Nigeria's Dangote Sugar to spend $1.5 billion on cane farming

Joe Brock
Reuters
Labourers drive a tractor as they harvest sugarcane at a commercial farmland in Numan community, Adamawa State
Labourers drive a tractor as they harvest sugarcane at a commercial farmland in Numan community, Adamawa State, northeast of Nigeria, November 14, 2009. REUTERS/Akintunde Akinleye

By Joe Brock

ABUJA (Reuters) - Nigeria's biggest sugar refiner will spend $1.5 billion over the next five years on farming cane at home, its managing director said, responding to a government drive to make the country less reliant on its oil industry.

Dangote Sugar Refinery, majority-owned by Africa's richest man Aliko Dangote, has previously shied away from the risks associated with growing cane itself and preferred to focus on refining imported raw sugar.

But progressive hikes in government duties along with tax breaks and other incentives for agricultural development have persuaded it to think again.

"In the next five years, we should be able to produce 1.5 million metric tonnes locally, from around 50,000 metric tonnes now," Abdullahi Sule told Reuters late on Tuesday on the sidelines of a conference in the Nigerian capital Abuja.

He said the firm, which claims 70 percent of the domestic sugar market, would invest $1.5 billion in the process.

Sule also said Dangote Sugar would expand its refining capacity to 2.5 million metric tonnes a year by the end of 2014 from 1.4 million now, at a cost of around $100 million.

The company expects consumption of sugar in Africa's most populous nation to rise from 1.2 million metric tonnes in 2012 to at least 1.8 million this year and 2.2 million in 2014.

DIVERSIFICATION

President Goodluck Jonathan is trying to revive farming to reduce Nigeria's reliance on a notoriously corrupt oil industry whose exports account for around 80 percent of government revenues, and to cut down its $11 billion-a-year food import bill.

Agriculture makes up around 45 percent of the economy, against 15 percent from oil, partly because it feeds a huge domestic market of 160 million people.

But the sector is in disarray and largely the preserve of peasant farmers.

To encourage its development, the government has scrapped duties on imported machinery for sugar processing plants.

Firms who invest from "sugarcane to sugar", rather than just on refining, have also been given a five-year tax break.

Meanwhile, raw sugar import taxes rose to 60 percent, from 5 percent last year, and the government says they will keep rising to a level of around 90 percent.

Nigeria has also banned imports of refined sugar in retail-ready packets, although supermarkets still stock them.

Dangote Sugar's competitor Flour Mills of Nigeria is also planning major expansion into sugar production, Vice Chairman John Coumantaros told the Abuja conference.

Dangote Sugar shares, which have risen around 76 percent so far this year compared with a 29 percent gain for Nigeria's stock index, were unchanged on Wednesday.