Presidential imports waivers: For good or bad? – Henry Boyo
“The bill gives significant powers to the Customs Service and ordinarily this should not be a bad thing, but it does remove powers from the President and the minister that we think are necessary to ensure that the economic agenda of the country are properly carried out as directed by the President and delegated to the minister.”
The above is an excerpt from the presentation of the Minister of Finance, Dr. Ngozi Okonjo-Iweala, at the public hearing on the proposed amendment to the Customs Act and the democratisation of the President’s powers on import duty waivers by the Senate Committee on Finance.
For the purpose of this article, we will briefly discuss the impact of waivers on industrial growth, social welfare and corruption.
Presidential import waivers are granted seemingly in pursuit of government’s altruistic economic objectives; ultimately, however, our agricultural and industrial base has often become destabilised by such waivers, as capacity utilisation in respective subsectors begin to contract with increasingly failed enterprises and rapidly rising unemployment as collaterals. Inevitably, the abiding spectre of unemployment has instigated huge security problems, as millions of our youths become jobless and desperate.
Furthermore, selective waivers have generally transfigured markets into monopolistic scenarios. Consequently, the usual imperfections of a monopolistic market such as price manipulation, excessive profiteering and a parasitic distribution chain would also prevail. Ultimately, the seemingly ‘altruistic’ social objectives of Presidential waivers become defeated, as beneficiaries of waivers celebrate outrageous returns on their investments, while local industrialists struggle unsuccessfully to maintain market space.
Import waivers may also deplete government revenue; incidentally, the current Senate public hearing is coming on the heels of Nigeria’s loss of about N58.7bn (over 10 per cent of the 2012 Customs revenue budget), as a result of executive waivers this year! Thus, projected federal revenue will consequently be further reduced by foregone corporate and personal tax revenue from failed businesses and lost employment opportunities caused by presidential imports waivers.
In the same vein, 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; i.e., those items for which local manufacturing capacity readily exists. Indeed, 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. Worse still, it is alleged that import waivers granted by previous administrations were often times used to import other fast moving products to sell rather than the specific products covered by the waiver.
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!
Consequently, prices would temporarily fall marginally, while cross border smuggling of rice and sugar will once again become very profitable business with the collateral of further loss of import duty revenue; worse still, government’s efforts to increase local production of rice and sugar may ultimately once again become impractical, as a result of smuggling. In other words, as it was in the past, so will it be next year.
In the light of the foregoing, the observation of Ahmed Makarfi, Chairman of the Senate Committee on Finance, that “the powers to grant waivers should not be under the prerogative of one person” should be taken seriously. Indeed, the view of the National Assembly, according to Markafi, is that “such power must not be exercised by any individual, except if the legislature by some legislation or resolution takes a decision about it”.
In reality, the revenue loss consequent upon covert presidential imports waivers is tantamount to robbing the federation account through the back door to bolster the fortunes of some friends of government. In lay parlance, this is akin to hurting the people while giving away public funds without any parliamentary authority for such ‘disbursement’.
Although Dr. Okonjo-Iweala earnestly favoured the retention of waiver powers by the President and the Minister of Finance, she however, pleaded that her ministry should be represented on the proposed new Customs and Excise Board. Incidentally, the Central Bank of Nigeria Governor, Lamido Sanusi, similarly called for the inclusion of the apex bank on the governing board of the Customs Service.
In view of the public revenue issues involved, these requests should be considered appropriate. But it is paradoxical that these same public officers, who recognise that their representation as board members of a new Customs board would enhance transparency and accountability, would move heaven and earth to resist any attempt to accommodate such principles in their own management of public funds. For example, the CBN obviously has no qualms about transparency and accountability of its current 12-member board with 10 CBN internal staff!
– Henry Boyo (firstname.lastname@example.org)