Making incentives operational for non-oil export growth

In 2013, the Export Expansion Grant (EEG) was re-designed from Negotiable Duty Credit Certificates (NDCCs) but not long thereafter, was suspended for another review following allegations of abuse. The scheme was suspended and reactivated eight times between 2005 and 2013. Despite the review, non-oil exporters have yet to be compensated, thus leading to a lull in the activities of the sector as well as in its contributions to the economy. Improving fiscal receipts from non-oil exports remains an aspiration without an effective incentive scheme. FEMI ADEKOYA writes.

Between 2013 and 2018 since the incentives needed to drive non-oil export were suspended for a review, non-oil export output has remained inconsistent with the diversification agenda being promoted by the Nigerian government.

Considering the numerous challenges in the non-oil export sector, the need for incentives that will assist exporters of value-added products in managing their operational costs and ensuring maximal business profits as well as returns for government are imperative.

The revival of the incentive scheme, according to the Chief Executive officer of Nigerian Export Promotion Council (NEPC), Segun Awolowo, was scripted to promote value-addition industry especially in the agricultural sector.

The suspension of the EEG scheme by government for almost six years has generated several criticisms from agro-processors and players in the value-addition sector, describing it as a disincentive and elixir to raw commodities’ exportation.

There were expectations earlier in the year that some of the backlogs would be cleared before the end of third quarter, the delayed implementation of the 2018 budget, under which provisions were made for some debt payments, may further prolong the issuance of promissory notes to the beneficiaries.

Although the Federal Government reiterated its stance that the delay in clearing the backlog of the revived EEG payments was attributable to prolonged approvals from the National Assembly, following its reversion to Credit Guarantee Certificate, stakeholders are seeking immediate payment of the promissory notes.

How much are exporters being owed?
While data from the NEPC showed that the backlog of unpaid incentives might have risen to at least N1.2 trillion, exporters claimed that they were being owed at least N350billion towards EEG claims that are due to them between 2007 and 2016.

One of the industry stakeholders said: “The EEG claims payable to the individual exporter depends upon the value and volume of products exported ( as outlined in the EEG Policy Circular of Federal Ministry of Finance) and the individual rating as per the company baseline data ( also outlined in the EEG Policy Circular of the Federal Ministry of Finance).

“The company baseline data is based upon the audited financial results of the exporting companies and is based on the audited results of the company filed at the CAC (Corporate Affairs Commission). The NEPC verifies the baseline data before it even begin to process any EEG application.

“The figures of EEG claims owed under Promissory Notes program of N350 billion approximately is based upon the claims processed and approved by the EEG Implementation Committee meetings”.

Awolowo however appealed to the non-oil exporters for patience, noting that government has done the necessary things for the implementation and payment of outstanding debts.

Awolowo, who was represented by NEPC Director, Policy and Strategy, Abdullahi Sidi-Aliyu, said: “The EEG for so many years is what many exporters leverage to expand their activities. In the absence of such incentives, non-oil export activities continued to dwindle, and this affected the volume of non-oil export that is being recorded. We are advocating that the EEG be revitalised, and exporters given access to the incentives to boost their activities.

“On the issue of promissory notes, we are appealing to non-oil exporters to be patient. Government has done all that is necessary for the take off of the programme. We are waiting for the National Assembly to reconvene to grant approval for the programme. A lot of debts are also affected by the prolonged delay of the lawmakers reconvening.”

Consequences of delayed EEG payments
According to some operators in the non-oil export sector, the delay in the payment of outstanding claims has led to challenges of loan repayment in respect of funds borrowed by exporters from financial institutions for export on the strength of the NDCC, incidence of bad loans in the hands of the bank since the NDCC collaterals are no longer honoured, potential non-competitiveness of products exported from Nigeria in the international market, and outright failure of the export business and attendant impact on the personnel employed in those operations.

Specifically, Manufacturers Association of Nigeria Export Promotion Group (MANEG) Chairman, Chief Ede Dafinone decried the lack of incentives for the non-oil sector, adding that since the collection of unutilised Negotiable Duty Credit Certificates (NDCCs) by the Federal Government, no payment has been made to the exporters, thus putting the exporters in a difficult position with their banks.

“The year 2017 was difficult for our members as shortage of foreign exchange lingered in the period coupled with other familiar challenges of the sector such as high cost of energy and of funds, multiple levies and taxes, smuggling that unleashed untold constraints on manufacturing operations”, he added.

Lead Consultant, 3T Impex Consulting Limited and LCCI Export Group Chairman, Bamidele Ayemibo noted that non-oil export challenges became intensified since the beginning of the year.

He expressed displeasure about the situation saying: “Countries that are considered as great are mainly non-oil export oriented. It is interesting to note that while other countries are taking this seriously, Nigeria is not serious about it. Every policy is geared to support import but that which is supposed to support export is either on paper and never implemented or partially implemented. It is a sad one.

“We have facilitated a lot of export for clients but we keep postponing and extending the dates of shipment. In the middle of all this issue, Nigeria is caught in the web of the trade war between the United States and China. Non-oil exporters are suffering on two fronts— China’s declining demand for imports and delay in payments as well as inability of exporters to ship the goods.

“Some people have had to suspend shipments because goods take longer time on the roads. Though exports volume in Q1 of this year was high, there are expectations that the volume will drop significantly in Q2 and Q3. Typically exports volume rise in Q1 and Q4. Because we deal in agro-based products, Q3 and Q4 are the peak periods.

“Nigerian exporters are very resilient and should be encouraged as the volume could be higher if there were no challenges in the sector. The situation is getting worse presently and the sector may witness 25 per cent drop in transactions volume”.

The exporters noted that having acted in good faith by relying on the extant government policy of EEG in making their investment and pricing decisions in their business, they have taken on debts to service these receivables and these debts are incurring further interest with the continuing delay.

To this end, the non-oil exporters want the Senate /National Assembly should expeditiously clear the payment of promissory notes so that the non-oil exporters can get the much needed relief and succour and rededicate themselves to growing the export sector thereby contributing to the creation of jobs and livelihoods and growing the valuable foreign exchange reserves of Nigeria.