How FG’s ‘reverse auction’ renders EEG scheme redundant

Nigerian exports
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The federal government has introduced the reverse auction for the Export Expansion Grant (EEG) scheme as a way of paying exporters owed between 2006 and 2016.

Reverse 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 seen by BusinessDay, will have to bid and reduce this amount by as lower as possible to have a chance of being paid at all.

The lower this company is willing to go, the more chances it has. Companies that bid much lower will have to be paid before others that are unwilling to go much lower.

Experts see this as trivialising an exercise that is expected to boost non-oil exports amid declining foreign exchange earnings.

“The implication of this is that un-genuine exporters can go any lower just to get anything,” an expert, who does not want her name n print, said.

The reverse auction is being managed by the Debt Management Office.

“The discounts offered will be the basis for allocation,” the Debt Management Office (DMO) said at a presentation recently.

This means that no exporting company is sure of how much it will get when the payment begins.

“So, the question is, will the government also pay me an interest on what they owed me all these years?” asked an exporter.

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

The government is using promissory notes for the settlement of qualified exporters, rather than the negotiable duty credit certificates used before 2015.

A document seen by BusinessDay shows that the National Assembly committees on promissory notes have approved notes of 269 companies worth N193.042 billion. BusinessDay earlier reported that 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 and GZ Industries, among many others.

However, the list of approved firms 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, former 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 2016 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.

“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.

Amid the outcry that some of the companies are not genuine exporters, and the fact that 38 firms are being held to ransom by legislators, the federal government is also saying that it cannot pay what is due to exporters using the reverse auction as a front, say experts.

Nigeria’s non-oil revenue to GDP has remained four percent since 2014 owing to lip service paid to issues around export and business environment in the country.

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 ready-to-wear garments.

“The key issue with Nigerian export is competitiveness. Unless we have an environment that positions the economy for competitiveness, we cannot make any headway,” Muda Yusuf, director-general of the Lagos Chamber of Commerce and Industry (LCCI), said at a book launch in Lagos recently.

 

ODINAKA ANUDU

 

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