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Increased Demand Paves The Way for Expansion of Africa’s Sugar Industry

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Sugar - Investors King

Africa, June 2021:  A new focus report produced by the Oxford Business Group (OBG), in partnership with the International Sugar Organization (ISO), explores the potential that Africa’s sugar industry holds for growth on the back of an anticipated rise in regional demand. The report was presented to ISO members during the MECAS meeting at the Organization’s 58th Council Session, on June 17th 2021.

Titled “Sugar in Africa”, the report highlights the opportunities for investors to contribute to the industry’s development by helping to bridge infrastructure gaps in segments such as farming and refining and port facilities.

The report considers the benefits that the African Continental Free Trade Area (AfCFTA) could deliver by supporting fair intra-African sugar trade efforts and bringing regulatory frameworks under a common umbrella, which will be key to improving competitiveness.

The increased international focus on ESG standards is another topical issue examined. Here, the report charts the initiatives already under way in Africa supported by green-focused investment with sustainability at their core, which will help to instil confidence in new investors keen to adhere to ESG principles in their decision-making.

In addition, subscribers will find coverage of the impact that Covid-19 had on the industry, with detailed analysis provided of the decrease in both worldwide sugar production and prices, as movement restrictions and social-distancing measures took their toll on operations.

The report shines a spotlight on sugar production in key markets across the continent, noting regional differences in terms of output and assessing individual countries’ roles as net exporters and importers.

It also includes an interview with José Orive, Executive Director, International Sugar Organisation, in which he maps out the particularities of the African sugar industry, while sharing his thoughts on what needs to be done to promote continental trade and sustainable development.

“The region is well advanced in terms of sugar production overall, but several challenges still hinder its full potential,” he said. “It is not enough to just produce sugar; producers must be able to move it to buyers efficiently. When all negotiations related to the AfCFTA have concluded, we expect greater investment across the continent and a clearer regulatory framework.”

Karine Loehman, OBG’s Managing Director for Africa, said that while the challenges faced by Africa’s sugar producers shouldn’t be underestimated, the new report produced with the ISO pointed to an industry primed for growth on the back of anticipated increased consumption across the continent and higher levels of output in sub-Saharan Africa.

“Regional demand for sugar is expected to rise in the coming years, driven up by Africa’s population growth and drawing a line under declines triggered by the Covid-19 pandemic,” she said. “With sub-Saharan Africa’s per capita sugar consumption currently standing at around half of the global average, the opportunities to help meet increasing domestic need by boosting production are considerable.”

The study on Africa’s sugar industry forms part of a series of tailored reports that OBG is currently producing with its partners, alongside other highly relevant, go-to research tools, including a range of country-specific Growth and Recovery Outlook articles and interviews.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Commodities

Refiners Predict Petrol Prices to Fall to N300/Litre with Adequate Local Crude Supply

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The pump price of Premium Motor Spirit (PMS), commonly known as petrol, could drop to N300 per litre once local production ramps up significantly, according to operators of modular refineries.

This projection hinges on the provision of sufficient crude oil to domestic refiners, which they say would undercut the exorbitant costs currently imposed by foreign refineries.

Speaking under the aegis of the Crude Oil Refinery Owners Association of Nigeria (CORAN), the refiners stressed the urgency for the government to ensure a steady supply of crude oil to local processing plants.

They argue that the reliance on imported petroleum products has been economically disadvantageous for Nigeria.

Eche Idoko, Publicity Secretary of CORAN, emphasized that the current high costs could be mitigated by boosting local production.

“If we begin to produce PMS in large volumes and ensure adequate crude oil supply, the pump price could be reduced to N300 per litre. This would prevent Nigerians from paying nearly N700 per litre and stop foreign refiners from profiting excessively at our expense,” Idoko stated.

The potential price drop follows the model seen with diesel, which experienced a significant price reduction once the Dangote Petroleum Refinery began its production.

“Diesel prices dropped from N1,700-N1,800 per litre to N1,200 per litre after Dangote started producing. This is a clear indication that local production can drastically reduce costs,” Idoko explained.

In a previous statement, Africa’s richest man, Aliko Dangote, affirmed that Nigeria would cease importing petrol by June 2024 due to the Dangote Refinery’s capacity to meet local demand.

Dangote also expressed confidence in the refinery’s ability to cater to West Africa’s diesel and aviation fuel needs.

Challenges and Governmental Role

However, achieving this price reduction is contingent on several factors, including the provision of crude oil at the naira equivalent of its dollar rate.

CORAN has advocated for this approach, citing that it would bolster the naira and reduce the financial burden on refiners who currently buy crude in dollars.

The Nigerian government has shown some commitment towards this goal. Gbenga Komolafe, Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), confirmed that a framework has been developed to ensure consistent supply of crude oil to domestic refineries.

“We have created a template for the Domestic Crude Oil Supply Obligation to foster seamless supply to local refineries,” Komolafe stated.

Industry Reactions

Oil marketers have welcomed the potential for reduced petrol prices. Abubakar Maigandi, President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), expressed optimism about the Dangote Refinery’s impact on petrol prices.

“We expect the price of locally produced PMS to be below the current NNPC rate of N565.50 per litre. Ideally, we are looking at a price around N500 per litre,” Maigandi noted.

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CNG Conversion to Save Nigeria $4.4bn in Annual Petrol Import Costs

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The Nigerian Federal Government announced on Tuesday that it will reduce the importation of Premium Motor Spirit (PMS), commonly known as petrol, by approximately $4.4 billion annually through the adoption of Compressed Natural Gas (CNG).

This announcement was made under the Presidential Compressed Natural Gas Initiative (PCNGI).

The initiative aims to convert one million diesel and petrol-powered vehicles to run on CNG, providing a substantial financial reprieve for the country.

