There was general public optimism when Dr. Ngozi Okonjo-Iweala, returned for a second term as the Finance Minister and also Coordinating Minister of the Economy, and promised that there will be strict discipline in granting imports duty waivers during her tenure.
In contrast, however, almost three years later, the Minister admitted that government has since granted about N171bn of waivers in three years! However,
The Comptroller General of Customs, Alhaji Abdullahi Dikko, on the other hand, had informed the legislature at the public hearing that the federal treasury lost over N603bn from import duty waivers to various companies between January and December 2013 alone.
Thus, we had consequently borrowed at an average cost of over 12% to fund about 60% of a budget deficit induced by a waiver of over 15% of total projected revenue in 2013.
In the wake of ensuing public debate on this matter, the Punch newspaper ran editorials, which accused the Finance Minister of doublespeak
Curiously, however, rather than challenge the Customs Service helmsman to substantiate the allegation of N603bn revenue loss from waivers, the Finance Minister launched a media offensive on both domestic and international fronts on the Punch newspaper for allegedly “trivializing corruption”.
Nonetheless, in July 2013, a ‘Financial Vanguard’ investigation had disclosed that waivers granted to a few highly placed individuals to import refined vegetable oil, soya bean meal and related products have put local vegetable oil and other associated manufacturers on the verge of total collapse, with hundreds of thousands of attendant job losses.
Similarly, a coalition of Oil Palm Value Chain Associations, which includes plantation owners and oil palm growers, also decried “the debilitating issues of selected waivers and illegal importation of crude palm oil, which have become the killers of the palm oil industry in Nigeria.”
Nonetheless, in spite of such opposition, government, according to the same report, allegedly granted waivers for importation of 250,000 metric tons of vegetable oil to a favoured company, while a concessionary rate of zero percent duty and zero percent VAT on the importation of soya bean meal for poultry consumption from 1st March to 31 December 2013 was also approved, in spite of the threat this constituted to local farmers! Curiously, an importer of cigarettes also received duty exemption of over N70m.
The Lagos Chamber of Commerce & Industry is not left out from criticism of the adverse impact of selective waivers. Muda Yusuf, the Director General of LCCI, noted that the “LCCI is of the view that waivers are detrimental to the economy…. It creates a situation of unfair competition, giving one player an edge over the others; it leads to huge revenue loss to government and also, results,” according to Yusuf, “in the perpetuation of a rent economy, as it weakens the moral authority of the political leadership to curb corruption.”
Yusuf therefore, decried the unexpected somersault on Okonjo-Iweala’s earlier promise on waiver approvals!
Furthermore, Lateef Oyelekan, President of the National Union of Food, Beverage and Tobacco Employees, also called for a “total end to import waivers, as these waivers were not only killing the local industries, but also compounding unemployment and insecurity in the country”.
Nonetheless, the Finance Minister insists that import duty waivers were also adopted by advanced countries to grow their economies and create jobs.
Incidentally, the Manufacturers’ Association of Nigeria (MAN) appears to be the only trade or industrial subsector that supports government’s waivers. In a recent full page advertorial in the Guardian edition of January 28, 2014, MAN stoutly came out in defence of the government, with the caption “Waivers and Exemptions: government’s incentives are boosting the economy and creating jobs”.
Certainly, MAN management is obviously on a different page with all the other major stakeholders and indigenous economic operators; indeed, as an executive member of MAN Ikeja Branch (comprising over 600 registered manufacturers), I am aware that the advertorial is certainly not the opinion of the majority of our branch members!
Indeed, in October 2013, on the occasion of the 46th Annual General branch Meeting, which was well attended by the press, our special guest, the national MAN President, Chief Kola Jamodu, who incidentally, does not own any manufacturing company, himself, was visibly anxious and bullishly attempted to stop a presentation by a seasoned manufacturer, whose $7m investment on a new steel rolling plant to increase local production, had become jeopardized by government’s imports waiver.
In the light of the foregoing, the subsequent full page advert by MAN in support of waivers may not come as a surprise; nonetheless, one wonders why the apparently ‘closet’ relationship between the MAN President and the government has not led to the adoption of fiscal and monetary management that will bring down inflation below 2%, as in Zimbabwe, a sister African country, and similarly also bring cost of funds to single digit, to impartially create the erstwhile elusive enabling environment for all manufacturers across the board.
The casino strategy of selective bailouts and indeed, Bank of Industry loans, where its 9% rate of interest becomes compounded by an array of charges, which push effective cost of funds well above 20%, have been adjudged by stakeholders in the critical economic sectors to be inappropriate to drive rapid industrial growth with increasing job opportunities and enhanced social welfare.
The Nigeria Industrial Revolution Plan, which was launched by President Jonathan last week, will inevitably fail just like several earlier economic blueprints, because of the Economic Team’s apparent denial of the pivotal importance of lower single digit rate of inflation and single digit cost of funds to rapid economic growth; show me a country that positively transformed its economy with an abiding inflation rate of 8%, and real sector cost of funds at over 20%!
Meanwhile, a well-articulated strategy for curbing Central Bank’s compulsive expansion of money supply, which fuels rising inflation and triggers higher interest rates was provided on request to the MAN President on at least two occasions; regrettably, however, an acknowledgement of receipt is still to come over a year after!