are particularly surprised by the brazenness as we believe that the choice of location and the publicity campaign behind the investment has been deliberately engineered to provoke public sentiment and pit the federal government against its people,” the petition said.
It said unless the ministry of industry, trade and investment plays an effective policing role of the NSMP, the country’s dream of becoming self-sufficient and indeed a net exporter of sugar would be defeated.
“The impunity with which BUA has contravened the provisions of the NSMP has placed the other players who are abiding by the regulations, not only at a significant disadvantage but has discouraged them from undertaking the huge investments that would deliver the desired objective of 100 per cent local production of sugar, unless, of course, the ministry wades in and addresses the situation,” it added.
They specifically urged the Minister of Industry, Trade and Investment, Mr. Niyi Adebayo, to prevail on the Nigeria Customs Service (NCS) and the Central Bank of Nigeria (CBN) to ensure that the provisions of the NSMP were enforced and that no additional allocation of quota should be given for raw, VHP, or refined sugar for the sugar refinery in Port Harcourt for local market production.
Among other recommendations, they said no allocations should be 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.
The BUA Group said the Dangote Group and Flour Mill have 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. The company said unlike the petitioners, it has been working on backward integration project with BUA’s Lafiagi Sugar BIP, a $250 million sugar refinery set to be completed in 2022.
This Day reported Rabiu, specifically assuring that its sugar export focused project in Port Harcourt, will not affect in any way, the backward integration programme adding that “the only way it will affect Nigerians is that Nigerians will pay lower prices for sugar”.
He explained that though the Port Harcourt refinery is mainly for exports, BUA is allowed under the Nigeria Export Processing Zones Authority (NEPZA)
Act and current approvals/rules to intervene locally in order to stabilize sugar price, “where it is absolutely necessary- in the face of arbitrary price increases and collusion to force scarcity of the product locally”.
He said: “The same NEPZA Act upon which this project is based, gives the permission to process, add value, and export at the same time. Companies under this act are allowed to process and if they so wish, sell 100 per cent of their production in Nigeria with payment of duties based on the current raw materials tariff.”
Nigerians are buying BUA’s side of the story. They said the whole plan by the Dangote Group is to implement in the sugar industry, its “price maker monopoly” that has pushed the price of cement high in Nigeria.
Dangote cement reportedly sells for 55 Kwatcha (N1150) in Zambia, but in Nigeria, the same bag of cement sells for N3,000 to N5,000.
Compared to other countries where governments take serious actions against monopolistic practices, Nigerian government has been accused of enabling monopoly and anticompetition by giving preferential treatment to the Dangote Group.
It could be recalled that during the period that Nigeria closed its borders, only Dangote Cement was given the license to export cement. All eyes are on the federal government this time to change the status quo, as the high cost of goods produced by the Dangote Group has riled the people against further government’s attempt to put the company first.