Poor due diligence by Federal Government officials has turned the Export Expansion Grant (EEG) scheme into a theatre of the absurd, with allegations of corruption against legislators and questionable approval of non-exporters, including overpayment of companies.
The EEG was originally established in 1986 to help Nigerian exporters to become competitive at the global market.
It is a practice in many developing and developed countries such as China, India and Australia to provide concessions or cash rebates/grants to companies penetrating new markets or consolidating already established markets to enable them rival competitors.
In Nigeria, companies that exported different kinds of products or commodities between 2006 and 2016 were owed billions of naira in claims as the Federal Government did not meet the obligation of settling them as promised.
But the process of settling these companies has become convoluted, with allegations of the Nigerian Export Promotion Council (NEPC) not doing due diligence before sending the list of qualified exporters to the National Assembly for approval.
For instance, at a Senate meeting held on May 2 this year, which was attended by many exporters, Mohammed Sabo, popularly known as Nakudu, who is a member of Senate Committee on Promissory Notes, asked a high-ranking officer of the NEPC whether there were beneficiary companies that were overpaid.
The NEPC official acknowledged that what over 17 companies received from the Senate Committee were in excess of their claims. The NEPC official also acknowledged that over 15 were underpaid, reliable sources who were at the meeting told BusinessDay.
After being suspended seven times, Ngozi Okonjo-Iweala, the then coordinating minister of the economy, stopped the scheme yet again in early 2014. However, it was reinstated in 2017 by the Muhammadu Buhari administration.
The government, through the NEPC, re-started the scheme in 2017 using promissory notes for settlement of qualified exporters, rather than the negotiable duty credit certificates used in the old scheme.
Because the notes required monetary allocations, they were meant to be approved by a Senate Committee on Promissory Notes (an adhoc committee) and the House of Representatives Committee on Promissory Notes (permanent committee).
A document seen by BusinessDay shows that the National Assembly committees approved the promissory notes of 269 companies worth N193.042 billion before publishing their names on December 5, 2018. Some of the companies approved were A&P Foods, African Glass Limited, African Textile Manufacturers Limited, Crown Flour Mills, Jebba Paper Mills, Deli Foods, Peugeot Automobiles, Procter & Gamble, Ajaokuta Steel Company, Olam Nigeria Limited, GZ Industries, among many others.
“The Senate approves a Promissory Note Program and a Bond Issuance in the total sum of N193,042,846,216.24 to clear the outstanding claims of the verified 269 companies i.e beneficiaries of the Export Expansion Grant (EEG) scheme,” the document, which contains the Senate resolution, said.
But the list contains companies that have questionable export records.
For instance, Ajaokuta Steel Company that has not produced a single sheet since its establishment in 1971, despite gulping over $8 billion, had N118.006 million approved as its share for the EEG.
Experts wonder what Ajaokuta that has little local relevance to the steel sector would have exported between 2006 and 2016 when the public officers in charge of the complex said it was dead.
“One of the major challenges why Ajaokuta Steel has not commenced full production has been the problem of infrastructure, like the railway for transporting raw materials to the plant,” Musa Mohammed Sada, minister of Mines and Steel Development, had said on December 24, 2014.
In 2016, Kayode Fayemi, then minister for Solid Minerals Development, said while defending his ministry’s budget in February of that year that the Federal Government would need to clear all legal hurdles surrounding the Ajaokuta Steel Company Limited for it to begin to function. Yet, money was allocated to this moribund complex as an exporter.
Money was also approved for Peugeot Automobile, which specialises in car assembly. There was also an approval for Jebba Paper Mill, which has been struggling to produce papers for the country since 2009 when it came on board.
BusinessDay could not immediately contact Jebba, Peugeot and Ajaokuta for comments.
“It will be interesting to know what all the companies exported and to where,” an exporter, whose company was approved, said.
“You can also see that some textile companies are on the list. It will be interesting to know whether they exported textiles or cotton within the period,” the exporter said.
Another leg of the story is that the legislators are yet to approve the grant for the remaining 38 companies, which include PZ Cussons, British American Tobacco, Okomu Oil, Lee Group (which has seven subsidiaries), and Sapele Integrated. Others are Nestlé Nigeria, De-United Foods, Beta Glass, Unilever, Dangote Agrosacks, among many others.
Sources allege that legislators are demanding that the exporting companies offer them ‘lunch’ before approval. ‘Lunch’ used in this context means bribe (money).
Many of the multinationals refused to offer bribes because it could dent their image and attract sanctions from their headquarters, BusinessDay was reliably told.
“It is also not a good business because no one knows what to get at the end of the whole exercise,” one of the affected exporters said.
BusinessDay contacted Francis Alimikhena, chairman of the Senate Committee on Promissory Notes, who debunked the allegation.
“Don’t mind them; they are telling lies,” Alimikhena responded on the phone.
“The promissory notes that we have already passed? We didn’t see them and we passed over 290, and it is just remaining 38 companies. The 38 just appeared before us last week. They did not even come with their papers. They are just telling lies. What they are telling you is a lie. They have not even appeared before the House of Representatives even,” he said.
But exporters told BusinessDay that they have been interfacing with the House of Representatives and have come with their papers many times.
In October 2018, Abdullahi Sidi-Aliyu, director in charge of policy and strategy, NEPC, had told journalists that the notes had been in the Senate. As of that time, senators were on recess.
“Government has done all that is necessary for the take-off of the programme (EEG). Right now, we are waiting for the National Assembly to reconvene so that they can grant approval to the use of promissory notes. It is not only the EGG that is affected. There are other debts – domestic debts by the Federal Government – that come under the promissory notes. Hopefully, if the National Assembly can reconvene before the end of the year and grant approval, the government will definitely implement the decision,” he said at the annual general meeting of the Manufacturers Association of Nigeria Export Promotion Group (MANEG) in Lagos.
He had put the value of the outstanding notes at over N1.2 trillion. However, the total amount owed 307 companies approved by the NEPC and sent to the National Assembly was N320.132 billion.
More so, the Federal Government is even trivialising the whole exercise by introducing what is called the reverse auction.
The debt auction means that creditor exporters will bid for promissory notes by offering discounts to the government.
The simple explanation of this is that Frigo Glass that is owed N185.988 million (according to one of the documents) will have to bid and reduce this amount by as low as possible to have a chance of being paid at all.
The lower the company is willing to go, the more chances it has. Companies that bid much lower will have to be paid.
“The implication of this is that non-genuine exporters can go lower just to get anything,” a source said.
Nigeria’s non-oil revenue to GDP ratio has remained at 4 percent since 2014. Its total non-oil export earnings from more than 25 commodities in 2018 was $3.3 billion (N1.19 trillion), according to the National Bureau of Statistics (NBS), but Bangladesh, once among the poorest countries on earth, earned almost 10 times as much ($33bn) from exporting one product, ready-to-wear garments.
ODINAKA ANUDU
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