The indiscriminate granting of waivers and concessions by the Federal Government in the last decade has become a source of concern to stakeholders who hold the view that such policy initiative by government is not only being abused, but is a conduit pipe for milking the economy dry. Ibrahim Apekhade Yusuf examines the issues
IN other climes, waivers ordinarily are granted at the behest of government to protect the local industries, in terms of building capacity and growing the economy in its entirety. The irony, however, is that this rather innocuous policy has become an albatross to Nigeria’s economy, where waivers and concessions by successive governments have been anything but good.
For the avoidance of doubt and confusion, a few anecdotes would suffice.
Pandora box
Investigation by The Nation revealed that abuse of the waivers is routine, as politicians and businessmen continue to collude to undermine the nation’s economy through the issuance of fraudulent waivers.
The first sign that all was not well was when the Jonathan administration curiously lifted a ban imposed by the former president Olusegun Obasanjo government on importation of many products such as juice drinks, in clear contradiction of the recommendations of a committee set up by the late President Umaru Yar’Adua to review the nation’s import policies. The committee had recommended sustaining the ban, and restriction on importation of many other items that were not on the prohibition list issued by the Obasanjo government such as textile materials.
Investigations further revealed that only President Goodluck Jonathan has powers to grant approval for waiver of import charges under strict conditions. But the reality on ground is that well-connected importers secure waivers on duty, levy, ECOWAS Trade Liberalisation Scheme charges, Comprehensive Import Scheme and other charges.
The Nation gathered that the import waiver cartel had ensured the sustenance of their nefarious activities. Following the swearing in of President Jonathan, a company, Network Supplies Limited, got the president’s nod to import 250,000 metric tons of rice with waivers on import duty. The company allegedly got waivers on import duty, ETLS, CISS and other charges.
Another company that got the presidential waiver is Energy Resources Management Limited. The company allegedly imported 250,000 metric tons of rice. The waiver approval was contained in a letter signed by Taylor J. O, an assistant Comptroller General (Tariff and Trade) for the Comptroller General of Customs, and addressed to the Customs Area Comptroller Apapa Port and Tincan Island Port. The list of Nigerians involved in this racket is astounding and shocking.
Investigations by the House of Representatives Committee on Customs and Excise put the losses incurred from the grant of such waivers at N380 billion. Obasanjo, during his tenure as president, used to even sweeten the deals by giving them crude oil to lift.
Apparently discomfited over the issue of indiscriminate granting of waivers to foreign firms, industry stakeholders under the aegis of Association of Steel Importers of Nigeria, had kicked against a request by Western Metal Products Company Limited (WEMPCO) for the extension of the $3 billion (N448 billion) import duty waiver granted it by the then President Umaru Musa Yar’Adua administration.
Lending credence to the foregoing, a member of the association who asked not to be named confided in The Nation that contrary to its directive in 2007 that import duty waivers, concessions, incentives and other exemptions be suspended, the Federal Government had gone ahead to grant exclusive import waivers amounting to $3billion (N448 billion) to WEMPCO, a Chinese company, for the establishment of a $250 million (N37.4 billion) cold rolled steel plant in the country.
Despite the loud cry against the waiver then by informed industry sources which included captains of industries and chambers of commerce and industry, government went ahead with the granting of the waiver. Glaringly undeterred by the voice of the industry and in defiance of the negative effect of its request on the economy, WEMPCO is now asking for the extension of the N448 billion import duty waiver.
Particularly worrisome, the source said, is that “a litany of materials that could be sourced locally was listed as item that would be shipped into the country by WEMPCO. The items included paints that Berger Paints and a chain of other paint companies operating in Nigeria manufacture, cables, electrical fittings, and so on.”
House probe
The House of Representatives at a public hearing last November was told that Nigeria had lost a whopping N276, 943,087,154.09 in eight years due to indiscriminate granting of waivers, exemptions and concessions by the Federal Government.
The revelation came through a motion sponsored by Chairman, House Committee on Services, Hon Yakubu Dogara, in which he expressed worries that the practice of granting waivers by the executive arm of government indiscriminately amounted to Executive Appropriation contrary to Sections 80 and 162 of the 1999 Constitution.
