Dangote Sugar Refinery Plc (DANGSUGA), Nigeria’s biggest grower of the sweetener, rose to the highest in a year after the government announced incentives to boost domestic production.
The stock gained 8.7 percent to 6.75 naira by the close in Lagos, Nigeria’s commercial capital, its highest since Oct. 12, 2011. About 15 million shares, or more than four times the three-month moving average, traded, according to data compiled by Bloomberg.
The government next year will remove import duties on machinery and spare parts brought in for domestic sugar processing companies, President Goodluck Jonathan said yesterday in his budget proposal for 2013. It also plans to grant a five- year tax holiday for “sugarcane to sugar” investors, he said. Nigeria will charge import taxes of 60 percent on raw sugar, and of 80 percent on the refined variety, Jonathan said.
Nigeria, Africa’s biggest oil producer, wants to revive its agricultural industry to increase domestic production and reduce food imports. The continent’s most populous nation, with a population of over 160 million people, spends at least $10 billion annually to import fish, sugar, rice and wheat, according to government figures.
“This is a good policy that should be able to attract investment in raw sugar production,” Pabina Yinkere, head of Research at Vetiva Capital Management Ltd., said by phone from Lagos today. “It will require a lot of effort on the part of the government and the private sector to achieve the capacity which will serve as feedstock to the refineries, such as Dangote.”
The measures will lead to higher prices for refined sugar in Nigeria in the short term, as the refiners, who depend mainly on imported raw sugar, pass the increased costs to consumers, Yinkere said.
Nigerian demand for refined sugar is 1.4 million metric tons a year while production is about 1 million metric tons, so about 400,000 tons must be imported, according to Yinkere.
Dangote Sugar shares have risen 43.6 percent this year, compared with a 32 percent increase in the Nigerian Stock Exchange All-Share Index. (NGSEINDX)
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