Nigerian exporters are worried by government inability to offset the Export Expansion Grant (EEG) backlogs and the closure of Nigeria- Benin border in the face of a beckoning African Continental Free Trade Area (AfCFTA).
The AfCTA, a continental free trade deal that will make Africa borderless, is expected to begin in January 2021.
However, exporters are still owed billions of naira in EEG while a critical export border has been shut by the Nigerian government for 14 months.
“The current backlog will be approximately N150 to N200 billion, which is bad because they are creating a fresh backlog,” Ede Dafinone, chairman, Manufacturers Association of Nigeria Export Promotion Group (MANEG), said in Lagos.
The EEG was set up in 1986 to help Nigerian exporters 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.
Dafinone said non-payment of EEG was greatly affecting the non-oil export sector for a country in dire need of foreign exchange.
Exporters have argued that Nigeria’s non-oil export grew from $600 million to $3 billion from 2005 to 2013 due to the grant scheme which encouraged them to expand and discover new markets.
According to Dafinone, exporters using promissory notes were offering a further discount, which should be appreciated by government, stressing that they needed to be paid to support their businesses.
The AfCFTA is said to have the capacity to create the largest trade zone in the world and increase intra-African trade by 52 percent by 2022 while removing tariffs on 90 percent of goods. The free trade treaty is expected to start in January, but Dafinone thinks Nigeria needs another year to prepare.
“We are not properly prepared to take advantage of the possible benefits and, in my opinion, as a country, we need additional preparation to take full advantage. My view would be that we should, on the back of Covid-19, call force majeure on this and ask for an additional year in order to put our house in order before we go live on the AfCFTA,” he said.
He noted that due to the closure of Nigeria-Benin border, export through land borders had been totally stopped, but the sea route was still available, adding that this option was largely more expensive than the land borders.
