Guardian

IN international economy, trade remains the essential backbone for economic growth and development. The demand for trade creates domestic production and the inflows of funds from overseas, when the outputs of production are exported.

Countries that have limited domestic resources, strive to keep up with domestic production of various goods and services in order to maintain a trade surplus, and enhance their production capacity.

Over the years, exporting has been increasing yearly, globally, even though there are complaints about imbalance of trade among nations. This is due to various factors. First, both large and small firms export – not just large firms, especially with the removal of trade barriers among nations, while many developing countries have been at a disadvantage with the removal of such barriers.

Specifically, the influx of finished goods to many developing countries has undermined the production capacity of many companies in such countries, Nigeria inclusive. The impact of international trade on economic growth has divided economists and policy makers of the developed and developing economies into two separate groups.

One group of economists is of the view that international trade has brought about unfavorable changes in the economic and financial scenarios of the developing countries.

According to them, the gains from trade have gone mostly to the developed nations of the world. Liberalisation of trade policies, reduction of tariffs and globalisation has adversely affected the industrial setups of the less developed and developing economies. As an aftermath of liberalisation, majority of the infant industries in these nations have closed their operations. Many other industries that used to operate under government protection found it very difficult to compete with their global counterparts.

The other group of economists, which speaks in favor of globalisation and international trade, come with a brighter view of the international trade and its impact on economic growth of the developing nations.

According to them developing countries, which have followed trade liberalisation policies, have experienced all the favorable effects of globalisation and international trade. China and India are regarded as the trendsetters in this case.

However, there is no denying the fact that international trade is beneficial for the countries involved in trade, if practiced properly. International trade opens up the opportunities of global market to the entrepreneurs of the developing nations, makes the latest technology readily available to the businesses operating in these countries and also results in increased competition both in the domestic and global fronts.

Duty is a tax levied on imports by the customs authorities to generate revenue and to protect domestic industries from more efficient or predatory competitors from abroad. However, these duties are sometimes waived for products with minimum production capacity in the country and also to encourage international trade.

Contrastingly, if the contentious issue brewing between the Presidency and Nigeria Customs Service as the Senate embarks on a process of stripping President Goodluck Jonathan of powers to grant duty exemption to certain categories of organisations, is anything to go by, the country may need to review its process of granting import waivers.

Import waivers have remained a very critical issue in the history of revenue generation in Nigeria over the years. The subject has been described as a conduit pipe through which revenue that is legitimately due for the development of the country has continually been drained or snuffed off the purse of government by individuals and firms favoured by the government.

Specifically, the president by virtue of the provisions of Sections 11 and 12 of the Customs, Excise Tariff, etc (Consolidation) Act 1995 has the powers to grant waivers.

For instance, the Customs administration is globally recognised as a key for driving economic growth by facilitating trade between countries and also by driving revenue collection. The primary role of the Customs in Nigeria has been to help drive revenue collection within the country and it has also added more and more trade facilitation role.

The Deputy Comptroller of Customs in charge of Corporate Support Services, John Atteh, Dikko had said, “a cursory look at the current law reveals a number of deficiencies arising from the fact that many actions currently being undertaken by the NCS are not provided for or codified in any law and, therefore, do not have a proper legal basis.

“Many such actions are typically based on pronouncements from government, raising the questions of where the powers to enact such policies came from, except as provided by the powers of the executive President of Nigeria to enact policies.

“This then makes the pronouncements mere policies and subject to judicial manoeuvres especially if such policies contradict existing legislations. Furthermore, changes conducted in this fashion cloud the spirit of transparency and consultation.

An Economic Analyst, Mr. Henry Boyo noted that the survival of some other local industries have become jeopardised by the inexplicable lifting of the ban on importation for such consumer goods as fruit drinks, tooth picks, furniture, textiles and vehicles; that is, those items for which local manufacturing capacity readily exists.

He added that the facilitation of such imports has been cited as a major avenue for dumping substandard goods in Nigeria; a development, which would inevitably further constrain industrial investments domestically.

“Critics have suggested that such duty and levy waivers are not often driven by altruistic or patriotic objectives, but by an obligation to compensate political cronies, godfathers, associates and friends of government.  Thus, the issuance of waivers has been seen as driver of political inequities and corruption, as well as a veritable obstacle to the true practice of democracy, as the considerable slush funds derived from waiver scams are deployed to influence political patronage and election victory.

“Regrettably, allegations of such impropriety with public revenue have largely remained uninvestigated by the security agencies.  Inexplicably, itinerant businessmen, often with shadowy corporate identities, have also been beneficiaries of the huge gains from import waivers; indeed, some of such ‘emergency entrepreneurs’ are alleged to have made billions of naira by simply selling their rights to the waiver to a third-party!  Incidentally, several of our nation’s business icons have at some time or the other also benefited from such waiver scams.

