A Senate report last week unearthed a N447 billion loss to improper administration of import duty waivers and concessions in the country.
The waivers were said to have been flagrantly granted by ministries, departments and agencies of the Federal Government to six companies in disregard of extant rules between 2013 and 2015. The Chairman of the Senate Adhoc Committee on Import Waivers, Concessions and Grants, Senator Adamu Aliero, denounced the waivers in very strong terms and the Senate, last week, asked the Federal Gov ernment to recover the money lost to the grants.
We strongly support the move to get the six companies that benefited from these controversial
waivers to refund the huge sum involved. The granting of such waivers to select companies is an unconscionable trade practice, which creates unfair competition and robs the Nigerian economy of badly needed funds. The serial rape of the economy through these controversial waivers
has, most likely, contributed to the nation’s economic adversity.
The Senate rightly observed that the waivers led to large-scale revenue leakages, and that the sums lost could have been used for infrastructural development or social services.
THE committee discovered that the waivers and the manner they were applied have become detrimental to the smooth-running of the Nigerian economy. The customs duty waivers and concessions, it said, were used “by the Budget Office of the Federation” to entrench “a very destructive patronage system” in which very few operators in the economy were singled out for favours which resulted in unfair competition.
The committee further observed that the consequence of such discriminatory practice was that many would-be investors were discouraged from investing in Nigeria. Many local and foreign investors were also said to have cited this injustice as one of the reasons for not investing in the country.
The committee courageously named the companies granted the waivers and urged the government to compel them to pay the waived import duties for exceeding the quota granted them on importation of rice, raw sugar, cube sugar and other items, without the required backward integration policies for local production of the products. The Senate adopted the recommendation of the committee that the firms which benefitted from the Customs duty waivers “through flagrant abuse of executive powers” should not only refund the lost sums but should also be sanctioned for economic sabotage.
We commend the committee for its work and support its recommendation to the Federal Government to come up with an unambiguous, clear-cut policy on import waivers, concessions and grants. The Senate was also right in calling for an immediate end to the “current patronage system” which, in its view, hampers economic competition. As for the organisations that illegally benefitted from the waivers and concessions, we cannot agree more with the Senate on the need to sanction them.
An economy such as Nigeria’s can only work at its optimum with a level playing field that is not only just and fair, but is seen to be just and fair to all investors. Rigging the system through executive abuse clearly undermines the system.
The committee discovered that the abuse of waivers did not end with import duty. It found that the country lost $2.9 billion to tax waivers. Tax waivers are a world-wide practice offered to encourage new investors to enjoy a “tax holiday” for a certain period to enable them stand on their feet before paying taxes. The committee has appealed to the Federal Ministry of Finance to review the regulations concerning eligibility and duration of these tax waivers.
Waivers, concessions and grants are potent fiscal tools which can be useful in the attainment of definite economic objectives of the government. They are sometimes used to enhance domestic capacity and to act as an incentive to boost domestic production, to encourage self-reliance, and to reduce dependence on imported goods. They should not be used like slush fund, a political pay-off or a bribe. A waiver is strictly an economic tool to attain certain goals in specific sectors of the economy.
The abuse of waivers and concessions is one example of how government officials can turn an important tool into an avenue for corruption. Many sectors of the economy need such waivers now and then. Agriculture, health, mines, steel and power, water resources, gas, even education and other sectors need special attention and help. The principle is that a waiver must be specific as to what it is meant to achieve for the economy.
Now that the Senate Committee has found that the Budget Office cannot be trusted to administer waivers with fairness and transparency, the Federal Government must find another way to administer them. It must also institute adequate checks and balances to ensure that waivers and concessions achieve the aims for which they are granted.
To demonstrate its determination to ensure a fair economic environment, the government must move quickly to recover the unlawfully withheld import duties for which demand notices have been issued by the Nigeria Customs Service. It must also move against the companies cited for economic sabotage to discourage such conduct by other companies.