He said available records show that between 2000 and 2008, the Federal Government entered into about 183 undertakings with individuals and corporate entities granting them waivers, concessions and exemptions running into billions of naira that ought to have accrued to the Federation Account as revenue.
Dogara lamented that the practice of illegal and indiscriminate granting of waivers to “totally undeserving firms and individuals” was yet to abate in spite of repeated resolutions of the House urging government to put a stop to the practice.
He urged the House to mandate its Committee on Customs and Excise as well as the Committee on Finance to carry out a comprehensive investigation of the legality or otherwise of all existing waivers, exemptions and concessions granted by the Federal Government since 2009.
The motion, which was co-sponsored by 15 other lawmakers, also urged the Federal Government to revoke all existing waivers, concessions and exemptions that were not backed by extant laws or protocols pending the outcome of the investigation. The motion was passed without a single dissenting voice.
Best practice
Import duty waivers are an otherwise useful device carefully used by sovereign nations to meet specific economic goals, especially in protecting local industries, creating jobs and promoting exports. Typically, a waiver means excluding a firm from paying import duty on certain goods for a fixed period.
Countries like Japan, China, Malaysia and India, at various times, had used import duty waivers, concessions and exemptions to protect and build up their local textile, vehicle, agricultural and manufacturing industries. Interestingly, these countries have become economic power houses with export-led economies.
Nothing to cheer about
In three decades of reckless granting of import duty waivers, however, it is obvious that none of these lofty goals have been met. Begun in the 1980s, waivers have been shamelessly abused by successive governments to the detriment of the taxpayer.
The Senate alleged that N58.7 billion in import duties has so far been lost this year through waivers granted by the Executive. Last February, the Federal Government admitted that it lost N276.9 billion to waivers between year 2000 and 2008.
An enquiry by the House of Representatives found that former President Olusegun Obasanjo, at a period, granted waivers to 1,843 beneficiaries with several billions of naira lost in customs duties. The enquiry alleged that not only were some of these waivers “illegal and indiscriminate”, but added that they were given to “totally undeserving firms and individuals” and despite repeated resolutions by the House that the government should discontinue granting the waivers.
Besides, the granting of waivers for imported raw materials is cited as one of the major avenues for the dumping of substandard goods in Nigeria, a development that is crippling investments in the country, analysts have further argued.
“No economy would develop when there is a specific policy for certain categories of people. In fact, it is double jeopardy for some firms, who after paying all the necessary duties, are still faced with multiple taxes and crippling infrastructure,” said Okorie Sylvanus, a market analyst.
Review of extant legal framework
Expectedly, there is a move to amend the Nigerian Customs Act and the import duty waiver system by the National Assembly, a move the presidency is not willing to give its nod.
Interestingly, the Federal Government is kicking against a clause in the bill that grants the Nigerian Customs Service discretion to grant import duty waivers. Instead, in a presentation to the Senate Committee on Finance, the Minister of Finance, Ngozi Okonjo-Iweala, urged legislators to retain the powers to grant duty waivers with the President and the minister, acting on his behalf.
The bill is the proposed Customs and Excise Management Act (CEMA), CAP 45 2004, (Amendment) Bill 2012; and the Companies Income Tax Act 2004 (Amendment) Bill 2012, which have undergone public hearing, the bills were said to be a calculated ploy to transfer the presidential power of discretion to grant import duty waivers to the Nigeria Customs Service (NCS).
“In our view, prohibition, importation and exportation of goods, duty exemptions and waivers are powers too critical to economic management to be left to the Customs Service, which is in real terms an agent not the principal… We all agreed on one thing, that (the) abuse of waiver for whatever purpose is not something good for the country. At the same time there are certain categories that are internationally respected, like the waivers for diplomatic communities and NGOs (Non Governmental Organisations)”, Okonjo-Iweala argued.
Views of other stakeholders
For many local businesses, waivers and concession being granted by the Federal Government, have been a curse rather than a blessing on the economy.
One of such organisations which have been at the receiving end of the policy is the National Association of Nigerian Traders (NANTS).
In a statement tagged: “Import Waivers and the Dangers to the Nigerian Economy: The Dangers of the FG’s 150bn rice and palm oil Import Waivers to 10 Firms in 10 months on Small Scale Farmers and Rural Livelihoods”, signed on behalf of the group and made available to The Nation, the association’s Secretariat President, Mr. Ken Ukaoha described as “scandalous” the indiscriminate issuance of waivers.
