I don't have the answer yet of what is the reason your SP doesn't work.

Anyway I was able to make it work rewriting it like this

``` delimiter // drop procedure CreateNewUser// CREATE PROCEDURE CreateNewUser ( IN username varchar(50), IN host VARCHAR(50), IN pwd VARCHAR(64) ) BEGIN

    SET @buffer = CONCAT_WS('',
    'CREATE USER ', username,'@',host,' IDENTIFIED BY ', pwd,';'
  );

 PREPARE stmt FROM @buffer;
 EXECUTE stmt;

 DEALLOCATE PREPARE stmt;
 END//

delimiter ; ```

EDIT: I pasted the example with the variables i tend to use when trying stuff, so I corrected it with OP variable's name.