Saving 38 Nigerian non-oil export companies from imminent death
By Olufemi Boyede, CITP
One of the sad realities of Nigeria’s economy today is that it still remains a mono-economy depending on crude oil as its mainstay. That has been the albatross hanging on our neck as a nation from the time oil was discovered in Oloibiri, Bayelsa State, in 1956.
This reality has however made governments over the years to introduce programmes and policy instruments that would help enhance non-oil exports. Such programmes have not been consistent though. But they have somehow helped to keep the non-oil sector in the front burner of discussions.
One of such support instruments is the Export Incentives and Miscellaneous provisions Act No. 18 of 1986. The scheme came with a technical mix of eighteen different incentives, the most prominent of which were: The Export Expansion Grant, Export Adjustment Scheme Fund and the Export Development Fund.
But of all the three instruments above, the EEG seems to be the most functional. It was amended by Act No. 65 of 1992 under the military regime of General Ibrahim Badamosi Babangida and has however continued to survive all governments, starting from when it was introduced.
The primary objective of the scheme is to assist exporters to: increase volume/value of non-oil exports, diversify their export markets and enhance their global competitiveness. The EEG seems to be the only scheme that is directly connected to the exporters.
For any exporter to qualify for the grant, such exporter has to have a registered company with the Corporate Affairs Commission, as a Limited Liability Company. The exporter must be registered with the Nigeria Export Promotion Council. The exporter must have a minimum annual export turnover of N5million while the products being exported must be of Nigerian origin. The exporter is also expected to show evidence of confirmed repatriation of export proceeds into a Domiciliary Account in Nigeria and submit baseline data which should include Audited Financial Statements and information on operational capacity to the NEPC, on an annual basis.
With all these measures put in place, it was unthinkable that anybody would want to circumvent the process. Yet, that is exactly what has happened over the years. Both government officials and exporters played the hide and seek game with the scheme, so much that it became rather difficult for genuine exporters to benefit from the grant. It took a lot of battle and efforts from some exporters in the country for the scheme to survive. While the hide and seek game was being played, the nation’s economy sank deeper and deeper into the abyss.
But when President Olusegun Obasanjo became Nigeria’s president in 1999, there emerged a ray of hope. The diversification song took the front burner. Non-oil exporters became the darling of government while campaigns and awareness were on for the nation to diversify her economy. The scheme was repackaged. Government reached agreement with exporters that the scheme would primarily compensate three categories of exporters: Those who export manufactured products, those who export semi/non-manufactured products and those who export primary products.
The percentage of grants approved for such exports range from 10 percent of the total investment put into the production of the non-oil exports to 30 percent. To demonstrate its seriousness and prioritization of value-added exports, the President signed an instrument, under his personal seal, that exporters of fully manufactured products, especially textiles would receive EEG of 40%! The scheme soon came into full operation while exporters began to benefit from it. The revolution in that sector was so cheering that a steady growth was recorded in the non-oil export as the years passed by.
The EEG thus proved to be pivotal to the ability of Nigeria’s exports to compete favourably in the international market. The value of non-oil exports according to reports increased from US$ 0.1 billion in 2005 to US$ 2.7 billion in 2011 (CBN), representing an increase in non-oil exports total export earnings by 270 per cent. The value of the corresponding Negotiable Deposit Credit Certificate released per annum also increased from N21.92 Billion in 2005 to N78.46 Billion in 2011.
One of the reasons the EEG became instant success was that the government of the then President Obasanjo made payment of grant through Negotiable Duty Credit Certificates (NDCCs) to conform with WTO international best practice. This was unlike the pre-1999 era where such grants were paid to companies in cash.
But then, despite the apparent success of the scheme, a spanner was thrown in its wheel. Soon, government bureaucracy began to creep in. By 2007, the Nigerian factor began to play in the granting of incentives to exporters to the point that several exporters were being owed the grant despite evidence that they had carried out exportation of goods from Nigeria. Petitions about possible fraud and unfair processes in its administration subjected the scheme to several suspensions, investigations and audits within a short spate of time. The result was that between 2007 and 2016 about 269 exporting companies were being owed grants of various amount. It was in the process of this anomaly that the scheme was suspended in 2013.
