Export Development Fund more boost for non-oil export, job creation
As policy makers undertake review of the Export Expansion Grant (EEG) scheme which was suspended some months ago, exporters have called for the full implementation of the Export Development Fund (EDF) as well.
The Export Development Fund which is backed by the Export (Incentives and Miscellaneous Provisions) Act of the Nigerian Constitution in Part II, section A, sub-section 4 is expected to be given as grants to ensure meaningful value addition to raw commodities before export. Though reviewed in the 1992 constitution, there has been no implementation because the Scheme has not been funded since then.
About a decade later, during the Obasanjo administration, the Export Expansion Grant was introduced. Currently, however, EEG has been under suspension for months now with the hint of being scrapped completely. Policy makers are planning to review it fully in 2015.
Whereas the Export Expansion Grant is given after the exporter has carried out the export and the proceeds have been repatriated, the Export Development Fund is a pre-export grant which would make it possible for indigenous firms to start or expand export business and add value to the raw materials before export.
Joseph Idiong, director general/chief executive officer, Association of Nigerian Exporters, said recently in Lagos, “Foreign-owned companies have the opportunity of taking interest- free loans from their governments to carry out the necessary operations needed to finance export projects in Nigeria, after which they would be able to access the EEG.”
Though Idiong did not state that this is wrong, he pointed out that there are many indigenous firms that are unable to undertake export projects, not because they do not have the market but because they lack the funds to even undertake the project which entails sourcing the raw materials and adding value to them.
He notes that most indigenous firms do not have access to such cheap funds and are therefore unable to carry out market researches and do the necessary value additions to their produce. He stated that when the EDF was being funded in 1986, exporters would submit proposals which would be assessed and the grant would be approved if the proposal is viable.
The EDF apparently has the potential to address some of the inadequacies of the EEG. While giving reasons for the suspension of the EEG recently, Ngozi Okonjo-Iweala, minister of finance and coordinating minister for the economy, the stated that though the EEG has increased non-oil export in the country, it has not generated enough employment and value addition.
Similarly, Grace Clark, board chairman of the Nigeria Export Promotion Council (NEPC), also stated recently in Lagos that as a result of some of its inadequacies, the EEG no longer caters for the current realities in the country’s manufacturing sector.
Clark added that to enhance the value addition of agricultural commodities in the country, an inter-ministerial committee is currently reviewing the scheme. She also explained that there are applications for processing of agricultural products and that this would be addressed in due course.
Alfred Uwheraka of Frijay Consult, an export firm, also attested to the fact that exporters are in dire need of funds to lessen the difficulty in carrying out non-oil export. Some of the challenges of companies that do processing or value addition of agricultural commodities include high energy, transportation, labour and financing costs.
Sotonye Anga, an exporter and national publicity secretary of the National Cashew Association of Nigeria (NCAN), affirmed that there is dire need to implement the Export Development Fund to support indigenous export firms to start or expand export business.
“Exporters need such support as a matter of urgency if we want to see the desired boost in non-oil export which is in line with the agenda of the current administration,” he said. Anga adds that this has become even more necessary in the face of falling crude oil prices.
Anga, however, advised that the EDF and EEG should run concurrently. But on the possibilities of operators of indigenous firms not undertaking the export after collecting the grant under the EDF if implemented, Anga said that it is a possibility that would have to be managed.
According to Idiong, when the EDF was being funded in the mid-80s, the company would send in a proposal which would be assessed and verified before the fund is approved. The possibility of defrauding the government has however also occurred with the EEG.
According to an interim report of the Price WaterHouseCoopers review of the EEG in 2005, three key government agencies allegedly cooperated with some exporters to defraud the federal government to collect grants over and above what they exported and were entitled to.
OLUYINKA ALAWODE