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 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 N170bn duty waivers in three years. However, the Comptroller-General of Customs, Alhaji Abdullahi Dikko, in contrast, 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!
In other words, our government may have borrowed at double-digit interest rate to fund a budget deficit largely induced by a waiver of over 15 per cent 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 his 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’ report 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 local manufacturers on the verge of total collapse, with thousands of attendant job losses!
The Vanguard report also noted that “The irony of this pathetic situation is that while the federal government openly speaks of its resolve to encourage local industry, in secret, it gives waivers to political associates and cronies to import and make cheap money thereby undermining local production.”
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, despite such opposition, government, according to the Vanguard report, allegedly granted waivers for importation of 250,000 metric tons of vegetable oil to a favoured company, while a concessionary rate of zero per cent duty and zero per cent VAT on the importation of soya bean meal for poultry consumption from 1st March to 31st 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 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, while answering questions on the 2014 budget in Abuja, Dr. Okonjo-Iweala insisted that “Revenue loss through waivers did not constitute a loss to the nation, as waivers of imports duties was a policy 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 came out stoutly 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 President of MAN, 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 advertorial 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 adoption of fiscal and monetary management strategies that will bring down inflation below two per cent, as in Zimbabwe, a sister African country, and similarly also bring cost of funds to single digit, to impartially create the erstwhile elusive enabling economic environment for all manufacturers across the board.
The casino strategy of selective bailouts, and indeed, Bank of Industry loans, where its nine per cent interest rate becomes compounded by an array of charges, which push effective cost of funds well above 20 per cent, have been adjudged by stakeholders in critical economic sectors to be inappropriate to drive rapid industrial growth with increasing job opportunities and enhanced social welfare. The survival of indigenous manufacturers continue to be challenged by unfair competition from powerful multinationals and unfettered imports of consumer goods, as evident in most shops and supermarkets, and reduced job opportunities nationwide!
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 Management Team’s apparent denial of the pivotal importance of lower single digit inflation rate 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 eight per cent, and real sector cost of funds at over 20 per cent!
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!
SAVE THE NAIRA, SAVE NIGERIANS!!!
