Every Nigerian who is interested in Nigeria’s economy diversification and growth should be concerned about the recent publications over the impasse on the Export Expansion Grant, EEG. The Federal Government through its agent, Debt Management Office, DMO was said to have introduced Reverse Auction Process for the issuance of Promissory Notes to non-oil exporters under the Export Expansion Grant, EEG.
The Reverse Auction Process is a proposal by DMO to Nigerian non-oil exporters to accept discount on payment of their incurred debt under EEG in the export business.
Though, DMO is yet to give further details on the Reverse Auction Process, but non-oil exporters are strongly holding to a position that if this proposal is carried out, it will put the exporters in terrible jeopardy as the Promissory Notes are meant to settle debts which are due for payment for export transactions done in the last 9 years during the 2007-2016 period.
It is not news that Nigeria has always been heavily dependent on oil as the main stay of its economy. The negative impact of this endless dependency underlines the need for the country to diversify her economy and develop a robust non-oil export base.
That has been the song of virtually all successive governments in Nigeria. This time, the government of President Buhari seems determined to do something decisive.
The government has realized that it will be very hard for the Nigerian economy to develop without doing something dramatic about growing non-oil exports.
The government dusted some neglected export promotion policies. Obviously, this action is in line with the renewed vigour to grow exports. The government is now getting serious with one key “tool” in that package-The Export Expansion Grant (EEG). Every stakeholder agrees that its effective implementation will remarkably boost non-oil exports and Nigeria’s economy in general. The Export Expansion Grant was created specifically to help cushion those disadvantages experienced by Nigeria exporters from a cost perspective due to anomalies in the areas of infrastructure, Power, monetary/ fiscal distortions and many others
Shockingly the implementation of policies on this grant by various government agencies has left most exporters extremely astonished, according to recent reports.
Steps to access the grant are not only slow; policies around it are hazy and nebulous. All stakeholders agree that the Nigerian presidency must intervene to set things right. The DMO that operates directly with the exporters in this matter has said that it will make disbursement on the principle of what is designated as Reverse Auction Process (RAP), which implies that only exporters who will accept discounted rates will become beneficiaries. Stakeholders in the sector see this as extremely controversial.
Ironically, a policy that was approved by Nigeria’s Federal Executive Council with the overwhelming endorsement of the National Assembly is now seen as endangering the country’s capacity to fuel exports, even in modest terms.
Stakeholders even point out that the controversial RAP policy does not take cognizance of the accumulation of debts the exporters have fallen under between 2007 and 2016, and the interests that have piled up.
This is obviously not acceptable to exporters and they are not lying low. Virtually all key local business bodies are also lining up behind them. Under a banner called Organized Private Sector Exporters Association (OPSEA) they have sent a strong Save-Our-Souls letter to President Buhari that exporters are becoming very unsettled in their businesses more than ever and unable to carry out their vital roles.
They are lamenting that the accumulated EEG not paid over the years is biting hard on the export activities of its members. The development, has led to the accumulation of billions of Naira owed exporters between 2007 and 2016.
Consequently, the association is making a three point request on the issue, which are as follows: The Reverse Auction Process (RAP) for issuance of Promissory Notes (PNs) should be reconsidered by the government; the second is that the government (including the Debt Management Office, DMO) should restrict itself to issuing the PNs as the shortest term feasible for payment, while equal treatment should be meted to all beneficiaries of all categories of PN.
Thirdly, the exporters should be issued PNs with shortest tenure (spread evenly over a maximum period of three years) bearing in mind that payment has been delayed for a period of three to 12 years for member’s claims.
The DMO, the exporters said has not been forthcoming with any further details about the mechanism of the RAP but they said that essentially it involves the beneficiaries of PN program to offer/accept discounts to their claims before they can be disbursed,” the association stressed in a letter.
However, PNs are intended to settle debts which are due for payment for exports done during the 2007 to 2016 period, and the association is weary that federal government has made no mention of the RAP for issuance of PN in any of its announcements or in its numerous interactions with the exporters in the two to three years of the issuance of RAP.
Lamenting about the current state, the association said, “Some beneficiaries of the program have been issued their PIN without subjecting them to any further verification after the NASS approval and without any deduction/reduction being made by the Debt Management Office (DMO) on the PIN approved for them by the federal government and the national assembly.
“Therefore, imposing further reduction in the value of PIN receivable by them is not only unfair and unjust, but this kind of discrimination approach is clearly contrary to the generally accepted standards of proper due process.”
The exporters questioned the alleged further imposition of costs/deductions through the RAP before issuing PIN at this stage, quarrelling that such action raises a question mark on the intent and sincerity of government towards meeting its obligations to the exporters. Continuing with this, OPSEA stated, would seriously erode investor confidence in the Nigerian market.
OPSEA, continuing in its presentation, recounted that before now, previous administrations had commenced the issuance of EEG to genuine exporters but the grant was later suspended in 2007 due to duplicitous claims and counter-claims by stakeholders over who and who should indeed benefit from the package.
The exporters say government’s inaction is causing mounting challenges to their members. One of such major challenges is the accumulating interests on loans. “We have taken up debts to service the receivables and these debts are incurring further interests with the continuing delay in the payment of EEG claims’, they explained.
OPSEA members play vital role in economic diversification through their contribution in generating the much needed foreign exchange earnings through export and creating numerous job opportunities via their operations throughout the country.
The body lucidly explains its pains and patience to the President: “Your Excellency sir, we are being constrained to draw your attention to the continued hardship and ill-treatment being inflicted upon the businesses and investors in strategically important non-oil export sector, especially as it relates to the Promissory Notes (PN) program of the Federal Government of Nigeria
“We, the exporters have been waiting anxiously since the approval from the National Assembly (NASS) for the PN to be issued,” the letter read,
They also explain that initially, pressure was mounted on the National Assembly to do its work and give its legislative nod for the issuance of the federal government’s N350billion Promissory Notes to exporters in continuation of the Export Expansion Grant (EEG). This was after the executive arm seems to have done its bit. But now, they stressed, the pressure is now back on the executive to complete what it started by ensuring that the PNs are settled without further delays.
For those who could recall, the presidency has shown remarkable urgency on this project with the Federal Executive Council (FEC) sending three issues for the formal approval of the National Assembly earlier in the year. The three executive resolutions bother on EEG claims, payment of construction contractors and pensions.
It could be equally recalled that diversification of the economy is one of the main policy initiatives of the Buhari administration that is aimed at shifting the nation’s economy from oil-based to non-oil sectors.
Stakeholders strongly advice that the federal government should carry private sector players along if they want to realize their economic diversification agenda.
They believe that faithful implementation of the EEG policy is the needed elixir to help track performance in the non-oil sector and accelerate the rate of industrial growth in the country.
The non-oil sector is seen to have great potentials, including the capacity to sustain the economy and ensuring inclusive growth, as in the case of agriculture.
According to the OPSEA, the inability of government to meet up with the promissory notes for non-oil exporters for dues owed them for over nine years may so well undermine the successes recorded so far by the policy.
Daniel Obi
