Import duty waivers: A tale of abuses

Inde-Dikko-Abdulahi, Comptroller General of Customs, Nigeria

Abdullahi Dikko-Inde, Comptroller General of Customs

03 February 2014, Lagos – The Nigeria Customs Service (NCS) intends to generate about N1.2 trillion this year. To many operators, this will remain a wishful thinking if the government continues to grant waivers to agencies and individuals not listed under, or covered by Schedule Two of the Common External Tariff for import duty exemptions.

For Customs to surpass its projected revenue for this year and beyond, government agencies, operators say, should be mandated to pay for all imports made by them to reduce revenue shortfall. A senior Customs officer, who craved anonymity, told The Nation that most of the waivers issued since the return of democracy are questionable.

“Since the army returned to the barracks, the import duty waivers given from 1999 to date should not have been granted. Apart from military hard wares, hospital and agricultural equipment, educational materials and projects that can create jobs for the millions of unemployed youths, no other import under whatever guise deserves duty waiver,” the officer said.

How waivers are used in other countries

The President, Association of Nigerian Licensed Customs Agents (ANLCA), Alhaji Olayiwola Shittu said that import duty waivers are mechanisms used by countries to meet their economic goals, especially in protecting local industries, creating jobs, promoting exports, generate and preserve foreign reserves.

A waiver, Shittu said, is also used to exclude local industries from paying import duty on certain goods for a fixed period. Countries such as Malaysia, Japan, India, China and others, at various times, have used import duty waivers, concessions and exemptions to protect and build up their local manufacturing, agricultural, textile and motor industries. Today, he said, all these countries have become export-led economic power giants.

Indiscriminate issuance of waivers

Part of the objectives of the waivers in Nigeria, the ANLCA chief said, are to boost local industries, make the much-needed raw materials, or goods available in the short-term and generate employment.

But for many years, he said, none of these lofty objectives has been achieved. He observed that most of the local industries have closed shop for lack of raw materials, resulting in the growing army of unemployed youths in the country.

Also, an industrialist, Mr Muyiwa Olabintan said an enquiry by the House of Representatives, found that former President Olusegun Obasanjo, over time granted about 1,843 waivers with several billions of naira lost by Customs. The enquiry, he said, alleged that not only were some of these waivers “illegal and indiscriminate,” they were given to “totally undeserving firms and individuals”.

Investigations by the House, Olabintan said, showed that some organisations that got waivers for equipment, used them to import furniture, cars, clothings and other luxuries that have no direct bearing on the economy.

Abuse of waivers

Olabintan said import duty waivers, exemptions and concessions which are used to protect local businesses and jobs elsewhere, have been abused many times in Nigeria, causing huge losses to the economy.

He added that those responsible for granting the waivers have abused the system, and denied the country and the economy of the much-needed revenues and the usual benefits associated with it.

Waivers, foreign companies and loss of jobs

The granting of waivers to foreign companies by the Federal Government has led to loss of several billions of naira and millions of jobs, the Managing Director, Nigeria Gas and Steel Limited, Hasib Moukarim, has said.

He urged that the issuance of waivers and concessions to importers of finished products must stop, stressing that such waivers are depleting government’s earnings while enriching some companies abroad.

He said for the Customs to meet its revenue target this year, the Federal Ministry of Finance, the Budget Office and the Federal Ministry of Trade and Investment must synergise and ensure that the waivers achieve its objectives.

He urged Nigerians to defend the interests of local manufacturers against government unfavourable policies and foreign domination of the nation’s robust market.

“When finished goods are brought into the country duty free, we are directly creating employment for workers of the foreign companies because such goods imported with waivers will become cheaper than the locally produced goods and this will escalate the demand and sales of the foreign manufacturers,” Moukarin said.

He said by giving waivers to foreign companies, locally produced goods have become more expensive and demand for them shrinks, noting this threatens the survival of local companies which the waivers were fashioned to protect.

“This type of scenario has forced many companies to retrench substantial percentage of their work force with the consequence of worsening the unemployment situation in the country,” he said.

Ways to grant waivers

Moukarin suggested that for waiver or concession to be given to any applicant, thorough investigations must be carried out by the Federal Ministries of Finance as well as Trade and Investment to verify the authenticity of the items the beneficiaries intend to import into the country without paying duty.

Nigerian manufacturers had complained in the past that some forein companies are abusing waivers by importing more than what they need for their projects and flooding the markets with the surplus, thereby killing local industries.

Foreign firms, the manufacturers alleged, have been obtaining waivers from the Federal Government to build airports, roads and other projects, but end up importing more products than they deserved.

Contradictions between Minister of Finance and Nigeria Customs Service

There were contradictions between the amount given as waivers by the Comptroller General, Nigeria Customs Service, Alhaji Dikko Abdullahi and the Coordinating Minister of Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala to the National Assembly.

Abdullahi spoke when he was invited to explain to the parliament the shortfalls in projected revenue last year.

The Customs boss said the country in the last three years, lost a staggering N1.4 trillion to import waivers, but the Finance Minister said the amount was N171 billion.

A senior Customs officer, who does not want his name in print, told The Nation that more than 65 per cent of beneficiaries received the grant for goods not approved by the government, which ordinarily should be limited to raw materials, machinery and spare parts.

