• Saturday, May 18, 2024
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Suspension of EEG stifling non-oil export growth

Nigeria’s quest for economic diversification may be imperilled by the continuing suspension of the Export Expansion Grant (EEG),with current backlog of Negotiable Duty Customs Certificate, (NDCC) put at over N117 billion, stakeholders say.

The implication is that currently, the certificates which serve as means of payment have not been claimed by non-oil exporters, thus frustrating many of them who took loans from banks to do export, with the hope of getting the grants, according to the Manufacturers Association of Nigeria Export Group (MANEG).

“The uncertainty in the scheme is really affecting the performance of non-oil exports in the country. With the ongoing non-acceptance of the NDCC, manufacturing exporters are incurring high cost on duties payment that the NDCC is meant to cover for their raw materials. And to a large extent, this is impacting on non-oil exports negatively,” said Tunde Oyelola, chairman, MANEG.

“The potential of the EEG’s contribution to export growth is very huge and government must exercise caution with the ongoing suspension of the scheme and the outcome of the policy reversal may ultimately become a disincentive for current and potential exporters, as well as discourage those already in the scheme,” he said.

The EEG was established in 2005 to promote the growth of Nigeria’s non-oil exports and diversify the economy away from oil. The scheme operated by the use of the NDCCs, which served as cheques for non-oil exporters who wished to benefit from the grant.

The essence of the grant was to reduce production, distribution and logistics costs for non-oil exporters so as to enable them compete effectively in the international market. The understanding of the initiators of the scheme was that allowing non-oil exporters to bear the brunt of the costs would make their products uncompetitive in the international market, as goods from other countries, where governments provide different grants, would sell cheaper than those exported from Nigeria.

non-oil-export

Incidentally, between 2005 and 2013, the scheme, which was managed by the Nigeria Customs Service (NCS), was suspended eight times. The final lap of the suspension was done in August 2013, when the NCS stopped honouring NDCCs from non-oil exporters. Research has shown that after the introduction of the EEG scheme, Nigerian non-oil exports grew from $600 million to $2 billion between 2006 and 2012. There was also remarkable increase in value chain expansion in terms of processing/manufacturing capacities, leading to new investments and job creation.

Checks have also shown that there has been a huge leap in production levels of commodities like sesame seed, cocoa and rubber, on the back of increased demand from exporters whose competitiveness was boosted by this scheme.

Nigeria’s non-oil exports reached $2.97 billion by the end of 2013, from $2.56 billion recorded in 2012, representing a 16 percent increase.

But stakeholders are worried by the fact that leaving the entire cost to non-oil exporters could jeopardise the steady progress recorded in this area, while also putting the country’s quest to diversify the economy in peril.

Joseph Idiong, director-general/chief executive officer, Association of Nigerian Exporters, said the EEG implemented in various countries had export subsidies designed to promote and grow the country’s exports and not to discourage the inflow of direct investment and exporters.

Ngozi Okonjo-Iweala, co-ordinating minister for the economy, had announced that the scheme was under review, as the previous regime was unsustainable. But many exporters’ funds are trapped as they borrowed funds from financial institutions for export before the EEG was suspended. This makes it difficult for many of them to repay their loans.

“This is why we need convertible government certificates or short tenure certificates. Does it mean this cannot be put in the constitution? If you say 30 percent is not sustainable, why not pay 15 percent, rather than suspend it every six months?” said a manufacturing exporter, who pleaded anonymity.

Alfred Uwheraka of Frijay Consult, an export firm, said the long and short of it was that exporters needed grants to lessen the difficulty in carrying out non-oil exports, as many of them would meet competitors in other markets whose products were cheaper, better packaged and consequently more competitive.

ODINAKA ANUDU