Explainer: What is the wheat grain levy pool account?

A recent viral document that surfaced online is raising questions about the “Wheat Grain Levy Pool Account”. The document whose authenticity is still being investigated shows a senior government official requesting approval for over $500,000 to cover the hotel expenses of the President and his close aides during their attendance at the United Nations General Assembly (UNGA) meeting, from September 16 to 23.

The document shared on X, a social media platform, showed the permanent secretary’s plea for the President to instruct the Federal Ministry of Finance, Budget, and National Planning to arrange for the release of funds from the 15 percent Wheat Grain Levy Pool Account.

This development has raised questions about the existence of the Wheat Grain Levy Pool Account, as it was originally established to promote the use of cassava in bread production, which had completely and still to this day relied on wheat. This policy shift, which ultimately proved unsuccessful, was abandoned in 2015.

The recent leaked memo has prompted many to question the continued existence of this account and the rationale behind maintaining a 15 percent levy on imported wheat in the country, where the price of bread, a stable food, is at an all-time high. What is the purpose behind its persistence?

What really is the wheat grain levy pool account?

The Wheat Grain Levy Pool Account is a financial account managed by the Federal Ministry of Finance, Budget, and National Planning, created through a collaborative effort between the Ministry of Agriculture, the Ministry of Finance, and the Central Bank of Nigeria.

In a memo dated February 20, 2012, and signed by Batari Musa, the director of the trade and exchange department, the Central Bank of Nigeria (CBN) announced that this fiscal policy measure a driving force behind the wheat substitution policy is  “to encourage the purchase and utilisation of locally produced commodities, the underlisted measures are hereby introduced with effect from July 1, 2012. Wheat flour shall attract a levy of 65% and 35% duty rate; while wheat grain shall attract a levy of 15% and 5% duty.

“Concessions: In order to expand domestic production, boost exports, generate employment, and create a level playing field, concessions and waivers shall be granted only on a sectoral basis.”

A much deeper look showed that these taxes were to encourage cassava utilisation in bread production, reduce the reliance on foreign exchange for wheat imports, boost cassava demand, enhance earnings within the cassava value chain and yield, and increase job opportunities in the cassava value chain, among several other benefits.

Do we still have a wheat grain levy pool account?

Some sources confirm that this account still receives the proceeds of a 15 percent levy and a 5 percent duty on imported wheat grain, even though the cassava bread policy has ended.

The policy ended suddenly in 2015, when President Muhammadu Buhari banned food imports and initiated a controversial border closure programme.

The recent request from the permanent secretary, Adebiyi Olufunso, asking President Tinubu to approve over $500,000 from the Ministry of Finance, provides further proof of the account’s existence and that Nigerians continue to pay 20 percent taxes on wheat grain imports.

Another proof of the existence of this account is an October 22, 2022, petition when the Social Economic Rights and Accountability Project (SERAP) asked Buhari to explain the withdrawal of over N47 billion from the Wheat Grain Levy Account.

Critics worry that this account might be used to move government funds without proper oversight.

Why continue to collect these levies if the cassava bread policy for which it was created has been stopped?

Unfortunately, that is a question many hope the federal government should provide an answer to, especially as the president tries, according to the Presidential Committee on Fiscal Policies and Tax Reform, to reduce the number of taxes.

In 2015, the cassava bread policy, the main driver of these taxes, was discontinued due to perceived shortcomings and a shift in agricultural policy objectives by the previous administration.

On May 30, 2022, a Cable newspaper interview with Jude Okafor, the National Secretary-General of the Association of Master Bakers and Caterers of Nigeria (ABCON), gave reasons why the cassava bread policy failed.

Okafor said that one of the major reasons for the failure of the cassava bread policy, linked to the 15 percent wheat grain levy, was the lack of significant improvements in the cassava value chain business.

He said that the ABCON concluded that cassava lacked the qualities of wheat, including taste and the ability to produce longer-lasting bread.

Additionally, the association argued that cassava bread didn’t have the same durability as wheat bread.

The bakers urged the federal government to eliminate these taxes, especially in light of the negative impact of the Ukraine-Russia war on wheat prices.

They believed that such a removal was necessary to prevent a “broader supply chain disruption and an economic recession”.

Unfortunately, these levies continue to persist, leading to surging prices for bread and wheat-dependent products due to foreign exchange scarcity.

Additionally, the federal government has failed to provide a policy objective for proceeds in the wheat grain levy account, creating a vehicle to encourage unbudgeted and unaccounted withdrawals.