Sisa A. Agboh
With the recent inauguration of the over N50billion Sunti Golden Sugar Estates in Niger State by President Muhammadu Buhari, the face of the Nigerian economy is undoubtedly changing; courtesy of the reform and privatisation programme of the Federal Government of Nigeria. Located on the banks of River Niger, in Mokwa, Niger State, the Sunti Golden Sugar Estate is owned by Sunti Golden Sugar Estates (SGSE) Ltd, a subsidiary of Flour Mills of Nigeria Plc.
The sugar estate features 17, 000 hectares of irrigable farmland and a Sugar mill that processes 4,500 metric tons of sugarcane per day. At full capacity, the estate is expected to produce 1 Million tons of Sugarcane which roughly translates into 100,000 metric tons of sugar yearly. Enclosed within a 35-kilometer dyke, the production facility area is 15,100 hectares, with a cane area that features a maximum output of 10, 000 hectares. The dyke provides flood protection from the River Niger. Over N1 billion was invested in the state-of-the-art irrigation system that will ensure the efficient cultivation of sugar cane, with infrastructure that includes drain pumps, pump stations and a power grid.
The estate no doubt, is the purest representation of the Federal Government’s Nigerian Sugar Master Plan (NSMP) with an ambitious backward integration programme that intends to set Nigeria on the path to self-sufficient sugar production. The farm at peak production, will provide direct employment for about 10,000 people yearly, and impact up to 50,000 people indirectly, including 3,000 small-scale out growers who will be cultivating sugarcane to feed the mill.
The estate has brought infrastructure benefits to the surrounding community, with 28 communities in total taking advantage of a new 30-kilometer road, plus expansive road networks that provide a variety of access routes to the homes of the indigenes. Drains, culverts, and flood-protection walls have also been constructed. The project illustrates the desire to reduce sugar importation, save billions in foreign exchange, boost local capacity, and reduce unemployment by putting thousands of Nigerians to work. The commissioning of the sugar factory is the first step towards a collective dream of agricultural progress for all in Nigeria; and clearly demonstrates that businesses are better handled by the private sector hence the need by all Nigerians to embrace privatisation. Perhaps, it is apt here to delve into the history of the now burgeoning sugar factory. Sunti Sugar Limited, a government owned company was established in 1974 as a private limited liability company, with a share capital of N100 million and percentage ownership of 90% and 10% to the Federal Government and Niger State Government respectively.
The company with a land mass of 17,000 hectares for sugar cane production, was not cultivated to its optimal potential neither did it process sugar since its inception as it did not have a refinery in place. Rather, the harvested sugar cane from the farmland was transported to the Nigerian Sugar Company (NISUCO) for sugar production.
Then, it was a company whose liabilities were greater than the assets in manifolds. Its assets were mainly farmlands, most of which were not cultivated, agricultural plant and machinery, motor vehicles and dilapidated buildings. The company’s factory at the time was not completed and the uncompleted factory components were left to waste away in the open fields. While the company did not yield profit to the Federal Government, it incurred debt of about N615 million, owed largely to the Federal Government, with some amount owed local creditors.
Following due diligence carried out by the Bureau of Public Enterprises (BPE), the untapped potentials of the company was juxtaposed with the growing debt profile and the burden on the government’s treasury and upon this, the resolution to privatise was reached.
At the initial attempt, its privatization was unsuccessful primarily as a result of the large debt burden the company had incurred through the years it was under-utilised. The report of the BPE’s privatisation advisers revealed that the proceeds to be realised from the sale would not be sufficient to pay off creditors and settle staff liabilities. The advisers consequently recommended asset sale, through liquidation, as the favourable method of privatisation.
Following the recommendation, the BPE obtained approval of the National Council on Privatisation (NCP) in July 2003 to liquidate the company as well an approval from the courts in February 2005 to wind it up. A simplified bidding process duly followed the NCP approval of 2004 for a guided liquidation process which produced Supertek Limited as the preferred bidder after been found to be responsive to the terms of the transaction by the Committee of Inspection (CoI) and the CoI’s findings that Supertek was capable of realising its envisaged investment. It was upon this that Supertek emerged as the new owner of the company with an offer price of N180 million.
There was transfer of ownership of the company to FMN. Under the new management, the company took the name Sunti Golden Sugar Estate, a subsidiary of FMN. It has since made a departure from the pre-privatisation days.
Sunti Golden Sugar Estate has since embarked on developing the first new sugar project to boost local sugar production in the country. To facilitate this, the company selected Booker Tate as its technical partner to assist with specifications for the project including factory design, contractor selection and final negotiations. Thus far, harvesting of the first sugarcane, commissioning of the factory, and processing of the first cane into saleable sugar was achieved in 2016.
The new owners have also put measures in place in anticipation of future demands. These measures include the installation of the latest technology of 3,000 tons per day factory and a planned capacity expansion of 4,500 tons per day in cane milling and processing, as well as a system of canals and dykes to provide irrigation during the dry season and flood protection during the wet season.
Recall that this is not the first time, a privatized enterprise will be making giant strides on the Nigerian economy. Eleme Petrochemicals Company Limited (EPCL), located in Port Harcourt, Rivers State, is one of such shining examples. A petrochemicals complex originally fully-owned by the Federal Government of Nigeria and commissioned in 1996, EPCL was never managed properly, at no time operated to its potential, and was a significant loss maker and drain on the State treasury.
The company operated for about nine years from 1996, never operated effectively, although it was technologically a state-of-the-art facility. Severe management problems and continuing financial losses led to the Federal Government’s decision to privatise
In 2006, EPCL was privatised by the sale of 75% of its shares to a core investor through a competitive bidding process. Little international interest was attracted. The company was sold to Indorama Group for $225 million, without liabilities which were retained by the FGN. Much of the acquisition cost was financed with debt, with the IFC lending Indorama $150 million for the acquisition cost and the new Eleme borrowing $130 million for its turnaround programme and working capital.
It is interesting to note that the available report on EPCL stated that “the absence of the two-year turnaround maintenance (TAM) of the company’s plants and facilities made it impossible for the company to achieve profitability” and “the level of the company’s indebtedness… also greatly hampered the company’s ability to achieve profitability”, whereas after four months of turnaround maintenance, the company was operating at a healthy profit; for the first full year of operation earned a net profit margin of 36.1% after tax; and in the second full year of operation had increased its net profit margin to an astounding 43.4% after tax. The company was able to pay its owners a dividend of N9.5 billion (approximately $74 million) after only one year of operation.
Agboh writes from the Bureau of Public Enterprises (BPE), Abuja.