Albert, the part of the song that appears in is meant to show the evil of the Black Queen. There is a lot of negative imagery in the lyrics. "I'm lord of all darkness, I'm Queen of the night". That being said, it was also a song recorded in London in 1973. I don't know what the exact understanding of that phrase was in London 1973, but my guess is that people used to use it to refer to lower quality sugar. In any case, even if the phrase in the song were written with the most vile intent possible, in the context of the song, it's being used to tell a story, not to show you the band's politics and beliefs.
I'm in a state of shock after reading the lyrics. This was always one of my favorite songs (ever-- not just by Queen). I'd love to know the band's justification for using the term "nigger sugar." I always thought the line was "a little bit of sugar."