How duty waivers underdevelop Nigeria,By Issa Aremu

Aremu2013Nigeria has lost a staggering sum N1.4 trillion (almost half of the annual national budget!)on import waivers in the last three years. And that is official! According to the Nigeria Customs service under the officially supervised waiver regime “more than 65 percent of incentives on export were for questionable goods”. PREMIUM TIMES quoted a new document by the Customs Service according to which hundreds of billions of naira are being lost to the Federation Accounts “as authorities recklessly grant import/export incentives on unapproved goods from rice to fish to kolanuts, with no significant bearing on the economy”. With manufacturing and value adding activities contributing less than 4 per cent to the Gross Domestic Products (GDP), Nigeria has long assumed notoriety as a “container economy”. Nigeria increasingly is emerging more of as an “imports destination” than an investment destination; every thing is imported from petroleum product to toothpicks, from presidential jet to policy ideas!

Taxes levied by the government in relation to imported items are referred to as import duties. In the same vein, duties levied on export consignments are called export duties. In the 70s and 80s Nigeria was truly a productive industrialising economy. Excise duties collectable from factory gates of functioning industrial estates in industrial cities of Lagos, Kano, Kaduna, Enugu and Portharcourt dominated the major sources of Customs revenue. Indeed Customs services maintained visible presence in the factories to collect taxes of local value
chains. However with the so called liberalization of the economy and abandonment of Industrialization agenda, import duties assumed special importance and the economy irug older with imported goods. It is bad enough that we have replaced a productive economy with an importing economy. We run the economy based on wholesale import of finished goods and export of raw materials in the classical version of Lugardian economy 100 years after amalgamation of the colonial economy. It is however clearly unacceptable that we cannot and indeed refuse to tax these imports ( some of them luxury goods such as armoured cars) under the regime of unacceptable waivers. Addictive waivers give undue advantage to importers and impoverishes local producers who operate under high cost environment which cannot be passed on to consumers.

During the public presentation of the 2014 budget in Abuja last Monday, Minister of Finance, Ngozi Okonjo-Iweala, has said that the 2014 budget envisaged a net collectible revenue of N7.50 trillion. Mrs. Okonjo-Iweala, who is the Coordinating Minister for the Economy also accepted as much that the expected collectible revenue represented a 9 per cent reduction from the N4.1 trillion in 2013. The revelation from the Nigeria Customs Sevices (NSC) however shows that the revenue loss to the Federation last year arising as a result of waivers is more than what has been officially acknowledged. By the time we add duty waivers to oil theft and depletion of Excess crude account, we may be have at hand a disintegrating economy caused by a policy suicide called political waivers the beneficiaries of which are the government cronies who just make money at the expense of local jobs and public revenue.

The present dispensation of wholesale waivers regime has inadvertently legitimised the status of Nigeria as a non-productive corrupt economy that is avoidably loosing scarce revenue, jobs and local goods and services to waivers.The NSC has rightly compared the government’s present management of export grant to the well-abused fuel subsidy pointing out 65 percent of beneficiaries that received the grant for goods not approved by the government, which ordinarily should be limited to raw materials, machinery and spare parts. It is legitimate for Nigeria as a developing economy to have policies that favour the growth of
it’s local companies, through such selective policies like tax breaks for local companies, even official ban of goods in which we have comparative advantages and waivers for machineries that are needed to produce goods at home. Thus economic waivers are good for the economy, once they are targeted towards local production and not to benefit rentier importers. Waivers granting policy had been in existence in Nigeria as means of fostering businesses with potential for value chain development. Indeed the economic waiver that encourages local production should be retained. There are also statute waivers as spelt out in protocols within ECOWAS for instance.

It is refreshing to note that question 15 of the 50 questions posed by the House of Representatives on the economy deals with the mangement of waivers policy. The Coordinating Minister for the Economy and Minister of Finance, Mrs. Ngozi Okonjo-Iweala was asked to produce a detailed report on the exact amount of money Nigeria lost to import duty waivers between 2011 and 2013. She was also directed to provide the full names of the beneficiaries; what the waivers were used to import; and the justification for granting such duty exemptions. Nigeria awaits public hearing on this singular question dealing with waivers. What is also clear is that the management of waivers policy is too important to be left with the executive alone. One the policies that undermine most local textile mills apart
from wholesale smuggling and lack of electricity is waivers for imports of finished textile products at a time local manufacturers cannot break even.


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