But then, non-oil exporters did not give up on EEG. They took up the challenge and made representations to the government on the need to revive the scheme. After sustained pressure and several representations by Nigerian exporters and the regulatory agency, Nigeria Export Promotion Council, the federal government under President Mohammadu Buhari revived the scheme. It then approved the payment of the huge backlog of benefits to Nigerian exporters under the Export Expansion Grant Scheme. The backlog, amounting to nearly N350bn, as noted by NEPC, was to be included on Nigeria’s domestic debt list and settled by the Debt Management Office through the Promissory Notes scheme. Also, future grants were to be paid via the new scheme that was evolved in 2017 known as Export Credit Certificates (ECC). This is in lieu of the erstwhile Negotiable Duty Credit Certificates (NDCC).
In line with its mandate, and after the approval of the Federal Executive Council, the Federal Ministry of Finance wrote to the Senate seeking approval for the disbursement through DMO’s Promissory Notes scheme. This is necessary because the EEG itself is a trade incentive and a policy tool managed by the Executive arm of Government through the Federal Ministry of Industry, Trade and Investment and disbursed by the Federal Ministry of Finance. Due process required that the legislature grant the approval for payment since it involves “appropriation”.
The National Assembly then set up a committee chaired by Senator Francis Alimikhena. The committee also had former Senator Shehu Sani, and subsequently co-opted the House of Representatives Committee on Trade and Investment. Its brief was to see, consider and approve the request by the Executive (through the Federal Ministry of Finance) for the payment of the EEG debt. For whatever reason, the committee, rather than consider and pass the list as sent by the Federal Ministry of Finance, introduced its own internal processes, resulting in the disturbing omission of some 38 companies. This became clear when the ad-hoc Committee presented its report to the 8th Senate. Included on that list are some of Nigeria’s biggest exporters both in terms of value, volume and uniqueness of their products.
The Nigerian public was, in fact bemused at the exchange of accusations and counter-accusations between the adhoc Committee and representatives of the “omitted 38, with no one being able to determine, till date, any reasons responsible for their removal from the list.
By the time the 8th assembly rounded off its tenure, the 38 companies were left in the cold. The way forward now is for the 9th Assembly to revisit the plight of the 38 companies if it is brought up as fresh business. To kick-start the process, the Minister of Finance will have to officially request the approval of the National Assembly for the 38 companies to be paid what is due to them. The extant approval by the Federal Executive Council from all indications remains valid.
Kudos must here be given to the Nigeria Export Promotion Council which has written reminders to the Minister of Finance to send a request to the National Assembly, on behalf of the “omitted 38”. This writer has also gathered that the Debt Management Office has even recently reminded the Hon. Minister of Finance to seek National Assembly approval so that the DMO can proceed to fulfill its own obligations by extending the payment via Promissory Notes, to these unfortunate and unwilling victims of system dysfunction.
Several appeals have gone out by the affected companies individually, through their respective associations especially the MAN Export Group, etc. but as yet, nothing has been done. As it is, those 38 unfortunate companies are in the dark. They are somewhat stranded and have had to continue to wait hoping against hope that the money being owed them would be paid. The truth is that the grant is the only way these companies can continue in business as they are playing in a global market where their competitors do not grapple with the challenges they grapple with in Nigeria.
The expected money, more often than not will be plowed back into the business. Already some of these 38 companies are stranded and struggling for life.A few are indebted to AMCON and their commercial banks. If these companies will not go into extinction, the way of several other companies that have died, the Senate will do well to resuscitate their case and approve the payment of the grant to them since the majority of the original 269 companies being owed (and with which they were all on the same list) have been paid.
The only way these companies will not go into obscurity is for government to pay the money due to them. That is the way to go. That is the way the hope of those operating in the turbulent terrain of the non-oil exporters can be rekindled again.
AS it is becoming more and more glaring that non-oil exports remains the only plausible and strategic alternative to a sustainable economic future, Government, if it cannot pamper exporter (as most other active exporting countries do), must as a minimum, ensure a just, fair and equitable treatment for all the players in Nigeria’s non-oil exports sector.
Olufemi Boyede, CITP
(Certified International Trade Professional)
President, Nigeria Trade and Investment Centre, Canada Inc.