Maybe, you know the poem, “For want of a nail, the shoe was lost; for want of a shoe, the horse was lost; for want of a horse, the rider was lost; for want of a rider, the battle was lost; for want of a battle, the freedom was lost; and all for the loss of a horse shoe nail.” If so, you might appreciate the disincentive that may be inflicted on the Federal Government’s export promotion drives if delays in the processing of the Export Expansion Grant available to a certain category of exporters continue. Qualified beneficiaries get a Debt Management Office promissory note of a maximum of 15 per cent of the value of their exports, which they can use “to pay all taxes, (including company tax, and value added tax, but excluding personal income tax), (and) offset government loans (from government agencies like Bank of Industry, Central Bank of Nigeria, and the Nigeria Export-Import Bank).”
The EEG promissory note can also be applied “to buy government bonds; (and settle indebtedness to the Federal Government’s) Assets Management Company of Nigeria.” A beneficiary can take 100 per cent of the grant at a go. To qualify for this rebate, beneficiaries must have “registered with (both) the Corporate Affairs Commission and the Nigeria Export Promotion Council; exported Nigeria-originated products or services; and carried out formal exports with repatriation of proceeds into (a) Nigerian bank account with confirmation by the CBN.” The intention of this scheme is to cushion the effect of infrastructure deficits which tend to increase overall unit costs of manufactures in Nigeria. It is a non-cash scheme that is operated via the Negotiable Duty Credit Certificate, or promissory note. The advantage of non-cash promissory note that is acceptable to government agencies is that, whereas government will not have to pay cash, the promissory note can be used to offset payments, like tax, due to government. The note is negotiable because it is transferable to third parties. So, beneficiaries can assign the instrument to their creditors, who can also use it to offset statutory payments to government agencies. When used to offset tax, it becomes a fiscal policy. It is truly a win-win for government, the beneficiaries, and the economy. Another advantage of the scheme is increased foreign exchange earnings, which translate to conservation of Nigeria’s foreign reserves. The EEG was introduced in 1986, via the Export Incentives and Miscellaneous Act, to diversify Nigeria’s export base from crude oil, to non-oil products, especially in the agricultural and allied sub-sector of the economy. Maybe, as a result of abuse, the scheme was suspended by the President Goodluck Jonathan government in 2014. But the President Muhammadu Buhari Administration reinstated it to diversify the export base of Nigeria. There are allegations that there are challenges in granting rebates that the National Assembly has approved for qualified exporters and beneficiaries of the statutory EEG that is domiciled in the Nigeria Export Promotion Council. In the manner of a man finding the easiest way to take a bull round a china shop without breaking the wares, Segun Awolowo, Executive Director of NEPC, noted that the National Assembly approved the first batch of promissory notes for the export grant in January 2019. He then tippy-toed to find a nice, non-threatening, way to appeal to the DMO “to ensure the completion of the programme within the shortest possible time,” before the next batch of authorizations is processed for approval by the National Assembly. He revealed that the claims cover “backlogs of 10 years (2007 to 2016) for 270 companies, with a total value of… N195,089,234,808.64, (which he believes), will bring succor to the export sector in particular, and the economy in general.” The estimated amount outstanding is N1.3trn. Awolowo added that Pre-Shipment Inspection Agency and Nigerian Bureau of Statistics figures indicate that “there was a growth of 48.43% from $1.204billion in 2016 to $1.787billion in 2017, (in Nigeria’s export business, and) it further went up by 27.22% equivalent to $2.274billion in 2018.” He is hoping “that exports for 2019 will grow by about 40 per cent,” if promissory note settlements are done early enough. But it looks as if something or somebody is holding up the process. The DMO is allegedly shifting the goalpost of the EEG by introducing what it calls Reverse Auction, which simply means that the beneficiaries have to yield a discount on their accumulated promissory note rebates. Traditionally, Reverse Auction occurs when several sellers submit increasingly lower bids to one buyer, instead of the other way round, where several buyers submit increasingly higher bids to one seller. This was not originally on the cards, and the beneficiaries claim that the Reversed Auction will affect their cash flows, and compromise their capacity to service debts incurred in the export transactions. Some tax experts regard this as an indirect tax, and added to the multiple taxation suffered by Nigerian businesses. The beneficiaries had worked with the figures that the DMO now wants to fiddle with, and lament that it may discourage the export promotion drive of the Federal Government. The DMO doesn’t seem to have said much to clarify its position. As you already know, the EEG is the NEPC’s way of supporting “active exporters (in) expanding their international business… through exports of existing products in new and current markets. It is essentially a post-shipment incentive designed to expand the volume of export goods and commodities, other than crude oil, and improve global competitiveness of Nigerian products.” Even though the scheme is a programme of the Federal Government of Nigeria, it is also supported and co-funded by the European Union and the United Nations Industrial Development Organization. The scheme resonates with the Economic Growth and Recovery Plan of the President Buhari government, which is to “accelerate non-oil revenue generation (for the government and people of Nigeria).” The ERGP’s broad objective is “to tackle the obstacles hindering the competitiveness of Nigerian businesses, notably poor or non-existent infrastructural facilities and the difficult business environment. It will increase competitiveness by investing in infrastructure and improving the business environment.” The DMO may have been introduced into the scheme for two reasons: To facilitate the administration of an IOU or promissory note to settle the due “payments,” and the transparency that comes with another government agency verifying the “liabilities” due to beneficiaries. You may recall the abuse that trailed the petrol subsidy. But this other good intentions should not stifle the earlier good intention of the government. If the DMO has found anyone or organization abusing the scheme, they should be sanctioned according to the law. The EEG is a tool for the economic development of Nigeria, and anyone abusing it should be treated as an economic saboteur. There must be an appropriate law in the statute to deal with such crimes. The DMO should find, and throw it at the unscrupulous offenders. The EEG may appear insignificant now, but it has great potential. The Vietnamese maxim, “Dau xuoi duoi lot,” if the head slides through, the tail will follow, may also mean to not despise days of small beginnings. Government should get the EEG scheme going, lest it fail. Please remember that “Statesmen are judged not only by their intentions, but the outcomes of their policies.”
Source: Punch
