22 January 2014

Nigeria: How Country Lost N1.4 Trillion to Waivers

. Customs contradict Okonjo-Iweala

Nigeria lost N1.4 trillion through import duty waivers and concessions given in the last three years, according to documents from the Nigerian Customs Service, contradicting claims by the Finance Minister that N170.7 billion was lost in the period.

Mrs. Okonjo-Iwela had said in her response to the 50 questions by the House of Representatives that a total of N170.7 billion was conceeded through import duty waivers and exemptions in 2011-2013.

She said the amounts were N55.965 billion in 2011, N55.345 billion in 2012 and N59.4 billion in 2013.

But documents from the Customs, obtained by Daily Trust on Friday, reveal that a total of N1.435 trillion was lost through import duty waivers and concessions since 2011.

In 2011, about N480 billion was lost, through waiving N389 billion under the fuel, lubricants and similar products category for 149 beneficiaries, and N91 billion through other concessions to 290 companies.

The same amount of N480 billion was lost in 2012, with N288 billion going to companies trading in oil and similar products and the remaining N191 billion being lost through other concessions.

Another N474 billion was lost in 2013. The breakdown of that shows that N359 billion went to 80 oil firms while N114 billion was lost through concessions to another 287 companies.

The Customs documents indicate that about 65 percent of beneficiaries received the waiver/concessions for goods not approved by the government, which ordinarily should be limited to raw materials, machinery and spare parts.

The inclusion by the Finance Ministry of "other goods" in the categories eligible for concessions, according to the Customs, enabled finished goods that add no economic value to the country to be imported. These goods include fish, bullet-proof vehicles, kola nut, palm oil and others.

A spokesman for the Finance Ministry did not respond to questions emailed by Daily Trust yesterday, but he had said previously that, under the existing policy, import concessions are given as incentives to critical sectors for the greater good.

The Customs records show that the concessions in 2011-2013 were granted mostly to fuel dealers, with Conoil being the biggest beneficiary among them in 2013, with N53 billion.

Oando was next with N22 billion, followed by NIPCO Plc (N19 billion), Sahara Energy (N14 billion) and Folawiyo Energy (N12billion).

In 2011, the oil firm that benefited most was still Oando with N83 billion, followed by Capital Oil and Gas (N47 billion), Integrated Oil and Gas (N20 billion), Folawiyo Energy (N18 billion) and Sahara Energy (N14 billion).

The documents show that in 2012, the Nigerian National Petroleum Corporation (NNPC) was the biggest beneficiary, getting N80 billion in concessions, and Sopon Nigeria Ltd was the highest non-oil beneficiary in 2011, netting about N33 billion.

Coscharis Motors, which supplied Aviation Minister Stella Oduah's controversial bulletproof cars and supplied 200 cars to the African First Ladies summit in 2012, received waivers of N400 million in 2011 and N698 million in 2013.

Other beneficiaries of import tax concessions include companies in the Dangote Group, the African First Ladies Peace Mission (AFLPM), Inspector General of Police, Chief of Army Staff, Central Bank of Nigeria, Bayelsa State government, Minister of Police Affairs, Nigerian Police Force, Sokoto State Government, Akwa Ibom State Government and the Watchtower Society.

N/Assembly to check abuses

When contacted on Monday, chairman of the Senate Committee on Finance, Senator Ahmed Mohammed Makarfi (PDP, Kaduna), said they were aware that waivers that do not have any significant benefit to the ordinary man were being granted.

"We are aware of waivers based on returns made to our committee sometime last year. About 60 percent of it went to a single businessman and his business empire... . I don't believe that the ordinary man derived significant benefit from (such waivers)," he said.

Makarfi said "there is also a bill that if promptly considered can be expanded to curtail such waivers. The way to deal with this issue is through legislation and it's our collective responsibility to do so, not continuing investigations and investigations."

He said documents from Customs show that in 2013 they had collection shortfall of N243.69 billion due many factors including waivers, concessions, duty exemptions and other policies.

Daily Trust sought to get the Finance Ministry's reaction to the revelation in the Customs documents yesterday, but Mrs Okonjo-Iweala spokesman Paul Nwabuikwu did not respond to emailed questions.

However, Nwabuikwu had issued a statement on Friday in response to a story done by Sahara Reporters which said the minister understated the amounts lost to the import waivers in 2011-2013.

The statement said "the waivers and exemptions policy is a direct government intervention whose objective is to provide incentives to improve industrial competiveness and support job creation in the economy.

"This policy, also implemented by other emerging economies such as South Korea and Malaysia, was misapplied in the past through implementation in a manner that created an unlevel playing field and gave unfair advantage to some individuals.

"The policy was revised and strengthened starting 2012 and is now largely applied on a sectoral basis.

"Saharareporters arrived at the conclusion that the country has lost $9 billion because it considers every waiver granted by government to critical sectors such as manufacturing, agriculture, power, gas etc as fraudulent and as a loss to the nation.

"This implies that Saharareporters doesn't understand government policy and the importance of giving incentives to industries. We do not share that view and there is no question of loss to the country when it is government policy. The policy choice is between customs revenue and incentive revenues for industries. The government chose the latter because we believe the country stands to gain more from the incentives."

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