Presidential imports waivers: For good or bad?

on   /   in Rational Perspectives 12:05 am   /   Comments

By Les Leba

“The bill gives significant powers to the Customs Service and ordinarily this should not be a bad thing, but it does remove powers from the President and the minister that we think are necessary to ensure that the economic agenda of the country are properly carried out as directed by the President and delegated to the minister.”

The above is an excerpt from the presentation of the Minister of Finance, Dr. Ngozi Okonjo-Iweala, on the proposed amendment to the Customs Act and the democratization of the President’s powers on imports duty waivers by the Senate Committee on Finance.

For the purpose of this article, we will briefly discuss the impact of waivers on industrial growth, social welfare and corruption.

Presidential import waivers are granted seemingly in pursuit of altruistic government’s economic objectives; ultimately, however, our agricultural and industrial base has often become destabilised by such waivers, as capacity utilisation in respective subsectors begin to contract with increasingly failed enterprises and rapidly rising unemployment as collaterals.  Expectedly, increasing spectre of unemployment has instigated huge security problems, as millions of our youths become jobless and desperate.

Furthermore, selective waivers have always inevitably translated markets into monopolistic scenarios.  Consequently, the usual imperfections of a monopolistic market such as price manipulation, excessive profiteering and a parasitic distribution chain would also prevail.

Ultimately, the altruistic social objectives of presidential waivers become defeated, as beneficiaries of waivers celebrate outrageous returns on their investments, as local industrialists struggle unsuccessfully to maintain market space.

Import waivers may also deplete government revenue; incidentally, the current Senate hearing is coming on the heels of the loss of about N58.7bn (over 10% of the 2012 Customs revenue budget), from executive waivers this year!  Thus, projected federal revenue will also be further reduced by the foregone corporate and personal tax revenue from failed businesses and lost employment opportunities predicated by Mr. President’s imports waivers this year.

Similarly, some local industries may also be jeopardized by the inexplicable lifting of the ban on importation for such consumer goods as fruit drinks, tooth picks, furniture, textiles and vehicles; i.e., those items for which local manufacturing capacity readily exists.

Indeed, the facilitation of  such imports have been cited as a major avenue for dumping substandard goods in Nigeria; a development, which would inevitably further constrain industrial investments domestically.  Worse still, it would seem that import waivers granted by previous administrations were sometimes used to import fast moving products to sell rather than the specific products covered by the waiver.

Analysts have suggested that such duty and levy waivers are not often driven by altruistic or patriotic objectives, but by an obligation to compensate political godfathers, associates and friends of government.   Thus, the issuance of waivers has been seen as driver of political inequities and corruption, and a veritable obstacle to the true practice of democracy, as the considerable slush funds from waiver scams are deployed to influence political patronage and election victory.

Regrettably, allegations of such improprietory with public revenue have largely been disregarded by the security agencies.  Inexplicably, itinerant businessmen, often with shadowy corporate identities, have also been beneficiaries of the huge gains from import waivers; indeed, some such ‘emergency entrepreneurs’ have been alleged to have made billions of naira by simply selling their rights to the waiver to a third-party!  Incidentally, several of our nation’s business icons have at some time or the other also benefited from such waiver scams.

Mr. President’s 2013 budget proposals may have inadvertently or possibly deliberately set the stage for another waiver scam next year; the high levy and duty rates for refined sugar (20% duty and 60% levy) and rice (10% duty and 100% levy) will undoubtedly instigate huge price rises for these ‘essential’ commodities.

The intention of such high duties and levies is presumably to support the survival of local production of rice and sugar.  However, it may be unrealistic to expect the products of such investment to come on stream in the next 12 months.

Consequently, the market will become under-supplied and the resultant price spiral for these ‘essential’ commodities will undoubtedly lead to massive public outcry in an economy already severely ravaged by inflation.  As usual, government would step in and ‘altruistically’ grant waivers to its favoured partners for urgent importation of rice and sugar.

Consequently, prices would temporarily fall marginally, while cross border smuggling of rice and sugar will once again become very profitable business with the collateral of further loss of import duty revenue; worse still, government’s efforts to increase local production of rice and sugar may ultimately once again become impractical.  In other words, as it was in the past, so will it be next year.

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