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Recent happenings in the nation’s governance space show we have not heard the last of troubling indiscriminate issuing of tax waivers by the Federal Government. The proposed N6trn tax waivers in the 2023 Federal Budget for instance, is currently stirring heated debate. SIAKA MOMOH, who has written robustly on this subject in the past, joins the debate, drawing on resource from his archives. Have a good read.
When shall we jettison this tax waiver bug? When shall we get rid of this drain-pipe on the Nigerian economy?
It can be recalled that in 2013 several questions were raised in the media on this ever recurring issue. For instance, analysts were reported to have asked why five years after a presidential committee on the review of incentives, waivers and concessions, recommended the abolition of discretionary waivers, the Federal Government continued the process, leading to the loss of about N40 billion in concessionary waivers to only seven companies in the steel sector.
Analysts and other sources were reported to have dismissed the concessions, exemptions and waivers granted the companies as spurious, and raised numerous questions bordering on the integrity, transparency and desirability of the grants. According to reports. they asked: could it have been that one could not smell a rat when considering a request for duty waiver from a so called prospective investor who claims he wants to set up an investment of $250m in Nigeria, and is applying for duty waiver to bring in building materials worth more than $500m?”; And can such request for duty waiver pass the credibility test when it is obvious that the materials being imported are mostly tradable goods, which can leak into the open market without a trace?.
They asked further: Why is it that government officials will give serious attention to a so called prospective investor seeking duty waiver to import 250,000 metric tons of iron to build a factory, when steel guzzling projects like the Abuja National Stadium used only 10,000 tons of steel, the South African World Cup wonder, Soccer City that seats 94,000 spectators, used only 13,000 tons of steel, the Allianz Arena in Munich, which also hosts Europe’s largest parking structure used only 22,000 tons of steel and the new 90,000 capacity Wembley Stadium draped with the world’s longest single span structure, used only 23,000 tons of steel?;Why is it that Nigeria front-loads incentives to so called investors by making it possible for them to receive benefits even before their investments are consummated, whereas other nations insist on investors receiving their incentives after their investment is on ground and begins to contribute the required benefits to the real economy?
Recent happenings in governance space show we have not heard the last of this troubling waiver issue.The proposed N6trn tax waivers in the 2023 Federal Budget is currently stirring heated debate. Things are no longer at ease with humongous tax waivers. The Senate Committee recently is reported to have rejected the N6trn tax and import duties waiver proposed by the Federal Government in the 2023 Budget stating that wastages and leakages must be blocked. Reports also have it that the lawmakers raised a similar objection over five months ago when it decried the high N1trn tax waivers to be granted by the Federal Government.
We are therefore joining the waiver palaver debate by drawing from Archives Siaka Momoh, opposition to indiscriminate tax waives granted companies in the past by the Federal Government.
We sure have a problem with steel making. It is one burden that we have been bogged down with over the years. At the close of 2021, the Senate Committee on Solid Minerals, Mine, Steel and Power Development and Metallurgy, decried alleged neglect of Ajaokuta Iron and Steel Project.
And only recently, President Muhammadu Buhari rejected the Ajaokuta Steel Company Completion Fund Bill, which proposed the withdrawal of $1 billion from the Excess Crude Account for the completion of the project. And recently also, there was a report which said Olamilekan Adegbite, the Minister of Mines and Steel Development, said Ajaokuta Steel Company Ltd. would function to capacity before the end of President Muhammadu Buhari’s administration. And only recently too, the Minister was reported to have said this would no longer be possible giving as reasons Covid 19 Pandemic issue and the Rusian/Ukrainean conflict. And there is a chain of other issues that Ajaokuta Steel has been entangled in. When will Ajaokuta be really born? When shall we break the jinx?
Duty waiver abuse was very evident and BusinessDay, in 2013, cried out against it. This writer as Industry Editor in the newspaper wrote extensively on it, drawing attention to the irregularities in the waiver that had to do with, among other things, Western Metal Products Company Limited (WEMPCO) listing for duty waiver, importation of items that were in production in Nigeria. Expectedly, the story called for WEMPCO’s quick and plump reaction.
Sources within the industry alleged WEMPCO abused the exclusive rights and waivers that were granted to it by the Federal Government during President Goodluck Jonathan’s administration. The previous government had granted the firm heavy waivers to aid it in the production of cold-rolled sheet locally. Cheaper substandard smuggled roofing sheets also constituted part of WEMPCO’s headache.
Again, in 2015, the Central Bank of Nigeria (CBN), as part of its initiative to resuscitate local industries and improve employment generation, released a list of items not eligible for foreign exchange in the government-created Importers & Exporters window. Among the 41 items on the list are cold-rolled steel sheets, galvanized steel sheets, and roofing sheets. However, the firm had instead embarked on heavy importation of the product.
The implication of all these will be labour flight. This reminds one of the case of St Louis Sugar that is being imported into Nigeria, which accounts for the loss of 4000 jobs to France. The attention of government was drawn to this yet lobbyists are still having the upper hand on this matter. Several media reports have revealed that no fewer than 19 enamelware firms are equally closing business due to WEMPCO’s proposed exit; about 250,000 jobs are therefore on the line.
Concerned stakeholders in the industry have never ceased raising their voices in condemnation of abuse of tax waivers. These industry players have criticized the Federal Government for its reckless issuance of waivers and levy concessions to a select group of steel manufacturers, apparently referring to the likes of WEMPCO and several other import substitution skewed companies in the country describing the government action as highly irresponsible and a disservice to the nation.
Some informed industry stakeholders told BusinessDay in confidence that import duty waivers, levy concessions, and petroleum subsidies are robust tools for funding elections, implying that beneficiaries of the scam are in league with key government functionaries.
The Manufacturers Association of Nigeria (MAN), the umbrella body for manufacturers in Nigeria, observed that contrary to the stipulation of Chapter 72 of the Tariff Book that says no waivers and concession on import duty and VAT should be given, steel items are being imported in enormous tonnages, most times in excess of what is needed to execute claimed projects. MAN, in a letter dated January 10, 2013, written to the Coordinating Minister of the Economy and Honourable Minister of Finance, Ngozi Okonjo-Iweala ( Attention: Director general , Budget Office), said: “CME, we are surprised also to discover that the material/product list attached to the concessions newly granted to three other companies (Messrs WEMPCO, Rite Aid Wire Industries Limited and Quits Aviation Services Limited) contain items that are not plant and machinery and are also being produced locally.” MAN argued these approvals should be amended to exclude skill and other items that are produced locally (such as steel, cables, etc.) in order to save local manufacturing from collapse.
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Independent Newspapers Limited, registered on July 17, 2001 (RC No: 419927), commenced publication on October 1, 2001. With registered office at 8, WEMPCO Road, Ogba, Ikeja, it publishes INDEPENDENT, Monday - Friday, Saturday Independent, Sunday Independent, independent.ng, TV Independent on YouTube and IndependentNgr (Facebook, Twitter & Instagram).
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