Like a sore thumb, the issue of the controversial misuse of import duty waivers, exemptions and concessions has resurfaced. That two ministers are vigorously distancing themselves from shady waiver deals exemplifies the confusion, hypocrisy and sheer incompetence of the outgoing Goodluck Jonathan government and its poor record in financial coordination. The incoming administration will have to take a tough, sensible and patriotic stance on waivers and other fiscal incentives to boost local production and create jobs.
What it is inheriting is too sordid. The failure of the government to uproot corruption and cronyism from the system is apparent in the two latest episodes. It was the House of Representatives that blew the whistle that over N36 billion was being owed by some importers who were hiding under the cover of incentives to dodge paying stipulated import duties on rice. Summoned by the House ad hoc committee, the Minister of Agriculture and Rural Development, Akinwunmi Adesina, stoutly denied granting waivers to the said importers, revealing in his testimony the tenacity of a fraud-ridden system that had been exposed through previous waiver scandals.
It is a well-oiled system of graft, impunity and patronage. Under the government’s local rice production policy, for example, companies that had made investments in domestic rice production were allotted quotas to import rice to augment the national shortfall and would pay 30 per cent duty (import duty and levy) compared to 70 per cent paid by other importers. But, according to the Nigeria Customs Service, some used them long after they had expired and some, said Adesina, “imported 100,000 metric tonnes, 300,000MT above their quotas.” NCS officials have confessed to being subjected to “pressure from above” and how some beneficiaries used waivers to bring in furniture and luxury cars instead of capital goods.
The second case is more intriguing. Ngozi Okonjo-Iweala, the Minister of Finance and Coordinating Minister for the Economy, reportedly wrote a query to the Nigerian Investment Promotion Council, complaining of huge revenue loss due to the abuse of Pioneer Status (tax holiday) to Seplat Petroleum “for a straight five-year period,” contrary to the law and fraudulent listing of beneficiary companies under existing legislation that allows them enjoy incentives reserved for firms that will add value to the economy and create jobs.
We are saddened that waivers, exemptions, concessions, among other fiscal incentives, that responsible governments everywhere deploy to develop and boost local production and nationally targeted sectors, create jobs, and promote and diversify exports to improve the citizen’s quality of life, have been turned into another huge fraud in Nigeria. Our officials are complicit, either by direct participation in the scam, incompetence or lack of will to stamp it out or walk away from a thoroughly corrupt government.
Adesina admitted for instance that when the abuses (of the rice waivers) came to his knowledge, he immediately, on January 2, 2015, “directed that companies must pay the N36 billion. I told the Customs to apply the duties accordingly.” So, why is it that, by May, they have not paid? The government has, on paper, an Economic Management Team to which Adesina belongs and Okonjo-Iweala leads; why is coordination so lax that payment had not been enforced until the House intervened? As in rice, so it has been in sugar, textile, cement and vegetable sectors and in the palm oil sub-sector where a 75 per cent import duty waiver, ostensibly for producers at the Lekki Free Trade Zone, is mired in fraud.
Manufacturers have, through various private sector bodies, urged the government to stop the abuse and adopt global best practices in granting waivers but to no avail. More scandals are likely to emerge from the waivers given to some importers claiming local production status under the government’s controversial National Automotive Policy that featured new import tariff on built-up vehicles hastily implemented and import quotas for purported domestic assemblers. As we have repeatedly pointed out, Brazil, South Korea, Malaysia, Singapore, China and Taiwan, among others, deployed waivers, concessions, exemptions and import substitution to transform from underdeveloped to economic champions. Here, it sustains rent-taking elite.
We are intrigued that Okonjo-Iweala, who, at various fora, claimed that the waiver system was being reformed and, indeed, always reacted angrily to critics of the corrupt waiver regime, is now battling waiver abusers a few weeks to the end of the current government’s tenure. The parliament has over the years been toothless and ineffective, moving only to hold hearings where widespread fraud and abuse are exposed, but fails to use its constitutional powers to compel change or initiate sanctions on the Executive.
The incoming Muhammadu Buhari government has two broad tasks: first is to revisit the recent past, undertake a thorough audit of the scheme, recover all revenues due to the government and prosecute law-breakers with implacable resolve. The second is to draw up a comprehensive economic plan and ensure strict implementation of all fiscal incentives, while reforming agencies such as the NCS, NIPC, the FTZs and other bodies. There should be an immediate break with the past system of fraud, corruption and subversive cronyism.
