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The Nigerian
Customs Service (NCS) appears pitched against the inter-ministerial
committee on the implementation of the Export Expansion Grant (EEG) for
the country’s trade facilitation.

The Manufacturers
Association of Nigeria (MAN) recently raised alarm that the NCS was
sabotaging the Federal Government’s efforts to promote the country’s
non-oil exports after the agency expressed concerns about the negative
impact the use of the Negotiable Duty Credit Certificate (NDCC) by
manufacturers, agricultural producers, and exporters for settlement of
custom duties has on its revenue generation capacity.

Other members of
the committee, consisting Central Bank of Nigeria (CBN), Nigeria Export
Promotion Council (NEPC), federal ministries of finance, commerce and
industry as well as the Special Adviser to the President (Manufacturers
and Private Sector), are accusing the NCS of issuing directives
countering the EGG guidelines capable of frustrating government’s
efforts to grow the country’s non-oil export base.

The certificate,
which serves as alternative to cash payment on export incentive claims
under the Manufacturer-In-Bond Scheme, could either be used by the
beneficiary recommended by the inter-ministerial committee, or
transferred by special negotiated endorsement to a third party,
subject, however, to three transfers.

Though Abdullahi
Dikko, the Comptroller General, said recently that the NCS is not
opposed to the use of NDCC as an instrument of trade facilitation in
the country, he added that the agency is not comfortable with any
arrangement that would not allow it realise its revenue targets.

As a self-funding
agency, Mr. Dikko said its survival depends on the revenue it generates
on a monthly basis, out of which it earns seven percent as cost of
collection to take care of its operations, including remuneration
packages and allowances to cater for the welfare of its staff, whose
take home pay was recently reviewed by 100 per cent as an incentive for
better performance.

Yearly, the
inter-ministerial committee, on behalf of the Federal Government,
considers and recommends some companies in manufacturing and
agricultural produce sectors for incentive in the form of discounted
duty certificates used exclusively for duty payment on in-puts to their
operations when they cannot be sourced locally.

The convertible
certificate, which is issued based on export performance, comes in
various denominations, ranging from N50,000, N100,000 and N1milion to
N5million, N10million, N100million and above, to be tendered in
exchange with the collecting agencies in lieu of duty charges on
imported in-puts in the form of machineries and accessories.

The Federal
Government is said to have allocated N50billion for discounted duty
certificates for the first quarter of this year.

Under the EEG, the
criteria for selection of eligible beneficiaries include the company
possessing products exports capacity of a minimum of N5billion per
annum, apart from its capacity to keep a minimum of 500 Nigerians on
its employment, promotion of export growth, capital investment and
local content.

The support is crucial

Immediate past
President of the Manufacturers Association of Nigeria (MAN), Bashir
Borodo, recently said that exporters of local goods cannot survive
without government support.

Statistics from the
Central Bank shows that since the introduction of the EEG in 2006, the
country’s non-oil sector, as reflected in the total annual repatriated
value of exports, grew from $1.3billion in 2007; $1.8billion in 2008,
and $1.9billion last year, owing to increased trade facilitation.

Mr. Borodo added
that the certificate was supposed to be for the settlement of duties on
imported raw materials, pointing out that considering that the bulk of
the exporters’ business depends on raw materials sourced within the
country, the percentage of the foreign raw materials to the total value
addition in their production process is minimal, beneficiaries often
discount their allocations to other importers.

Ordinarily, the
NDCC is supposed to facilitate the exportation of products from
Nigeria, by saving beneficiaries the agony of sourcing for foreign
exchange from the open market to facilitate importation of in-puts
(machineries, pesticides, chemicals, etc.) that would help improve the
local production process.

But the practice is
for beneficiaries to transfer their allocations at discounted rates to
third parties, who are hardly in the manufacturing and agricultural
produce sectors of the economy, and they in turn use it to pay for
duties on imported luxury items, like cars, electronics, household
furniture and office equipment, that have nothing to do with their line
of production.

Reluctance generates controversy

However, the
reluctance by the Customs to accept the convertible certificate in lieu
of payment for duties on certain imported goods by beneficiaries has
triggered a controversy that has brought it at daggers drawn with other
members of the inter-ministerial committee.

According to the
NCS boss, the problem in accepting NDCC in lieu of the duties its
agency should have collected on imported items is not only with losing
a sizeable percentage of revenue that could have accrued in the
federation account, but also because the certificate is a negotiable
instrument that could be discounted and transferred to a third party.

Besides, the EEG
implementation guideline is fraught with loopholes that beneficiaries
have been exploiting to the disadvantage of the government, as there is
no specification about the kind of goods a beneficiary can use the NDCC
for import duty payment; neither is there any timeframe or expiry
period for its utilization. It does not attract any tax also.

Though import duty
belongs to items that form the federation account, allocation for NDCC
is not captured as part revenue generated into it, neither is it given
out with the consent of the other tiers of government in line with the
provisions of the country’s constitution concerning the management.

The Customs’
argument has been that, as a self-funding revenue generating agency, it
should be allowed to collect duty on all imported items, and all
earnings from such collections paid into the federation account, from
where government can draw any incentive it considers necessary for any
group to promote export activities, for accountability purposes.

On the other hand,
the agency is arguing that if convertible certificate must be given to
any category of operators in the economy, government should make it a
non-negotiable instrument issued to specific beneficiaries, who cannot
transfer it to any third party for any purpose, while specific items
that the instrument can be used to pay for import duties should be
expressly stated, and subject to an established expiry period, to avoid
abuse.

But a senior
official of the Nigerian Export Promotion Council (NEPC), who asked not
to be named, said in Abuja that the government cannot do anything to
remedy the anomaly, irrespective of what the NCS is claiming.

“The NCS is a
member of the seven member EEG implementation committee, including
representatives of the ministry of agriculture. It is improper for it
to issue any other guideline on NDCC usage without the consent of other
members. The issuance of NDCC cannot be restricted to the importation
of machineries, because most companies do not retool or overhaul its
machinery in several years,” he argued.

It was gathered
that a recent meeting of the committee presided over by Yabawa Wali,
the minister of state for finance, had asked the NCS to withdraw its
directive that commands should reject discounted certificates. But it
was gathered that the issues raised by the NCS were not addressed at
the EEG inter-ministerial committee meeting a fortnight ago.