“The 2013 budget proposals may have inadvertently, or possibly, deliberately set the stage for another waiver scam next year, the high levy and duty rates for refined sugar (20 per cent duty and 60 per cent levy) and rice (10 per cent duty and 100 per cent levy) will undoubtedly instigate huge price rises for these ‘essential’ commodities.  The intention of such high duties and levies is presumably to support the survival of local production of rice and sugar.

“However, it may be unrealistic to expect the products of such investment to come on stream in the next 12 months. The market will inevitably become under-supplied and the resultant price spiral for these ‘essential’ commodities will undoubtedly lead to a massive public outcry in an economy already severely ravaged by inflation.  As usual, government would step in and ‘altruistically’ grant waivers to its favoured partners for urgent importation of rice and sugar,” he added.

Chairman of the Senate on Finance, Ahmed Makarfi had observed, “the powers to grant waivers should not be under the prerogative of one person” and this should be seriously considered, as “such power must not be exercised by any individual, except if the legislature by some legislation or resolution takes a decision about it.

For example, then Minister of Finance, Shamsudeen Usman had in 2007, lamented that waivers and tax concessions had been abused, especially between 2000 and 2007.

Findings revealed that waiver granting policy had been in existence in Nigeria for ages, particularly as a means of fostering businesses with potential for value chain development.  Specifically, the 1995 Customs Excise Consolidation Act granted the president the powers to grant waivers.

However, there are still conventions and multilateral trades that allow technical aids goods top come in. For instance, there are some goods that are under Cotonou convention, which are under schedule 2. The aides are going to local assemblers and manufacturers.

While the powers of the president in this regard, is not in dispute, the manner in which the powers are being exercised have been described as indiscriminate. Hence, many are of the opinion that such presidential import waivers have cost the three tiers of government billions of naira in the wake of dwindling reserves and rising debt profile.

Even though, waivers have been reportedly suspended in 2012 following presidential orders, only a few want the policy reviewed in order to address the issue of political waiver, which is regarded as the major source of tax evasion.

Some experts are of the opinion that waiver is supposed to help build the economy and create employment, and that waiver is not supposed to be stopped; rather, they should be encouraged, because they are useful to the economy.

A group, National Association of Nigerian Traders (NANTS), represented by its President, Ken Ukaoha, in its recent submission on import waivers, noted that the process of waiver granting in Nigeria has always been shrouded in secrecy; conceived and executed by a few.

The group said: “It is a clear manifestation of economic sabotage. It is a process that appears to completely erode even the fundamental rights of the citizens to know and make inputs on the very issue that concerns and touches on their livelihoods.

“Essentially, government must show clear signs of understanding of and commitment to the concept of economic development and growth. The most critical economic implication of waivers is a direct increase in loss of employment opportunities in the domestic economy. Waivers rather expressly shrink local jobs while donating employment to exporting countries from where the commodities come.

“For a Nigerian government which has anchored the pillar of her development strategy– the Transformation Agenda on agriculture, it is rather confusing, irreconcilable and most unfortunate to see such volume of imports on agric produce (which can be produced locally) being imported into the country, and worse still, having revenue that could have accrued thereof being waved. With all due respect, this is admissibly the height of irresponsibility.”

“Nigeria is one of the few countries that still apply import prohibition as a trade policy. The Federal Government has always aimed at reducing the influx of goods into the economy, as well as encouraging local production. Rice and Oil palm are some of the items severally given prominence in the import prohibition list. At one time, rice as a commodity had an import tariff of 150 per cent. At some time, rice had a levy attached thereto in addition to the duty/tariff and at other times, it has been outrightly banned. Successive governments including the present administration have made several pronouncements declaring commitments towards improving local production and stopping importation of these commodities.

“In fact, in his 2012 budget presentation to the Parliament, the President in paragraph 34 of his budget speech informed Nigerians “our objective is to ensure food security whilst also promoting exports in agriculture value chains where we have a comparative advantage. We intend to process and add value to different crops such as rice, cassava, sorghum, oil palm, cocoa, cotton, etc”.

“Mr. President went further in paragraph 37 to declare, “We will further look at supportive fiscal policies for the rice and wheat sectors to stimulate domestic production”. He summarized this by stating in paragraph 40 that “It is common wisdom that the best way we can grow our economy and create jobs for our people is for us to patronize Nigerian-made goods.” To see this same commodities having their tariff being waived by the same government therefore smirks of high level of confusion and or (if you kindly permit) irresponsibility in governance,” the group added.

They noted that economic waivers that encourage growth should be retained.

However, President,Chartered Institute of Taxation of Nigeria (CITN), John Jegede mentioned that for business to thrive in Nigeria, tax administration should be harnessed properly, where the local government and state government try to share their duties and investors only pay tax at one level of government.