Why FG must change its import policy on barley – Sudhansu Sinha
This is not a good time to be a stakeholder in the sorghum production value chain in Nigeria. The sub-sector has been pushed to the brink of collapse by a lack of stability in government policy and an unjust import tariff system which has left local investors at the mercy of importers who bring in cheap barley malt, malt extract, glucose and maltose syrups to the detriment of locally made sorghum-based malt and extracts. The decision by previous Federal Government reversing ban on importation of barley malt with very low import duty and exemption from VAT and Levy, has brought about a catastrophic reversal to the fate of investors and producers of sorghum malting and sorghum-based malt extract in Nigeria.
Following the ban on imported barley malt in 1988, a number of sorghum malting plants were set up with attendant economic activity-chain, involving thousands of workers, ranging from farming, processing and storage, transportation, malting and conversion into higher value food ingredients. The sorghum farmers and rural communities growing sorghum saw financial uplift.
More than five companies in Nigeria made multi-billion investments in the construction of sorghum malt plants. One of them was Sona Group, which immediately set up Food, Agro & Allied Industries Limited, a multi-billion naira investment that specializes in the production of malted sorghum and malt derivatives like malt extract, malt syrup, glucose, etc.
And over the years, Food, Agro & Allied Industries Limited, inspired by its commitment to produce sorghum based malt and derivatives that meet global standard and can serve the need of breweries and food companies in Nigeria, has invested billions after billions of Naira in the expansion of sorghum malting plant & state-of-the-art malt extract plant. But these investments stand grounded because of government’s decision to again allow importation of barley malt on special concessions in duty.
According to Mr. Sudhansu Sinha, Managing Director, Food, Agro and Allied Industries Limited, the current waivers given to barley malt and barley concentrates imported into the country from Europe, mean that thousands of workers in the farming, processing and storage segments of the sorghum value-chain could lose their jobs.
“Foreign exchange is wasted for a product for which locally-grown replacement is abundantly available. The malting plants closed down one by one, markets collapsed, new brand of professionals like ‘maltsters’ and supporting workers are losing their jobs; sorghum price has also collapsed and farmers and those involved in the sorghum chain are suffering.
“The agricultural products are very cheap overseas, because of the subsidy that their governments over there are giving and any products made out of them are also cheap. In Nigeria, agriculture has no subsidy or support from the government, which is why the import duties cannot be too low. Malted barley is imported into the country at only 5 percent duties, exempted from VAT. So it is never possible to compete with imported barley malt. So anybody using any malted product prefers to import so that he will make more money,” Sinha said.
Of course, it is not only Food, Agro and Allied Industries Limited that has been affected by this reversal. All the other malting plants in the country are barely functional. Aba malting plant is doing a mere 10 percent of its installed capacity as a result of the waiver and every other element in the sorghum production value chain, including the farmers, are now losing their livelihood.
Breweries in Nigeria who are all multinational companies and their malting plants overseas, are enjoying their windfall at the cost of local sorghum based industries, employees and sorghum farmers in Nigeria.
Importing raw materials for beer production is imposing forex burden on the masses in Nigeria. This is done by some unscrupulous companies and their supporters in the government policy making in the name of quality of beer. But the fact is beer made with sorghum and malted sorghum is “Gluten free” and scientifically proven to be better and of a higher quality.
According to Sinha, “the quality they find in our Sorghum brewing extract, they don’t find in imported syrups used in brewing. When we started extract production, Guinness Nigeria was importing extract from China and Turkey; when we presented our sorghum extract, they said our extract should be first analyzed overseas. We sent it to Germany, when they saw the result; they were surprised that they could get such a product in Nigeria. “ Fermentability” of the imported extract was 60-70 percent but ours has a fermentability of 85 -90 percent. Then our product is rich in essential vitamins and minerals, while the imported ones lack vitamins like amino acid, vitamins, and others”.
“That is not all, Sorghum has got the unique property of being gluten-free, barley and wheat are full of gluten, people pay more money to buy gluten-free beer in Europe and these products are abundantly available here and we are neglecting it”.
It is for this reason that Guinness and a number of other brewing companies in Nigeria have switched side, preferring the Nigerian made sorghum extract, which is clearly of higher quality. Unfortunately, the story is not the same for food segments like biscuit makers who still prefer to patronise the cheaper but inferior foreign made glucose, maltose syrups. Even what they use as malt extract is often Molasses, a heavy metal loaded waste from sugar makinking”.
Sinha has said that his biggest regret is not the misfortune of his company, but the fact that Nigeria stands to lose a major agricultural heritage that has put her on the global map. “I’m not happy that the sorghum malting industry is dying; this is essentially a Nigerian asset, why should we lose it?” He said.
“Nigeria happens to be the top producer in the world. In 2008, it was number one with 11million tons; currently it is about 6 to 7 million tons because of the government’s policy problems, but it is still the fourth largest in the world, and there is every potential to increase.
“Sorghum does not grow in Europe, it is a produce of the semi arid tropical region; sorghum is grown in Nigeria in the upper North, , Europe does not have that; Europe is a temperate climate, sorghum is not really unknown to them except for the lower part of France and Spain.
“Of course, a lot has so far been lost, but it is not too late for the government to rescue the situation by listening to the cries of stakeholders in the agro-allied segment who are calling on the Federal Government to re-impose the ban on importation of malted barley or stiff duty and levy to discourage imports”. To him, for every ton of malted barley imported, the importer should be made to use at least two tons of locally-produced malted sorghum.
But while the industry awaits federal government’s response to their request, Food, Agro and Allied Industries Limited is already exploring new ways to grow its sorghum malting and extract business by exploring possibilities of exporting to other markets. The outfit’s parent company has recently appointed an executive to seek buyers along the West Africa sub-region.
Meanwhile, the Ota based agro allied company could be making supplies to Guinness plants in Kenya and Ghana by this year (2017) as discussions are already on-going.
The company also in a bid to drive up the capacity utilization of its plant is already working at expanding its value chain by investing in new production initiatives like animal feeds and sorghum flour. All of these efforts could see Foods and Allied Company not just optimizing its production capacity, but also emerging an even bigger force in the food and agro allied industry in Nigeria.
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