Fresh revelations on Nigeria’s long-running import duty waiver fraud have finally moved the Senate to action. The lawmakers’ demand that the Federal Government halt all waivers on agricultural products should, for once, be followed up with parliamentary bite. The reform-minded Muhammadu Buhari government must design a new template to end a noxious policy that has robbed the taxpayer of trillions of naira and rendered millions of youths jobless. Now is the time to act decisively.
The Senate was reacting to information that domestic agricultural producers were being run out of business and that government was still losing several hundred billions of naira through questionable import duty waivers, exemptions and concessions. It set up an ad hoc committee to probe reports of abuses that led to losses of N71 billion annually to importers of rice, palm oil, vegetable oil, energy tools and steel inputs. It heard that government granted N585 billion in waivers between 2011 and 2014 with 10 beneficiaries taking between them, N150 billion to import rice and palm oil in 2011 alone.
As the Senate rallied, the Nigerian Customs Service has sealed off four firms that it says owe N23.6 billion in duties they had sought to evade by importing products above the approved waiver limits. But this and the details that provoked the Senate to action are just the tip of the iceberg. The reality is much more mortifying and reveals grand larceny and betrayal of public trust by public officials conniving with politicians and businessmen. According to the NCS, N1.4 trillion was actually lost to waivers between 2011 and 2014; not the N585 billion in official records and certainly not the N171 billion figure initially given by the immediate past Minister of Finance, Ngozi Okonjo-Iweala, to the National Assembly in January this year. Like last year, the NCS has said it may not meet its revenue target of N1.2 trillion this year.
As we have consistently argued, waivers, concessions and duty exemptions are legitimate investment incentives applied worldwide by countries to meet economic goals, especially to protect local industries, create and protect jobs, promote and diversify exports, as well as boost public revenues. Three broad forms of investment incentives were recognised under the Multilateral Agreement on Investment adopted by OECD countries – fiscal, financial and ‘other.’ Reports by development agencies have detailed how incentives helped create the Asian Tigers of Singapore, Taiwan and South Korea. Singapore’s highly developed trade-oriented economy is ranked the world’s “most pro-business” by the World Economic Forum, with the third highest GDP per capita.
Specially targeted incentives in the Philippines stimulated agriculture, wood-based industries and clothing in 1995-2001, according to a report. Malaysia’s incentives helped develop its agriculture and electronics sectors, while India’s, sustained over decades, have made it a major exporter of vehicles and computer software.
What went wrong in Nigeria? According to the organised private sector, corroborated by testimonies of NCS officials, waivers have failed in the country because of corruption. Here, unlike in other jurisdictions where policies are made and implemented in the overall public interest, the entire process is driven by greed and cronyism – with disastrous results to the economy. The NCS and the Association of Nigerian Customs Licensed Agents allege that waivers for equipment are used to import furniture, luxury cars and designer clothes. The House of Representatives heard last year how waivers granted in 2007, 2008 or before, were still being used in 2014. While Okonjo-Iweala claimed waivers were now given “industry-wide” to some sectors to boost local production, churches, mosques and individuals appeared on the list of beneficiaries subsequently published by the Ministry of Finance that certainly fit no economic sector.
Worse, it appears that past Presidents and ministers may have serially misused and abused their discretionary power to grant waivers to politicians, cronies and dodgy companies. The result has been a collapse of firms in the vegetable, palm oil business and other agro-based sub-sectors, the very segments that incentives are designed to protect and stimulate for job creation and exports. They have done incalculable damage to the small-scale rice farmers.
But we do not need any long-running parliamentary probe to unravel the serial waiver scandals: there are already many of such reports on the shelf. Only a criminal investigation by relevant agencies is required to recover lost revenues and bring perpetrators of economic sabotage to justice. Buhari should immediately change the guidelines in the waiver management. Like other countries, waivers and other concessions must have fixed periods beyond which they are not valid. They should be limited to inputs such as machinery and equipment, never finished products.
The current template where operators that register as local producers are also given concessions and quotas to import say, rice, cars, vegetable oil from the sources they are supposed to compete with, is absurd and wrong-headed. It is rigged for corruption and makes no economic sense. Incentives for local producers should never again include waivers for finished goods. Evidence abounds that such quotas have made nonsense of activities at the free trade zones and ruined efforts to revive the palm oil and vegetable oil business. In addition to other fiscal incentives like tax holidays, waivers should be restricted to equipment and raw materials. The law should be amended to remove discretionary power to grant waivers to anyone.
Customs should be reformed and made independent to resist the frequent “orders from above” that compel them to release goods to duty evaders and waiver abusers without requisite payment. Buhari should appoint a Finance Minister who is a reformer with integrity, not an “anything goes” minister who will allow and defend palpable abuses and apparent leakages as we have seen in the past.
Government should ensure that all stolen revenues are recovered.
