Reforming the import waiver regime

  Details of the messy affair, coming on the heels of the uproar caused by the Central Bank of Nigeria’s disclosure that the NNPC illegally withheld over 10 billion dollars from crude oil sales, have called to question the efficiency of the government’s record-keeping. The Ministry of Finance, like the NNPC, appears to be tardy […]

  Details of the messy affair, coming on the heels of the uproar caused by the Central Bank of Nigeria’s disclosure that the NNPC illegally withheld over 10 billion dollars from crude oil sales, have called to question the efficiency of the government’s record-keeping. The Ministry of Finance, like the NNPC, appears to be tardy too in that regard because it was unable to provide accurate figures on the waivers and exemptions issue at a crucial moment. Responding to a set of 50 questions posed to her by the House of Representatives, the Minister for Finance, Mrs Ngozi Okonjo-Iweala produced a table indicating that 170 billion naira was lost to duty waivers and other concessions over the last three years. The Nigerian Customs Service disputed the figure, insisting that during this period, the shortfall was ten times higher, at N1.4 trillion.
Concessions are not bad per se, when properly applied. They are use in a regulated and determined on a case-by-case basis by governments in various parts of the world to protect local businesses and jobs. Clearly, these have been abused in Nigeria and become a major drain on the economy. Members of the National Assembly have observed, with some justification, that in the past the waivers were not only illegal and applied indiscriminately, they were granted to undeserving firms and individuals. The Speaker of the House of Representatives, Aminu Waziri Tambuwal, has called for scrapping of the duty waivers and review of the policy that allows indiscriminate import of goods into Nigeria.  That’s the way to go; at least in the interim. Current effort to amend the Nigerian Customs Act which provides for the contentious import duty waiver system is therefore a step in the right direction. The National Assembly should put a complete stop to its rampant abuse by outlawing all discretionary powers to grant waivers.  The waivers and exemptions policy is meant to be a direct government intervention whose objective is to provide incentives to improve industrial competitiveness and support job creation.  But a situation in which, as one Customs official noted, about 65% of beneficiaries received waivers for goods not approved by the government is unacceptable. Ordinarily approval should be limited to raw materials, machinery or spare parts but the inclusion of “other goods” in the categories eligible for duty waivers by the finance ministry opened loopholes for import of goods that add no value to the economy.  
 Calls to review the policy are not new. In 2012, the federal government stopped granting import waivers following discovery that in the previous year, unaccounted billions of naira was lost to waivers and exemptions.  The Custom Excise Act of 1995 empowers the president to impose or remove any import on excise duty, although the powers were surrendered to the Economic Management Team. Most of the abuses took place in the period since. Negotiable Duty Credit Certificates (NDCC) are used in the payment of import and excise duties; some reports suggest that the majority of them processed by the Customs Service were found to have been used for unapproved goods such as “automobiles (like bulletproof cars), rice, fish, etc. Another variant of the abuse of the waiver regime is that beneficiaries of the government’s Export Expansion Grant to export-oriented companies and local manufacturers to export raw materials in fact sell the documents to dealers, who then use them to import finished goods. Enmeshed in corruption, and having served no useful purpose other than political patronage and cronyism, the waiver policy as currently constituted is harmful to the economy because it alienates genuine importers of valued-added goods. Until a more rigorous policy is put in place, all importers/exporters should henceforth pay the approved duties and apply to the Ministry of Finance for a refund. In this way, the amount to be spent on duty waivers should be reflected in the budget and be subject to debate and monitoring.