Impact of sugar levy on industry’s growth, by Busari, ex NSDC boss

Many experts and stakeholders in the Nigerian sugar sub-sector have continued to highlight the achievements in the industry, especially with the ongoing implementation of the National Sugar Master Plan, as a good case study for the diversification of the economy.
In this interview, former Chief Executive Officer of the National Sugar Development Council, Dr. Abdul –Latif Busari, recounts how the NSDC, while he was in the saddle, was able to reduce, to a large extent, the level of sugar importation into the country. He spoke with Business Editor, ADE OGIDAN, shortly before leaving office.

How much was really generated from the sugar levy scheme?
Well, to truly know how much was realised through the sugar levy and how it has been disbursed as well as the impact it has had, the places to go are both the Central Bank of Nigeria and National Sugar Development Council, NSDC. The Nigeria Customs Service only charges the importers on their sugar imports and is thereafter required to pay into collecting banks from where all sugar levy collections are transferred to a dedicated account at the CBN. So, even before the era of the Treasury Single Account, sugar levy had never directly come to NSDC.
NSDC’s access to the levy funds is through its approved annual budgets. And right from inception up till 2013, the council’s annual budgets were personally approved by the sitting President. It was only as from 2013 with the approval of the National Sugar Master Plan, NSMP, and the need to ease its access to its fund to enable it implement the policy, that NSDC obtained a Presidential approval directing CBN to transfer, on a quarterly basis, sugar levy accruals to the Bank of Industry, from where the NSDC could access it; still only through its approved budget.

Now, from inception in 1993 to the second quarter of 2015, comprehensive data on sugar levy accruals compiled on a monthly basis by the Office of the Accountant General of the Federation show that between 2011 and 2015, the total accrual stood at N13.9 billion.

So, can you differentiate between your budgetary allocations and accruals from the sugar levy account?
Let me first say here that what the council (NSDC) got as budgetary releases during those years were not the same as what accrued to the sugar levy account with the CBN. From its inception in 1993 to 2015, a period of 22 years, the council got a total of N18.57 billion. It is common knowledge that Nigeria imports two types of sugar –raw and refined sugar. By 2000, with the establishment of sugar refineries in the country, raw sugar importation gradually became more prominent such that today, over 99.9 per cent of total sugar imports are raw. Also, from that same year, government granted a complete waiver on the payment of sugar levy on raw sugar imports. So, the levy was only being paid on the dwindling quantities of refined sugar. This was only partially reverted in 2013 with the approval of the NSMP and a new fiscal tariff for sugar imports, which required refineries to pay a concessionary five per cent CIF on raw sugar import as levy. Between 2013-2015, NSDC had accessed, via its budgets, a total of N12.5 billion of sugar levy fund.

Can you explain how the fund was utilised?
In broad terms these were expended as follows: N3.06 billion – Remittances to CRF (25 per cent); N2.10 billion – Sugar Investment Fund (with BOI); N1.50 billion – Agriculture and Infrastructure Fund (Bank of Agriculture); N3.92 billion – NSDC Capital Expenditure; N1.92 billion – NSDC Recurrent Expenditure and N12.50 billion, being the total from 2013 to 2015.

The above were as provided by BOI in its report of disbursement of NSDC funds domiciled it with and can be cross-checked with the bank.
The council is required by the Fiscal Responsibility Act to remit 25 per cent of all its revenues to the CRF, which it did and the receipts are available for anyone’s verification.

This is good accountability. However, what assistance has the Federal Government, through the NSDC, been able to render to prospective sugar investors in the country?
Since the bulk of the sugar levy is to provide funds for sugar investors, the NSDC signed Managed Fund Agreements with both BOI and BOA, to create a pool of fund from which sugar investors can and are already accessing cheap funds. You can check this with the banks. Thus, of the accruals, only a total of N1.92 billion and N3.92 billion, respectively, had been retained by NSDC for its recurrent and capital budgets over the three years.

How would you react to insinuations in some quarters that much of the NSDC earnings were spent on salaries and overheads?
That is not true. It is noteworthy that over the three years, the council had only spent about 15 per cent of its total receipts on salaries and overheads, contrary to such insinuations. The major items of capital expenditure in the years between 2013-2015 include: establishment and equipping of sugarcane bio-factories in Zaria and Ilorin; pre-feasibility studies on 10 sites across six states; acquisition of NSMP project monitoring vehicles; acquisition of 150 sugarcane varieties-handed over to existing research institutes for cane varietal studies-and funding of R&D studies on cane variety improvement and development.

All these expenditures, like the bio-factories and prefeasibility studies, as well as R&D and varieties importations, were aimed at critical challenges that have bedevilled and slowed down the growth of the local sugar industry. The Council, after years of moving from one rented office to another since 2006 when its old office was forcefully sold, acquired a befitting office complex and renovated it for occupation in 2014. It has since June 2015 moved into the office.

Can you shed light on some achievements recorded under your outgrower scheme?
It is necessary to point out that the outgrower scheme is just one of the functions of the council; not the only one. Going by the e-wallet programme of the Federal Ministry of Agriculture and Rural Development, over 17 million farmers have so far been captured across Nigeria. Also, the Sugar Sector’s Backward Integration Programme is a public programme. Suffice to say that the Council would not provide any support to any group of farmers who could not indicate in their business plans, definite and reliable information on the processing mill that would provide off-take for the sugarcane they wish to produce. Providing support to such farmers would amount to sheer waste of scarce national resources, as there will be nowhere to process the canes.

How would you rate the NSMP in terms of deliverables?
Yes, it is necessary to highlight some of the achievements recorded in the last three years of NSMP implementation and let the public see what has been done. For the first time, the three existing refineries committed to and signed-off a BIP plan, which by 2017, should lead to the local production of 700,000 metric tonnes of sugar.

Secondly, several new cubing/packaging facilities and factories were established and five new local sugar brands launched. Again, total jobs created by the sugar industry increased to 10,150.

The implementation of the NSMP has been making steady progress with 17 sites already earmarked for development – 10 sites with pre-feasibility studies ongoing or concluded and three green field projects ongoing. There was also the commissioning of 4500 tcd plant, which started under NSMP to be carried out in May, 2016; two new 12,000 and 9,000 tcd major plants ordered and to be test-run by 2017, bringing total installed capacity to nearly 30,000 tcd or about 500,000 tonnes sugar per annum.

For the first time in over 30 years, the industry was able to attract fresh investment, with $3.16 billion pipeline investment commitments. There has been a total of N15 billion funds created with BOI and BOA under Managed Fund Agreements, leveraging on the sugar levy accruals, with over N4.5 billion already paid up. Domestic stability in sugar market prices have also been achieved, with smuggling reduced to the barest minimum, through the administration of a sugar import quota regime and a robust monitoring and evaluation framework.

Furthermore, two new bio-factories with cutting-edge tissue culture and micro-propagation techniques were established, with total aggregate output of two million seedlings per annum to satisfy some of the cane-seed requirements of the industry.

For the first time as well, the implementation of the NSMP is being done in collaboration with officials from different government agencies – Federal Ministries of Finance, Agriculture, Works, Power, NAFDAC, Standards Organisation of Nigeria, Customs, and the Manufacturers Association of Nigeria, among others, which constitute the technical committees working together to oversee NSMP implementation.