Sunday, September 6, 2015

Non-oil exporters call for restoration of incentives

As the suspension of the Export Expansion Grant enters its second year, non-oil exporters in Nigeria are asking the government of Muhammadu Buhari to restore the incentive which has remained the only major stimulus in the sector.

The group is also appealing to the president to look into outstanding Negotiable Duty Credit Certificate claims which currently stand at over N151bn.

In order to boost Nigeria’s trade presence in the international market, the Federal Government established the EEG in 2006 as an incentive to cushion the effect of harsh business environment faced locally by importers and drive non-oil exports revenue.

The incentive, modelled after Brazil’s and China’s, was targeted at earning more foreign exchange, attracting more non-oil investments and creating thousands of jobs, while also making local commodities competitive in the international market.

The EEG was operated through the Nigeria Customs Service with instruments known as Negotiable Duty Credit Certificates and suspended in August 2013 by the previous administration which promised to review it. The review, however, did not happen before the exit of the last government.
The Chairman, Manufacturers Association of Nigeria Export Group, Tunde Oyelola, said the scheme should be restored on account of its recorded success.

He added that operations of the EEG between 2005 and 2013 led to a boost in the value of Nigeria’s non-oil exports from $700m to $2.9bn.

In a statement issued by the association, Oyelola said, “Nigeria’s vision is anchored on economic diversification away from a mono-product (oil), transformation from primary commodities to processed and manufactured goods, as well as high levels of efficiency and productivity.
“However, this vision remains a mirage without a strong commitment to the implementation of the EEG which has proved to be the most veritable tool of achieving the broad objective of economic diversification in Nigeria.”

According to him, the EEG was suspended unofficially as there was no official pronouncement before its termination, adding that the outstanding debt owed non-oil exporters by the Federal Government has pushed players to the precipice.

He said,“Some of our members discounted the prices of their products in the international market in order to secure contracts, hoping to make up the difference from the EEG, but the sudden suspension of EEG has grossly affected their accounts.

“In addition, some others went into expansion of their operations in order to increase their non-oil export volumes due to expected benefits promoted by EEG. In some other instances, manufacturers borrowed from their bankers with the NDCCs as security, but due to the suspension of the EEG, the bankers have been forced to ask for additional and better collaterals, thereby pushing them into further distress.

A non-oil exporter and the Chief Executive Officer of Sapele Integrated Industries Limited, Ede Dafinone, said a country desirous of economic expansion amid crude oil crash could not afford to ignore a critical area like the non-oil sector, stressing that the EEG is not free money as it is targeted at non-oil growth and remains a practice in many developing and developed countries.
“You look at the number of jobs it can create, the economic diversification and expansion, the multiplier effect on other sectors and wonder why a scheme like this would be ignored,” he said.

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