Sugar prices have skyrocketed in Nigeria, with increased demand combined with worsening weather conditions and price indexes of currency scarcity suggesting there is still room for prices to increase.
According to the National Sugar Development Council, the average sugar price for the week ending July 29, 2022, was N579,400 per ton.
Comparing this with N835,400 per ton for the week ending July 28, 2023, representing 44.2%, when compared to the 2022 price.
Nigeria imports about 98% of its sugar needs, the rest is produced domestically. Globally, sugar prices are rising as India – the main producer and exporter of this commodity – is grappling with a drought that has reduced production, affecting supply.
On the world commodity exchange Sugar is up 44% since the beginning of the year and is the best-performing commodity in the world.
Dangote, BUA, and Flour Mills of Nigeria have focused more on importing raw sugar into the country where it is refined and sold.
The National Sugar Development Council is forcing sugar companies to invest in sugar production and increasingly use local extracts for their refineries, a process known as reverse integration. Meanwhile, companies are allowed to import extracts depending on the size of the investment in the plantation.
The Forex scarcity and the devaluation of the naira are also affecting sugar imports. The naira has lost about half of its value since the managed float FX system was put in place in June.
The Nigerian Manufacturers Association (MAN) has previously denounced the lack of foreign exchange as it hinders the import of raw materials and machinery.
Sugar prices could rise further in the coming months as inventories dwindle and the peak holiday season approaches.
Currently, the world needs more than 180 million tons of sugar every year, from both individual buyers and companies that need huge amounts of sugar to make their products.
Weather/climate conditions that already limit sugar production in other major sugar-producing countries: Brazil, Thailand, China, and the United States.
According to the International Sugar Organization, India is the world’s second-largest sugar exporter after Brazil, and the largest consumer and producer, but this season only exported 6.1 million tons, down from 11.1 million tons of the crop year 2021-2022.
Sugar prices in India jumped more than 3% in two weeks to a six-year high, traders and industry officials said, as limited rainfall in the main producing regions of the countries increased the concerns about sugar’s output.
Another factor driving prices higher was OPEC’s recent surprise decision to drastically cut oil production, with Saudi Arabia and Russia cutting even more.
This encourages the redirection of sugarcane to ethanol production and away from the sugar supply, Fitch Solutions wrote in its Q2 report.
In the 21st Century, it is very absurd that Nigeria as a country will be importing 98% of Sugar need. I hope the present administration will look into this matter with a need to refocus our economic and industrial policy.