Abuse of import duty waivers

The Senate Ad hoc Committee on Import Duty Waivers, Concessions and Grants headed by Senator Mohamed Adamu Aliero said last week alleged fraud in the administration of import duty waivers on rice, sugar, other foods items and automobiles by Ministries, Departments and Agencies (MDAs) of government. The ad hoc committee’s report said it uncovered fraud […]

The Senate Ad hoc Committee on Import Duty Waivers, Concessions and Grants headed by Senator Mohamed Adamu Aliero said last week alleged fraud in the administration of import duty waivers on rice, sugar, other foods items and automobiles by Ministries, Departments and Agencies (MDAs) of government. The ad hoc committee’s report said it uncovered fraud worth N447.42 billion involving frontline companies such as Dangote Limited, Kersuk Farms, Bua Group, Elephant Group, Milan Group and Golden Penny between 2011 and 2015. The government agencies involved are Ministry of Finance, Nigeria Customs Service (NCS), Ministry of Industry, Trade and Investment, Nigeria Export Promotion Council (NPC), Ministry of Agriculture and Rural Development and Federal Inland Revenue Service. bg
Granting import waivers is not fraud in itself. The Customs and Excise Management Act provides that some imported goods could be granted duty exemptions if they are meant to boost local manufacturing of goods for export. In this regard, agricultural implements, materials for textiles and automobile industries are usually exempted from duty. The reason is mainly to protect local industries because imported finished goods may be cheaper and of higher quality than locally-produced goods. If duty is not imposed, imported finished goods could displace local products in the market. For instance, the palm oil industry in Nigeria is now being threatened by duty-free imports of palm oil from Malaysia. In 2011, government granted waiver worth N150 billion to 10 firms to import refined palm oil. This is not healthy for the local palm oil industry.
In the last two decades, waivers have been abused, having been granted to political cronies of politicians.  In the run-up to the 2007 elections it was alleged that the Obasanjo administration granted N380 billion undeserved import duty waivers to importers who supported the government. As a result, President Umaru Yar’adua’s Finance Minister, Shamsuddeen Usman, announced the suspension of duty waivers. In 2011 alone, under ex-President Goodluck Jonathan, it was reported that N37.2 billion was lost to fraudulent import duty waivers. In 2014, a former Minister of Finance, Dr Ngozi Okonjo-Iweala raised issues over the abuse of import waivers granted by the regime, saying they fell short of international standards and were harmful to local industries. Now, the Senate of the 8th National Assembly has come up with a report which says N447.42 billion was lost to import duty waivers’ fraud between 2011 and 2015, a regime in which  Dr Okonjo-Iweala was in charge of granting waivers.
This fraud has serious implications for the country. First, if indiscriminate import duty waiver is not curtailed, government might find it difficult to finance the 2016 budget. Part of the expected sources of revenue for the budget is import duties, especially now that the export of Nigeria’s crude oil is being threatened by low pricing and destructive activities of the Niger Delta Avengers (NDA), which has blown up several gas and crude oil pipelines. It is not only the Federal Government that will be stuck. The revenue that accrues from import duties is shared among the three tiers of government – Federal, State and Local Governments. At a time when many states cannot pay salaries, not to talk of funding infrastructure, fraudulent waivers is another way of depriving states and local governments of their legitimate revenue.
It is pertinent for the Federal Government to investigate the discovery by the Senate adhoc committee and ensure the recovery of all the funds involved in the illegally waived off duty for powerful groups of companies. The Economic and Financial Crimes Commission (EFCC) should be enlisted in this effort to recover the huge sums of money, the same way the agency is recovering the stolen security, oil and other funds snatched from the Central Bank of Nigeria in the run up to the 2015 presidential election. Now that the All Progressives Congress (APC) is in power, it must resist the temptation of committing the same offence of granting undeserved import duty waivers to its own cronies. Government should take the fight against corruption to this important revenue-generating agency.