The federal government’s inability to offset the Export Expansion Grant (EEG) backlogs and remove the bureaucratic process in accessing the grant is hampering the country’s revenue diversification quest.
EEG – Nigeria’s only known incentive scheme for exporters — has been marred with allegations of corruption against some government officials and a lack of due diligence by the Nigerian Export Promotion Council (NEPC) before sending the list for approval.
These bottlenecks have made many exporters lose trust in the scheme as they fault the possibility of receiving the issuance of the grant when required.
Experts have advocated a total overhaul of the EEG to boost non-oil export proceeds, create jobs, achieve trade balance and diversify the country’s revenue away from oil.
The EEG helps exporters elevate and cope with pressures from the cost of doing business, break even somewhat, and compete, said Odiri Erewa-Meggison, chairman of the Manufacturers Association of Nigeria Export Promotion Group (MANEG).
Without the export grant, it is difficult for Nigerian manufacturers to be competitive in the export market amid a challenging business environment, according to Meggison.
“We all have to come together to support exporters to bring in foreign exchange that the country badly needs and not create bottlenecks,” she said.
In Nigeria, companies that exported different kinds of products or commodities as far back as 2009 were owed billions of naira in claims as the federal government did not meet the obligation of settling them as promised.
“There are lots of backlogs as far back as 2009 that have not been cleared despite being approved by NEPC,” she added.
The EEG was established in 1986 to help Nigerian exporters become competitive in the global market and as a measure to increase the volume of non-oil exports in the country.
The scheme is also intended to encourage the export of value-added products as against raw agricultural commodities.
It is a practice in several developing and developed countries such as China, India, and Australia to provide concessions or grants to companies penetrating new markets or consolidating already established markets to enable them to rival competitors.
“The hiccups of the export expansion grant are just too many. First, it was structured to favour big companies, making small businesses not get the full benefit from it,” Madu Obiora, chairman and CEO of Multimix Group, said in response to questions.
“The incentive backlogs are still there, and export is the goose that lays the golden eggs. The SMEs are the engine of any economy, yet there is no clear initiative to push them to be what they are,” he added.
According to him, despite various complaints about the scheme, nothing has changed after Muhammadu Buhari’s government set up a committee to look into it before it was reintroduced in 2017.
Nigeria’s non-oil export earnings from over 30 commodities in the second quarter of 2023 was N688.7 billion ($1.27 billion), according to the National Bureau of Statistics, while Brazil, a country with a population just nine million larger than Nigeria, earned $1.4 billion from sugar exports alone in June 2023.
More so, the Federal Government is even trivialising the whole exercise by introducing what is called the reverse auction.
The reverse auction means that creditor exporters will bid for promissory notes by offering discounts to the government.
The lower the company is willing to go, the more chances it has. Companies that bid much lower will have to be paid.
In March 2023, the NEPC said the federal government had approved the disbursement of N307 billion worth of promissory notes to 199 exporting companies under the scheme to clear some of the backlogs.
However, MANEG said about N71 billion is still owed to exporters under the scheme, noting that the country’s accelerating inflation has eroded the current value of the money.
“As of today, we have N71 billion that was not approved by the 9th Assembly. This money has lost a lot of value considering inflation,” Meggison said.
She urged the government to remove the bureaucracy in the entire process and revert to the export credit certificate model to facilitate the processes. She also called for a yearly budgetary allocation to cover export grants.
According to her, the failure of the government to support exporters earning foreign exchange for the country, especially now that Nigeria is in dire need of FX, is a huge loss.
“If the government makes it unpalatable for exporters and they can export their products, they will not want to bring their money back to the country and this is a loss to Nigeria as the foreign exchange will be taken elsewhere,” she said.