According to Zayyan Tambari, Coordinator for Regulations, Compliance, and Facilitation at PCNGI, this move is expected to save Nigeria around $4.4 billion annually in petrol import costs.

Speaking at the Co-Creation Session on Nigeria Gas Vehicle Monitoring System in Abuja, Tambari highlighted the Federal Government’s target to replace 20% of the 50 million liters of petrol consumed daily in Nigeria with CNG.

This shift is part of a broader strategy to enhance energy sustainability and economic resilience.

Tambari’s statements followed a report indicating that the Federal Government had already commenced the rollout of CNG-powered buses and tricycles.

The initiative was officially launched in Ilorin, Kwara State, with Governor Abdulrahman Abdulrazak inaugurating a refueling and conversion center.

The launch included the unveiling of CNG buses and tricycles, marking the beginning of a nationwide deployment.

The Special Adviser to the President on Information and Strategy, Bayo Onanuga, confirmed the launch, emphasizing the Federal Government’s commitment to expanding CNG infrastructure.

“Ilorin’s launch is just the beginning. We are setting up refueling and conversion centers across the country,” Onanuga said.

During the co-creation session in Abuja, the PCNGI noted that an investment of about $890 million would be required to develop the necessary infrastructure for the alternative fuel.

Ekperikpe Ekpo, the Minister of State for Petroleum Resources (Gas), represented by Abel Nsa, underscored the government’s dedication to maximizing the benefits of Nigeria’s abundant gas resources.

Ekpo emphasized the need for public education and adherence to safety standards in the use of CNG.

“We must educate ourselves and adopt new tools and materials to ensure the safe and efficient use of CNG,” he stated, drawing a parallel to the economic impact of mobile phone adoption during former President Olusegun Obasanjo’s tenure.

Ogbugo Ukoha, Executive Director for Distribution System, Storage, and Retailing Infrastructure at the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), announced that new filling stations would only be licensed if they provide CNG dispensing points.

“We are engaging stakeholders to mandate the conversion of fuel trucks and fleet owners to CNG, given the high cost of diesel,” Ukoha said.

Michael Oluwagbemi, Project Director and CEO of PCNGI, highlighted the economic and environmental advantages of CNG, stating that it is cheaper, cleaner, safer, and more sustainable than petrol.

He stressed the importance of a smooth transition, strong regulatory compliance, and cooperation across the ecosystem to ensure the success of the CNG initiative.

The PCNGI has already commenced a nationwide CNG conversion program for mass transit buses, starting in Lagos, Kwara, the Federal Capital Territory, and Rivers states.

The program is being executed in partnership with major transport unions, including the National Union of Road Transport Workers (NURTW), Road Transport Employers’ Association of Nigeria (RTEAN), and Nigerian Association of Road Transport Owners (NARTO).

The initial phase involves eight of over 120 designated conversion workshop sites, with plans to scale up operations across 15 states in the next 45 days.

“This ambitious initiative aims to convert mass transit vehicles to cleaner energy sources, significantly reducing emissions and promoting environmental sustainability,” Oluwagbemi stated.

This landmark initiative marks a significant step towards reducing Nigeria’s dependence on imported petrol, promoting the use of domestic gas resources, and advancing the country’s environmental sustainability goals.

As the nation embarks on this journey, the anticipated $4.4 billion annual savings will be a critical boost to Nigeria’s economy.

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Nigeria Spends $2.13bn on Food Imports in 2023

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Commodities Exchange

The Central Bank of Nigeria (CBN) disbursed $2.13 billion for food imports in 2023.

This disclosure raises concerns about the nation’s ability to achieve self-sufficiency in food production.

Despite being touted as the “food basket of Africa,” Nigeria continues to rely heavily on imported food commodities.

The CBN’s quarterly statistics revealed a consistent demand for foreign currencies for food imports throughout the year.

The significant forex release for food imports stands in stark contrast to efforts by the Nigerian government to boost local agricultural production and reduce dependence on imports.

Factors such as inadequate infrastructure, insecurity, and climate change have hindered progress in the agricultural sector, leaving the nation vulnerable to fluctuations in global food prices.

A breakdown of the disbursements shows varying amounts allocated each month, with notable spikes observed in March and November.

Despite initiatives aimed at promoting local production, including the ban on food imports by the Federal Government, the nation’s appetite for foreign food products remains unabated.

The rise in food prices has also been a cause for concern, with the average price of imported food commodities reaching a 34% increase between April 2023 and April 2024.

This surge in prices has contributed to food inflation in Nigeria and across sub-Saharan Africa, highlighting the region’s vulnerability to global market dynamics.

Experts warn that Nigeria’s heavy reliance on food imports poses significant risks to its economy and food security.

Despite efforts to promote local production, challenges such as insecurity and inadequate infrastructure continue to impede progress in the agricultural sector.

Commenting on the issue, Kabir Ibrahim, the National President of the All Farmers Association of Nigeria, acknowledged that Nigeria has made strides in reducing its dependence on certain food items but expressed concern over the increasing trend in food imports.

He highlighted the challenges faced by farmers, including insecurity and flooding, which have affected food production and contributed to the rising import bill.

Yusuf Muda, the Managing Director of the Centre for the Promotion of Private Enterprise, emphasized the need for accurate data to assess Nigeria’s food import dependency accurately.

He called for a comprehensive analysis of the types of food imported and their contribution to the nation’s food consumption.

As Nigeria grapples with the challenges of food security and economic stability, addressing the root causes of its reliance on food imports remains a critical priority.

Efforts to strengthen the agricultural sector, improve infrastructure, and mitigate climate change impacts are essential for achieving long-term food security and economic resilience.

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