Why National Assembly must expedite approval of over N1.2trn EEG claims

Developed and developing countries earn billions of dollars each year from exporting what they produce or have in abundance. Since 2012, China’s annual export has been exceeding $2 trillion. It is public knowledge that the country exports virtually everything from toothpick to soybeans, from copper to alloys.

Global estimates show that Bangladesh, once among the poorest countries in the world, rakes in $28 billion just from textile export of textiles each year.

India exported textiles and clothing valued at $37.4 billion in 2017. This is a rise from $35.5 billion recorded in 2016, according to the Southern India Mills’ Association (SIMA). Brazil’s sugar production is about 30 million metric tonnes at today’s price of $280 to $310 per ton. This shows that the country earns about $9 billion each year from sugar.

But Nigeria is a different case. Using the Nigerian Export Promotion Council (NEPC)’s data, non-oil export has fallen from about $3 billion in 2013 to less than $1.4 billion in 2017. Even if a more comprehensive data from the National Bureau of Statistics (NBS) are used, the number is still comparatively low—from N577 billion in the first quarter of 2018 to N218.98 billion in the second quarter (if you factor out Other Oil Exports). This is about $2.20 billion for the half-year of 2018, less than what many countries earn from just one product, experts say.

One big reason for the continuous growth of the non-oil export sector in these countries is the support given to firms in the form of subventions and budgetary allocations.

The United States government has four grant programmes to help firms test foreign markets, orient themselves in new markets, train US or foreign representatives, and overcome in-country obstacles to trade.

Similarly, Australia has an effective Export Market Development Grants (EMDG) scheme which assists aspiring and current exporters. China and other smaller/ developing countries also have various forms of export assistance.

The essence of these grants is to enable export firms to compete effectively and be able to repatriate huge foreign exchange that will serve as bulwarks against internal or external shocks.

Nigeria has an Export Expansion Grant (EEG) that has survived a string of suspensions— halted nine times between 2005 and 2013. The last suspension lasted till the new government of Muhammadu Buhari came to power in May 2015. The government proposed to replace the use of the Negotiable Duty Credit Certificates (NDCCs) with promissory notes.

The proposal to issue promissory notes in lieu of EEG claims for the legacy EEG claims of non –oil exporters was approved by the Federal Executive Council in 2017.

Exporters are owed approximately N350 billion between 2007 and 2016, though the Nigerian Export Promotion Council (NEPC) told Real Sector Watch last week that processed claims on promissory notes have exceeded N1.2 trillion.

“The EEG has been what many of the exporters leveraged on to expand their export. In the absence of that very important incentive, you discover there was dwindle in the non-oil export data. We are agitating and canvassing that the EEG should be revitalised and exporters should be given access to it because it will expand non-oil export activities,” Olusegun Awolowo, CEO of NEPC, who was represented by Abdullahi Sidi-Aliyu, director in charge of policy and strategy, said at the annual general meeting of the Manufacturers Association of Nigeria Export Promotion Group (MANEG) in Lagos.

The EEG claims of non-oil exporters were processed and approved at a series of meetings of the EEG Implementation Committee (EEGICM) made up of the Federal Ministry of Finance (FMF), Federal Ministry of Industry, Trade and Investment (FMITI); Central Bank of Nigeria (CBN), Nigeria Customs Service (NCS), Federal Inland Revenue Service (FIRS), Federal Ministry of Budget & Planning, and the NEPC.

The EEG claims were also audited by the Presidential Initiative on Continuous Audit (PICA) team between March and July 2018. PICA called for comprehensive documentary submissions from the individual exporters and also embarked on extensive field visits to their export facilities.

Baseline data were based upon audited financial results of the exporting companies and on the audited results of the companies filed at the Corporate Affairs Commission (CAC). It was gathered that the NEPC verified the baseline data before processing EEG applications.

Real Sector Watch gathered that all the due diligence has been done, given that the Federal Ministry of Finance has forwarded the request for payment of promissory notes for EEG to the National Assembly. This means that as soon as the legislators approve, the ministry will proceed with issuance of promissory notes.

“Government has done all that is necessary for the take-off of the programme. Right now, we are waiting for the National Assembly to grant approval to the use of promissory notes. Hopefully, if the National Assembly can grant approval, the government will definitely implement the decision,” Awolowo said.

Exports say that absence of the EEG has hurt them, making their products uncompetitive in a fiercely competitive export market.

A senior manager in a multinational export company told Real Sector Watch that exporters have taken on debts to service receivables, saying that the debts are incurring further interest with the continuing delay, pushing exporters into greater financial distress with their banks and financiers.

“This is why 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,” the manager, who craved anonymity, said.

Another exporter said it is important for the legislators to approve these notes which have the capacity to boost export and strengthen the naira.

Ede Dafinone, chairman, MANEG, said, “I would like to see more incentives from the government. We need to improve our competitiveness.”

ODINAKA ANUDU