FG loses N10.4b yearly to stalled silos concession

FG loses N10.4b yearly to stalled silos concession

About N10.4b yearly concession fee and share profit might have been lost by the Federal Government in the last one year, due to the non-release of the 19 Silo Complexes concessioned in 2019.
Checks revealed that the Federal Government could have earned a yearly concession fee of N3.4b and another N6b as profit share of the franchise, if the silos had been handed over to the concessionaires early. Unfortunately, the concessionaires still have about N1.3b tied down in the transaction.
To compound the issue, the current Minister of Agriculture, Sabo Nanono, according to the grapevine, has threatened to review the contracts, saying he would not hesitate to revoke the licence of any concessionaire that couldn’t meet the ministry’s terms of agreement.

Aside this, experts argued that the development might have hampered dreams of averting imminent food crisis staring the country in the face, due to the Coronavirus pandemic lockdown, as the current 90,000 Metric Tonnes (mt) of grains in government’s reserve could have been hugely increased.

But the Federal Government has denied the accusation. The Director, Department of Strategic Grains Reserve, Engr. Sule Haruna, said only three concessionaires, out of the six that won the bid, promptly met the condition precedents, and they have since been given approval to execute needed repairs.

The concession process, announced on September 19, 2018, by the former Minister, Audu Ogbeh, after the Federal Executive Council’s (FEC) approval, was initiated in 2013 by the then Minister of Agriculture, Akinwumi Adesina, who felt the Federal Government did not have means to manage and maintain the 33 silo complexes. 

Adesina, while speaking at the signing of Memorandum of Cooperation (MoC), with the Infrastructure Concession Regulatory Commission (ICRC) said: “Running and managing these huge infrastructure is extremely expensive. At the current guaranteed minimum price rate, about N100b would be required to stock the silos. Government does not have that kind of money to manage them. We, therefore, want the private sector to lease this huge storage infrastructure to improve their management, efficiency and profitability.”

Adesina noted that the MoC was continuation of the process of synergy with the private sector to manage and operate the silos across the country, as they are part of the ministry’s storage infrastructure under the Strategic Grains Reserves.

He said the network of Strategic Grain Reserve Silo Complexes were established to, among other things, provide immediate food relief in terms of emergencies, provide appropriate mechanism, guarantee minimum price (GMP) scheme to make farmers earn remunerative prices for their produce; provide a mechanism for price stabilisation and storage capacity for excess production and reduce post-harvest losses.

It is, however, unfortunate that seven years after, the ministry is yet to fully put the silos to use. 
On May 16, 2019, the Federal Government released the silos to six agro allied companies— Agro Universal Consortium, Matriville Nigeria Ltd, Flour Mills Limited, Ebony Agro industries Ltd, Neon Farms Africa Consortium and Coscharis Farms Ltd, which won the bid, for the benefit of farmers and the nation. 

Upon conclusion of the transaction process, a ceremonial handover and signing of concession agreement was performed to enable the concessionaires meet the conditions before physical hand over. 
Part of the condition precedents include: Twenty-five per cent upfront payment to the Federal Ministry of Agriculture; payment of 75 per cent to the ministry; proof of payment of success fees to the transaction Advisers; submission of payment receipt to ICRC; submission of Performance bond for review and approval; and Submission of insurance cover for review and approval. 
Other conditions include proof of representation of Warranties; Certificate of Compliance; proof of no material adverse effect; proof of corporate proceedings, including letters showing board resolutions of the transaction, constituent documents of concessionaires, and letter granting authority to office of the concessionaires executing the concession agreement. 

The Guardian checks showed that, while five of the concessionaires fulfilled the obligations, only Neon is lagging behind, as it has only made 25 per cent upfront payment to the ministry. Neon Farms got concession for the 25,000mt silo complex capacity in Uyo, Akwa Ibom State. 