The Federal Government of Nigeria, he recalled: “Granted rice and palm oil import waivers amounting to about N150 billion last year to 10 companies, with one of them securing the duty write-offs 164 times since February…”
Citing a recent media report, the NANTS boss said, from January to October this year 2011, the Federal Government waived import duties, levies and other taxes associated with the importation of rice and palm oil to over 100 private companies, out of which 10 companies alone got N150 billion waivers.
One of the beneficiaries, Connotation Concepts Limited, according to Ukaoha “which registered its nature of business as “bookshops and stationery stores”, secured duty waivers to import refined palm oil worth billions of naira over a period of 10 months during the year as well as got four waivers to import palm oil amounting to N233 million, N233 million, N21 million and N67.4 million.”
The Federal Government, he further noted, “Approved for the same company imports of palm oil worth N337 million, N136 million, N114 million, N141 million and N110 million. Four days later, it secured another four separate import approvals totalling N1.3 billion. On July 27, it was granted seven import permission totalling N1.2 billion. The report further pointed out that another company, Energy Resources Management Limited got rice import waiver approvals 34 times between February and July, thereby saving taxes amounting to N5.6 billion. In July, the company secured waivers to import rice worth N1.45 billion naira, N46 million, N104.8 million and N92.1 million at different times, costing the government millions of naira in taxes. It noted that in July alone, the same company got tax reliefs worth N469 million, while another company, Network Supplies Limited, got rice import duty waivers 36 times during the year, leading the Federal Government to lose about N5billion in taxes. Also on the list of firms that benefited from the rice or palm oil waivers are Olam Nigeria Limited, Presco Industries Limited and Sopon Nigeria Limited.”
NANTS, he said, is yet to see any proven economic gains of the waivers to the nation, but have only seen negative tendencies towards perhaps monopolizing the economy of the country and possibly enriching a few at the expense of the generality of the population who are rather daily drifting towards the pallets of poverty.
“In summary, therefore, NANTS insists on the need to reverse the unjust and unfair import waivers granted to these companies. Nigeria has so much budget deficits, and to bridge this gap these waivers are needed. Importantly, we wish to underscore the need to grow the non-oil sector of the economy as well as the need for prudence in resource generation and management. That is the only way the Nigerian poor can be hopeful and committed to the policies of government. “
Speaking with The Nation, a Customs licensed agent, Anthony Williams Offor, gave a bird’s eye view of the state of affairs at the ports.
While lauding the port reforms, Offor argued as a matter of fact that the reforms have both positive and negative sides to it.
According to Offor, the Customs, some dubious agents, those new concessionaires and the NPA are to blame for the level of malfeasance in the ports one way or the other.
“Yes, some importers are also into sharp practices. For example, an importer, because of his or her connections with some politicians, would secure a fraudulent import-waiver, and you’re talking of a cargo that would have fetched the Federal Government up to half a billion naira. It has happened many times before my very eyes,” he stressed.
Expatiating, he said: “As an expert, I always took closer looks at those waiver documents and found out that they were all fake. Others would import one thing and declare another, even in a cargo that has a pre-shipment inspection report. So, the blame must be shared.
“Let me dare say that the customs, though rakes in billions annually, are largely corrupt.
Like other concerned stakeholders, Offor would want the authorities to plug the different avenues of revenue leakage, citing the issue of unauthorised and fraudulent waivers, sharp practices by large scale importers, some of them politicians or related to top politicians. “The moment those loopholes are plugged, then it will be a new chapter in our national life.”
It is, however, instructive to note that as part of efforts to make the clearing of goods in Nigerian ports faster, simpler and convenient, the Comptroller General of Customs, Alhaji Dikko Abdullahi, recently introduced a special incentive for importers who import cargoes into Nigeria five times within a given period without any discrepancy.
Speaking at a sensitisation and town hall meeting between the Customs Service and importers at the Trade Fair Complex in Lagos, the CG explained that henceforth, “any importer or agent who imports into Nigeria five times within a given period, without any discrepancy, shall henceforth enjoy fast track concession for all subsequent importations.”
Analysts have, however, argued that the measures being mooted by the Customs boss are merely cosmetic and may not necessarily address the issues.
