Businesses say they have three big concerns, which are all connected. First, Nigeria’s manufacturing sector is still struggling with an array of subsectors already wiped out in the last five years: it has barely managed to resuscitate those haemorrhaging from excessive waivers and concessions given a select few within their subsectors, mostly emanating from the presidency.
Second, the feeble manufacturing sector has meant the government’s numerous promises to suspend or eliminate waivers and concessions on non strategic imports have been much harder to achieve than many expected. The Federal Government has abandoned its target to make sure that companies have a level playing field for an effective market
economy to thrive. The basic metal group of manufacturers are the hardest hit by the Federal Government’s nefarious waivers and concessions and grants, with only a handfull of players in the sector enjoying the bounty.
Third, they (businesses) expect a cumulative loss of over N80 billion to the nation by the end of the year if the scam is not tackled head on by every concerned stakeholder. This amount, according to them, is enough to stimulate industrial revival in the country.
Their worries stem from the continued involvement of the office of the President, the unscrutinised waivers and concessions signed by officials of the Ministry of Finance and the Federal Government’s failure to implement reform in investment incentive packages and conversion-waivers and concessions, despite recommendations from a committee set up by government itself and the organised private sector players requests over the past five years.
“The Presidency has no business getting its hands soiled with these waiver scams,” a top Lagos Chamber of Commerce and Industry (LCCI) official told BusinessDay. “It could intervene if it involves a major national project to solve a social project,that is to make the cost of the project affordable. No government agency has any business with waiver and concession. It is a distortion to the economy,” he added.
The official, who said he is surprised at the abuse that is used as patronage, said if there should be waivers, there should be a universal application.
The committee which was set up by late President Musa Yar’Adua, to review incentives, waivers and concessions, and which submitted its report in February 2008, recommended that incentives, but not duty waivers, should be granted to support rapid development in five strategic sectors, namely the power, railways and road, manufacturing, education and capacity building, as well as agriculture.
Among the key recommendations is that Credit Incentives should be harmonised and made accessible to Small and Medium Scale Enterprises (SMEs). This, according to the committee, will facilitate the growth of SMEs in Nigeria. It also recommended reduction in reliance on incentives, but instead the adoption of a reasonably low, generally applicable, corporate tax rate of 20 percent or less, the simplification of incentive structure and administration. It noted that existing incentives, which are still considered to be relevant, should be reviewed and simplified and enacted into a comprehensive law.
“The incentives should be sector specific, but of general application to all those who may wish to invest in the sector, without discrimination.”
It also recommended the setting up of a new agency, the Incentives, Taxes and Tariffs Regulatory Commission in the Ministry of Finance, to advise on the restructuring of these incentives, to monitor their implementation and to regulate and administer the incentive regime. Among its suggestions is that new agency should be required to provide regular reports to the President and the National Assembly, through the Minister of Finance.
“In this way, there will be a single responsible agency that can focus on
the regulation of Nigeria’s incentive regimes.”
In all, ten key recommendations were made, but to-date only one has been implemented-the creation a Ministry of Investment and Trade.
On January 10, 2013, the Manufacturers Association of Nigeria (MAN) underscored the bitterness of its members to the discretionary waivers and concessions through a letter it wrote the Minister of Finance. The letter buttressed the concerns of its member companies against two companies, Monaplex Industries Nigeria Limited and Zarcom Manufacturing Company Ltd who were processing special investment incentive packages for the establishment of Cold Rolling Steel Mills, which involves processing Import Duty/VAT Waivers for some items need for the mills.
“We understand that some items that are not part of plants and machinery were included in application, contrary to the position agreed with the Director (Fiscal Department) at a meeting held in March 2012 with the Basic Metal, Iron and Steel Sectoral Group of MAN,” according the letter.
They noted that in the agreement, no waivers and concessions on import duty and VAT should be given under chapter seventy-two (72) of the tariff book.
“Unfortunately, we observed that steel items under chapter 72 are being imported in enormous tonnages, most times in excess of what is needed to execute such claimed projects. This has left genuine importers and manufactures, who are paying the correct duty, to be unable to compete because of the distortion these waivers engender on the economy.”
MAN, in the letter signed by its Director General, Olayinka Akanda, expressed its suspicion to the Coordinating Minister of Economy, that the various applications for import duty waivers and existing concessions granted for steel products may have been processed under false pretences and fictitious claims/promises.
“This is what you get in rice waiver and all the other waivers the government grants,” one analysts said. “Their personal interest is the overriding interest. They know what they want and what they are getting.”
Another analyst called it the biggest atrocity, apart from the loss of revenue to the economy, because it does not provide a level playing field.