The Guardian findings also revealed that the silo complexes, spread across the geo-political zones were located at-Ado-Ekiti, Ekiti State (100,000 Metric Tonnes (mt) capacity; Ogoja, Cross River State (25,000mt); Akure, Ondo State (25,00mt); Jos, Plateau State (25,000mt); Sokoto (25,000mt); Gaya, Kano State (25,000mt); Bauchi (25,000mt); Ikenne, Ogun State (25,000mt); Kwali, Federal Capital Territory (100,000mt); and Bulasa, Kebbi State (100,000mt).

Others are Jahun, Jigawa State (25,000mt); Kaduna (25,000mt); Lafiagi, Kwara State (11,000); Makurdi, Benue State (25,000mt); Gombe (25,000mt); Ibadan, Oyo State (25,000mt); Ezillo, Ebonyi State (25,000mt); Uyo, Akwa Ibom State (25,000mt); and Igbariam, Anambra State (25,000mt).

An obtained list indicated that Agro Universal Consortium was awarded eight silos—Ado-Ekiiti, Ogoja, Akure, Jos, Sokoto, Gaya, Bauchi and Ikenne.

Matrixville Consortium was awarded five— Kwali, Bulasa, Jahun, Kaduna and Lafiagi. Flour Mills got three— Markurdi, Gombe and Ibadan. Ebony Agro industries Ltd. was awarded Ezilo, Neon Farms Africa Consortium got Uyo, while Coscharis Farms was awarded the silo complex in Igbariam. 

While eight of the silos have been pencilled down for the next phase of the concession, six will be retained for Federal Government’s usage, according to a leaked document from the Ministry of Agriculture.

Though the move was generally applauded, when it was initially announced, considering that the silos have been idle for a long time, after several billions of naira had been expended on their installations, some experts registered their reservations.

Some of them claimed the process was shrouded in secrecy, as farmers were not carried along, insinuating they may have been offered to government cronies, who are non-practising farmers or agro processors.

Almost two years after, the concessionaires’ investment appears to be going down the drain, due to inactivity of the silos.

Though, in paper, the silos were to be handed-over to the respective concessionaires on May 21, 2019 at the Transcorp Hilton Abuja, according to a letter signed by the Permanent Secretary, FMARD, Dr. Umar Bello Muhammed, dated May 14, 2019 with reference number: FMA/SGR/S/681/IV/24, The Guardian gathered that none of the concessionaires has so far taken possession of the silos, despite fulfilling necessary requirements.

“I have the pleasure to invite you to the official handover ceremony of Federal Government of Nigeria Silos to the respective concessionaires taking place at Transcorp Hilton Abuja on the 21st May, 2019.

“The FMARD is implementing a concession process with the objective of partnering with the Private Sector for the management and operation of Silo complexes for the storage of grains in Nigeria and in line with the ERGP, ICRC Act and PPP Policy. The silo concession programme is a win-win situation for the government at all levels, private sectors and the Nigerian farmers,” the letter read.

The Director, Department of Strategic Grains Reserve, Haruna disclosed to The Guardian that of the six companies that won the bid, only Flour Mills, Matriville Nigeria Ltd and Agro Universal Consortium met the condition precedents.

“As it is now, Flour Mills, Agro Universal Consortium and Matriville Nigeria Ltd. have since completed their repairs and are already test running the plants to enable final handover of the silo complexes under concession to their companies,” he said.

Haruna said in contrast, Ebony Agro and Coscharis farms Ltd. only met the condition early February 2020 and subsequently sent request to carry out necessary repairs on March 4, 2020, while Neon Farms is yet to meet the conditions. 

Some of the concessionaires, who narrated their ordeal to The Guardian, said they have met all stipulated requirements, including insurance cover for review and approval.

They explained that they are only waiting for the silos to be released to them, but unfortunately, the process is still being held up by government bureaucracy. 
One of them said: “Had the silo complexes handed over to us in good time, we would have been able to access credit facility from the Central Bank of Nigeria (CBN) to enable us mop up farm produce from farmers, so that we can return to the farm and maintain all-year-round farming cycle. Unfortunately, that has not been done.
“It’s a good initiative, but it has to be well implemented. Ogbeh did everything and handed over the certificate to us then. But when the new minister came on board, he wanted to go over all the documentation again. So, the delay is from this new minister.”

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