New Guidelines and Benchmarks For Raw Sugar Allocation to BIP Operators
1.0 Introduction
The implementation of the Sugar Backward Integration Programme (BIP) began with the official take-off of the Nigeria Sugar Master Plan (NSMP) in January 2013. Three (3) Refineries were approved as BIP Operators and made to sign formal commitments, detailing a number of indicators by which their performance will be measured.
Raw sugar quotas at the concessionary tariff of 5% Duty and 5% Levy were to be allocated to Operators on the basis of PERFORMANCE OF THEIR BIP PROJECTS and as an incentive to encourage Operators to plough back profits into their BIP projects. The concessionary tariff was to last for 3 years in the first instance. Operators’ performance was to be assessed by two Committees set up by the NSMP:
SURMIC (Sugar Road Map Implementation Committee)
SIMOG (Sugar Industry Monitoring Group).
2.0 Performance
At the end of the First Phase of the NSMP (2013–2016), while it can be said that the operators’ performance varied, the general performance was below average at about 40% of projected performance. Overall performance was rated as follows:
DSR – 46%
BUA – 17%
GSC – 58%
Although each operator claimed to have committed ‘huge’ sums to their BIP projects from tariff concessions received since 2013:
DSR – N101.9 billion out of N170.7 billion
BUA – N9.3 billion out of N66.5 billion
GSC – N46.1 billion out of N87.4 billion
Only GSC commissioned a 50,000 tons/annum sugar factory at Sunti, Niger State, in 2016. DSR’s progress was barely fair, while BUA’s performance was poor after 4 years of BIP implementation.
This state of affairs is unacceptable and has led to opposition from government agencies (Ministry of Finance, CBN) against continued NSMP implementation, particularly the concessionary tariff and quota allocation regime. The key issues are:
Past quota allocation was not strictly based on BIP performance.
The incentive was not effectively utilized to improve BIP implementation.
A radical review of the BIP strategy and reward/sanction regime is imperative.
3.0 NMSP Mid-term Review
Originally scheduled for November 2017, the Mid-Term Review (MTR) was held earlier on 1st June 2017 due to below-average performance. Operators submitted revised BIP commitments for 2018–2023, with the following aggregated deliverables:
Number of project sites: 8 (DSR – 3; BUA – 2; GSC – 3)
Total land area: 187,000 ha
Estate cane fields: 137,070 ha
Outgrower farms: 25,850 ha
Sugar production target: 1,550,524 MT
Jobs creation (seasonal, farm & factory): 65,805
To ensure effective implementation and address concerns, the following guidelines will apply:
4.0 New Guidelines
4.1 Quota Submission
Operators must submit quota requests for the following year in December of the preceding year.
4.2 Allocation Criteria (Effective 2018)
2017 Allocation: Last based on old criteria (market share/refinery capacity).
From 2018: Allocation strictly based on quantitatively verified BIP performance.
4.3 Monitoring
SURMIC & SIMOG will conduct quarterly monitoring.
Reports will be sent to Operators, NSDC, and the Honourable Minister (FMITI).
4.4 Key Performance Indicators (KPIs)
| Key Performance Indicator | Weight |
|---|---|
| Total Land Developed/Target for the Year (Ha) | 1 |
| Total Land Under Cane/Target for the Year (Ha) | 2 |
| Sugar Produced (Tons)/Target | 3 |
| Jobs Created (Nos)/Target | 2 |
| Additional Development at BIP Site | 1 |
| Contribution to Self-Sufficiency Goal | 1 |
Priority: Local sugar production and job creation carry the highest weights.
4.5 Harmonized Performance Review
SURMIC & SIMOG will hold a joint review in October each year.
Harmonized reports will guide quota allocation.
4.6 Presidential Approval
Next year’s quota requests will be submitted for Presidential approval by early December.
4.7 Performance-Based Allocation
Operators failing to meet targets will receive reduced quotas proportional to their performance scores.
4.8 Excess Quota Utilization
Operators with excess quota may sell or expand capacity as they deem fit.
4.9 Revised Tariff (2017–2020)
10% Duty + 5% Levy (subject to review).
5.0 Sanction for Poor BIP Performance
Operators failing to meet targets will face quota reductions proportional to their performance scores.
6.0 Sanction for Sugar Quota Infringement
6.1 Excess Importation Penalty
Excess imports will be charged at full NSMP tariff (not concessionary rates).
6.2 Duty Payment Before Discharge
Erring operators must pay penalties before unloading cargo.
6.3 Additional Sanctions
NSDC may recommend further penalties for non-compliance.
7.0 Guidelines for New Entrants
New investors must:
Submit a minimum 100,000 tons/annum development plan.
Achieve at least 40% progress (field & factory) to qualify for quotas.
Non-investors (end-users/logistics firms) must import through existing operators.
8.0 Government Intervention Required
To address challenges in Adamawa, Taraba, Jigawa, Kebbi, Kwara, and Niger States:
8.1 Land Allocation
FMITI will engage the National Economic Council to resolve land issues.
8.2 Flooding & Infrastructure
Collaboration with Water Resources, Works, Power, Housing, and NERC.
8.3 Community Sensitization
National Orientation Agency (NOA) will lead awareness campaigns.
8.4 Corporate Social Responsibility (CSR)
Operators must expand outgrower schemes and CSR initiatives.
8.5 Inter-Agency Collaboration
Service Level Agreements will be signed under Executive Order 01 for seamless coordination.
FMITI/NSDC
JUNE 2017
At the end of the First Phase of the NSMP (2013-2016), while it can be said that the operator’s performance varied, the general performance was below average at about 40% of projected performance. Overall performance was rated as follows: DSR – 46%, BUA – 17% and GSC – 58%. And even though each operator is claiming to have committed ‘huge’ sums of money on their BIP projects from the amounts that accrued from Tariff concessions received since 2013 (DSR – N101.9billion out of N170.7billion, BUA – N9.3billion out of N66.5billion, and GSC – N46.1billion out of N87.4billion), apart from GSC which commissioned a 50,000 tons/annum sugar factory at Sunti, Niger State in 2016, progress by DSR was barely fair while BUA’s performance was poor, after 4 years of BIP implementation. This state of affairs is unacceptable. It has, as can be expected, resulted in some opposition by relevant government agencies, particularly Ministry of Finance and CBN, to the continued implementation of the NSMP, particularly the concessionary tariff and the sugar quota allocation regime, as presently implemented, because it is believed the country is not getting enough value for the tariff concession to Operators and the restriction of importation to few qualifying participants. The bane of the current strategy is that past quota allocation has NOT BEEN STRICTLY BASED ON BIP PERFORMANCE and the incentive has NOT BEEN UTILISED EFFECTIVELY IN GETTING OPERATORS TO IMPROVE PERFORMANCE IN THEIR BIP IMPLEMENTATION. A radical review of the entire BIP strategy as well as the entire reward and sanction regime of the NSMP is IMPERATIVE.