Addressing pending issues on EEG policy and NDCC utilisation

In a recent letter, May 11, 2015, written by the Federation of Agricultural Commodity Association of Nigeria (FACAN), and addressed to the coordinating minister of economy/minister of finance, the attention of the minister was drawn to the danger of not following through the Export Expansion Grant (EEG) policy and Negotiable Duty Credit Certificates (NDCC) to plan its investments and make its pricing decisions.

The letter signed by Victor Iyama, national chairman, FACAN, read in part: “We write to you on behalf of member companies and organisations from agriculture and agro-allied sector who form the bulk of the non-oil exporters from Nigeria and who contribute to over 80 percent of Nigeria’s non-oil export earnings.

“We have noted with deep dismay the seeming apathy being displayed towards non-oil exports. We believe that at this juncture it is of urgent and strategic importance that Nigerian government formulates a policy for sustained support and growth of non-oil exports.

“However, to our complete shock and deep disappointment what we have seen and experienced is that the Federal Government is ignoring and neglecting to even implement and abide by the extant policies which are in force. Our members, who are exporters, have relied on the policy announced by the Federal Government of Nigeria, in the form of EEG and NDCC to plan their investments and make their pricing decisions. Now, the government has been dragging its foot on implementation of those policies.”

Background

Diversification of the economy by expanding the non-oil sector is a policy imperative for the government; EEG has been a key policy instrument to boost investment and trade in non-oil export sector. EEG policy is backed by legislation viz The Export (Incentives and Miscellaneous Provisions) Act of 1986. The policy took due cognizance of the infrastructural disadvantages faced by the exporters to make our products internationally competitive. The grant is given to non-oil exporters in the form of Negotiable Duty Credit Certificates (NDCC) to be utilised for payment of customs and excise duty.

Since 2010, the non-oil export sector has been seriously affected by inconsistency in the implementation of the policy.

As the non-oil export sector employs millions of Nigerian, mainly in the agro-allied value chain, there is an urgent need to address the constraints faced by the exporters to revive the economy and boost employment and government revenue.

Impact

Based on the extant government policy, companies have invested in export processing factories to add value to primary products; Non-oil exports have shown a remarkable growth from $1 billion (2006) to $3 billion (2013) in foreign exchange (source: NEPC); The bulk of non-oil exports are agro-allied and employ over 11 million Nigerians directly and indirectly and have boosted agricultural incomes.

Constraints

Non-oil sector is facing a crisis due to an arbitrary embargo imposed by the minister of finance in January 2014 on the utilisation of EEG-NDCC’s resulting into a huge backlog of over N150 billion of NDCC’s lying unutilised with exporters and decline in non-oil exports in 2014.

The backlog of unutilised NDCC’s has paralysed the non-oil export sector and is affecting Nigeria’s image as a reliable trading partner. The liquidity problem faced by exporters is having a negative impact on agricultural and manufacturing sector. Many companies have scaled down production and declared redundancy.

Besides the unutilised certificates, Nigerian Export Promotion Council (NEPC) has a backlog of claims against exports made by 2013 and 2014 and foreign exchange repatriated by the exporters as per extant policy, which await processing by the EEG implementation committee.

Addressing the minister

According to FACAN, we fail to understand how on one hand the Federal Government is regularly paying subsidy on fuel together with interest and exchange rate adjustments while on the other hand it is refusing to allow utilisation of NDCCs, which have been signed by the Finance Ministry and disbursed to the exporters as a ‘legal tender.’ “It appears that because our members have been patient and they are being subjected to continued neglect.

“We wish to draw your attention to the following specific issues: EEG Policy: The EEG Policy Review which has been in the works since the commencement of this administration is yet to be completed. We believe that non-oil exports is a critical issue at this juncture for this country. We urge you to kindly ensure that appropriate details are shared with the transition committee so that the incoming administration would be assisted to complete this process at the soonest.

“The Federal Government refused to implement the new EEG policy framework as announced by the Finance Ministry through the office of Minister of State for Finance in Dec 2013 for 2014 and beyond. However, the Federal Ministry of Finance has not implemented the extant EEG scheme for 2014. No revised scheme has been announced for 2014. So, the exporters do not know if the scheme is cancelled ( although there has been no announcement to that effect by the Federal Government) or there is a revised scheme for 2014 and beyond.”

Its prayer

Treat EEG claims with same seriousness as other subsidy payments like fuel, fertiliser, etc, as non-oil exporters should not be subjected to an inferior treatment; Approve and release the two EEG claim files pending for Finance Ministry approval for over a year; Announce a set schedule for redemption of NDCCs, perhaps 5 percent of total outstanding NDCCs each month so that exporters can plan and organise their cash flow and business operations; Advise the NEPC to continue with processing of EEG claims submitted to them which are pending for processing.

Way forward

Stakeholders in the non-oil export sector are pleading for intervention by the incoming administration to allow millions of Nigerians engaged in the non-oil export sector to enjoy the dividends of democracy. The following measures are suggested to restore confidence of the stakeholders in the government policy on non-oil exports: Instruct customs to accept utilisation of NDCC’s for duty payment as per extant policy; Meeting of the inter-ministerial committee on EEG should be reconvened in conjunction with the OPS; ministry of finance should treat the backlog of NDCC’s in a time-bound manner; NEPC should process EEG against exports made till December 2014 as per extant policy, and government should make a clear statement on non-oil exports and EEG Policy as a way forward.

 

EDOZIE IFEBI