But in a new memo signed by the Minister of State, Finance, Yerima Ngama, and dated December 11, 2013, says the Federal Government has expanded the scope of the Negotiable Duty Credit Certificate (NDCC) to cover “other goods,” a decision, Mr. Ngama said was reached by the Federal Executive Council (FEC).

Investigation however, revealed that the list of beneficiaries include private individuals and businesses whose imports appear not valuable to the economy.

The Customs officer said there were so many questionable waivers. For instance, he said, a total of N91.506 billion was given as concessions to 290 beneficiaries between January and December 31, 2011.

He said one of the firms (name withheld) which he claimed was the biggest beneficiary, got N32.774 billion, stating that there was no indication about the line of business for which it was given the incentive.

Other beneficiaries, he also alleged, included the Aluminium Smelter Company of Nigeria, ALSCON, Ikot Abasi (N47.789 million) and (N13.715 million), despite the fact that it has not being producing since 2007.

Besides, about N389.15 billion, he said, was granted to 149 entities in 2011 through concessions on fuel, lubricants and allied products businesses.

the list, he said, included major oil marketers that received over N145.7 billion worth of waivers, adding that the Nigerian National Petroleum Corporation (NNPC) and a few other companies received about N143 billion as waivers.

For 2012, the customs official said a total of N191.545 billion was granted to 416 beneficiaries, including individuals and private businesses. He said another 287 beneficiaries, got a total of N83.260billion in concessions and waivers for imports between January one and September 30, last year.

During the year, he alleged that one firm, ANL, was granted N8.588billion concession for importing kola nuts, while another was granted N5.643million to import tables, kitchen and household articles made of cast iron.

Similarly, he alleged that while one Ayo Adeju got N2.035million for importing iron/steel wool, pot scourers and polishing pads and gloves, another, Asif Mohammed was allegedly paid N4.148million for importing tables and kitchen household articles.

He alleged that a major motor dealer was granted N698.177million for importing fully built four-wheel drive motor vehicles, motorised tanks and other armoured fighting vehicles.

Between 2010 and 2013, records showed that the motor firm received about N2.46billion concession from the government for the importation of vehicles valued about N7.932billion.

Factional Secretary, National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), Ben Ndee, said import duty waiver in Nigeria only serves as a tool to enrich politicians and should therefore be scrapped.

Ndee said import duty waiver in the country is a tool to enrich politicians and should therefore be scrapped, adding that “customs duty waiver speaks volume of profligacy in our country.” He said the Nigeria Customs Service should “be positioned to check this fraud to enhance its revenue target and boost the economy”.

Chairman, Association of Nigerian Licensed Customs Agents (ANLCA), Ikorodu Chapter, Chief Tomi Aloba, said since duty free imports are sold in the market at expensive prices like those with payable duty, the benefiits of import duty waivers, he argued, are lost and therefore, needless.

“A manufacturer importing raw materials that was given duty waiver sells his products at the same price as the same commodity imported without waiver, so, what is the need? There is no need for it,” he said.

Another clearing agent and a chieftain of the National Association of Government Approved Freight Forwarders (NAGAFF), Ugochukwu Nnadi, also said the import duty waiver has been abused and should be scrapped.

However, a member of the Ports Consultative Council (PCC), Ajanowu Vincent, said there are certain categories of imports for which waivers should be granted to boost local industries and their productive capacity.

Effects of waivers on consumables

Investigation revealed that in recent months, waivers granted to some individuals were used to import refined vegetable oil, soya bean meal and related products. This has put local vegetable oil producers on the verge of total extinction.

For instance, investigation has shown that most of the oil mills in Kano, including Nigeria Oil Mills, Kano Oil Mills and PS Mandrid, located in Bompai Industrial Estate, have closed down with the attendant loss of over 20,000 direct and indirect jobs.

Also in Lagos, Port Harcourt and Jos, where there are oil and related mills, the spokes-man of the producers, Mr Alaba Salau, said they were not finding it easy with many imported vegetable oil in the market.

“While few of us are just managing to survive, many others are making arrangement to close down and start importation, but that is not a good omen for the country because one of the by-products of vegetable oil mill is used for animal feed by poultry farmers.

“The irony of granting waivers is that while the Federal Government tells Nigerians of its resolve to promote made-in-Nigeria goods, in secret and under closed doors, it gives waivers to political associates and cronies to import and make cheap money, undermining local production,” he said.

Task before the National Assembly

Shittu said the National Assembly needs to wake up to its responsibility as a constitutional organ for checks and balance. The Constitution, he said, empowers the parliament to make laws and approve all public spending. Where the government serially flouts the laws, the lawmakers, are empowered to correct the situation.

Olabintan also said the lawmakers must continue to perform their oversight functions and should not allow the Executive to carry on as it pleases. Such laxity, he said, had caused Customs to say that the country lost a staggering N1.4 trillion on import waivers through fraudulent manipulation of the Export Expansion Grant in the last three years.

Since the waiver system has been so misused and abused, other operators said the National Assembly should stop the Presidency, the Finance Minister and the Customs from granting waivers except they are approved by the parliament.

Government and its agencies, operators alleged, are doing little or nothing to stop corruption and cannot be trusted to transparently manage such discretionary powers. The operators, therefore, called on the National Assembly to protect the nation’s economy by forbidding import duty waivers.


– Oluwakemi Dauda, The Nation

About the Author