Jonathan Eze writes that the Export Expansion Grant scheme is a vital incentive required to stimulate export-oriented activities
The Export Expansion Grant (EEG) Scheme was introduced via the Export (Incentives and Miscellaneous Provisions) Act (amended in 1992) to stimulate non-oil exports.
The scheme is administered by the Nigerian Export Promotion Council (NEPC).
The scheme was suspended in 2014, to review and redesign it, in order to prevent abuse and ensure that the it is fit for purpose.
Prior to its suspension, the incentive was granted in form of a negotiable duty credit certificate (NDCC) utilisable by exporters for payment of import and excise duties.
The NDCC has now been replaced with the Export Credit Certificate (ECC). The revised guidelines were released and effective from January 1, 2017.
To facilitate its implementation, a budgetary provision of N20 billion was made in the 2017 budget for settlement of the grant.
The previous administration had commenced the issuance of EEG to genuine exporters. However, it was suspended in 2007 due to duplicitous claims and counter-claims by stakeholders over who and who should indeed benefit from the package.
The development had led to the accumulated sum of N350billion owed to exporters between 2007 to 2016.
Highlights of the Revised Guidelines
Exporters are divided into four categories with maximum applicable EEG rates as indicated below: fully manufactured products: 15 per cent, semi-manufactured products -10 per cent, processed/intermediate products -7.5 per cent, merchants/primary agricultural commodities – five per cent.
It states that proceeds of qualifying export transactions must be fully repatriated within 300 days calculated from export date and as approved by the EEG implementation committee. Exporters are also required to present an Export Expansion Plan as a prerequisite for participating in the EEG scheme.
However, the ECC can be used to settle all federal government taxes such as VAT, WHT, companies’ income tax etc. It can also be used to purchase government bonds and repay government credit facilities and debts due to the Assets Management Company of Nigeria (AMCON).
The ECC is valid for only two years and transferable once to final beneficiaries. To fund the administration of the scheme, EEG beneficiaries are to pay two per cent of the value of the ECC upon collection of the certificate and four cost of collection when utilised.
According to a report released in 2017 by PricewaterhouseCoopers Limited, it stated that he revision and reintroduction of the EEG scheme was a reflection of the federal government’s commitment to export promotion but advised that to ensure effective implementation of the scheme, potential challenges around financial reporting should be addressed.
Owing to the significance of this policy and its importance to the growth of the country’s export, stakeholders in the non-oil sector have been urging the National Assembly to give its legislative nod for the issuance of the federal government’s N350 billion Promissory Notes to them in continuation of the Export Expansion Grant (EEG).
However, it appears that after the executive arm has done its bit, the legislature wants to sit on the policy; a situation which analysts and economic watchers say would lead to de-industrialisation, massive loss of jobs as well as lull in non-oil exports.
The Federal Executive Council had sent three matters for the formal approval of the National Assembly earlier in the year. The three executive resolutions bother on EEG claims, payment of construction contractors and pensions. Whereas NASS had since rectified the latter two items, there have been no legislative actions yet on the EEG claims, making tongues to wag about the government’s seriousness concerning its economic diversification programme and export promotion drive.
The EEG no doubt, is a very vital incentive required to stimulate export-oriented activities that will lead to significant growth of the non-oil export sector.
To ensure transparency, it provides for claims payable to individual exporters depending upon the value and volume of products exported (as outlined in the EEG Policy Circular of Federal Ministry of Finance) and the individual rating as per the company baseline data (also outlined in the EEG Policy Circular of the Federal Ministry of Finance).
The company baseline data is based upon the audited financial results of the exporting companies and is based on the audited results of the company filed at the CAC (Corporate Affairs Commission) and it verifiable by the NEPC before it even begins to process any EEG application.
This means that how much that is eventually paid out is based upon the claims processed and approved by the EEG Implementation Committee meetings, a committee which draws membership from such agencies of the federal government as the Federal Ministry of Finance, Federal Ministry of Industry, Trade and Investment, the Central Bank of Nigeria, the Nigeria Customs Service, the Federal Inland Revenue Service, the Federal Ministry of Budget & Planning and the Nigeria Export Promotion Council,
Beyond that, the EEG claims are first audited by the PICA ( Presidential Initiative on Continuous Audit) which normally includes calling for comprehensive documentary submissions from the individual exporters and also extensive field visits to the exporters facilities.
However, the present situation surrounding the settlement of EEG obligations appears to be threatening its noble objectives.
Having made a lot of sacrifices with investors keying into the EEG initiative, non-oil exporters in the country appear being short-changed for now. This is because they are currently owed outstanding payments running into several billions of naira in respect of the EEG.
In fact, the Executive Director and Chief Executive Officer, Nigerian Export Promotion Council, Mr. Segun Awolowo put it at over N1 trillion, saying that the payment was expected to commence as soon as the National Assembly gives its approval.
Awolowo, however, gave assurance that the government had processed the promissory notes and concluded plans to start payment but was waiting for final approval from the National Assembly.
“The government has done all that is necessary for the take-off of this programme. Right now, we are waiting for the National Assembly to reconvene and then they will grant approval for that promissory note programme.
“There are other debts that are coming under the promissory note programme. So hopefully, if the National Assembly reconvenes before the end of the year, everything will be implemented.
“They hold the requisite promissory notes issued in lieu of the export values but have not been able to claim the monies due”, he said.
It is important to note that the EEG claims of non-oil exporters, referred above, have been processed and approved at the series of meetings of the EEG Implementation Committee (EEGICM).
And when they made enquiries, the exporters under the EEG scheme were made to understand that the Ministry of Finance had forwarded the request for payment of promissory notes for the EEG to the National Assembly, adding that it was awaiting NASS approval to enable the Finance Ministry to proceed further with issuance of Promissory Notes.
Some Nigerian exporters who spoke to THISDAY, stressed the need for expedited action so that the delay in settling the grant would not affect their operations.
“We are really expectant on the National Assembly, because the monies involved is huge and the delay in payment is hamstringing Nigerian exporters,” the Executive Director of the Export Think Tank, Mr. Jude Ajuonu said.
“If there are policies that should be expedited, it is ones tending on promoting the export sector. All over the world, countries are seeking to maximise the export market, and Nigerian should not lag behind”.
Also, Mrs. Mojisola Adenekan, expressed optimism that the members of the assembly would do justice by promptly approving the payment as a way of triggering increased activity in the export sector.
“I personally believe that this government is committed to increasing the capacity of the country to export. The EEG is a veritable tool to achieving that, and it behoves on all concerned to see that the grant is promptly signed and disbursed.”
In his remarks, the Chairman, MAN Export Group, Chief Ede Dafinone, commended the federal Government for reviving the EEG, especially with the expansion of the use of the Export Credit Certificate and transfer of the ECC.
“As a result of this expansion, our members will be able to transfer the ECC to a third party and use it to settle all Federal Government taxes as well as purchase of government bonds and settlement of credit facilities by development banks and liabilities of the Asset Management Company of Nigeria.”
Indeed, one of the main policy initiatives of the President Muhammadu Buhari administration is the re-focusing of the nation’s economy from oil-based to non-oil sectors.
As a result of this, the federal government had promised to beam searchlight on the export sector; how to expand and promote the sector for much needed foreign exchange, industrial growth as well as job and employment creation.