House Probes $30bn Annual Revenue Leakages from Forex Allocations

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Udora Orizu in Abuja

House of Representatives has begun investigation into the $30 billion annual revenue leakages arising from various malpractices in foreign exchange allocations to companies from sources such as the Central Bank of Nigeria (CBN), autonomous Interbank, domiciliary and over the counter purchases.

The move followed the adoption of a motion of urgent national importance by Hon. James Faleke, at yesterday’s plenary.

The motion titled: “Urgent need to rescue the country from over $30 billion annual revenue leakages arising from various malpractices in foreign exchange allocation to companies from sources such as CBN, autonomous Interbank, domiciliary and over the counter purchases for the importation of physical goods, payments of foreign service vendors, dividend repatriation, foreign loan and interest payments, including foreign currency denominated contracts payments by companies in engineering, procurement, construction, installation and marine transportation.”

Presenting the motion, Faleke said the House was aware of the low performance of the country’s economy at this critical time.

He said in the past years Nigeria has not been able to fund capital projects of her annual appropriation acts for lack of funds due to low remittances of revenue by generating agencies, low payment of taxes by private companies and diversion of expected revenue by corporate organisations.

The lawmaker stated that the crude oil price bench mark in 2020 Appropriation Act was put at $57 dollar per barrel, but the price of crude oil in the international market has dropped to $47 per barrel.

According to him, this clearly indicated that the major source of revenue towards funding the 2020 Appropriation Act was already in the negative.

He lamented that the abuse of millions of dollars in forex allocation to companies for the purpose of payment of foreign vendors for services rendered in Nigeria were in most cases found to have exceeded the then statutory five per cent VAT and five per cent WHT accordingly.

“The House take cognizance of the following facts: pro-forma invoices overstatement by importers with the intention of obtaining large forex allocation above the international cost, insurance and freight value of goods, thereby increasing the domestic inflation rate.

“Fictitious transfer of forex allocation for the payments of dividends to foreign shareholders of Nigerian companies above the dividend approved by the company’s board of directors and audited accounts thereby leading to evasion of statutory 30 pr company income Tax thereof.

“Allocation of foreign exchange to companies for the repayment of principal foreign loan and interest that were in some cases found to be non-existing, but rather a fictitious loan backed by a mere packaged documents without evidence of utilisation in Nigeria and related taxes paid.

“The value of imported physical goods, materials, equipment on account of forex allocation by most companies were always understated to Nigeria Customs Service at the port of entry in order to reduce import duty payable and based on verifiable information.

“Companies in offshore engineering, procurement, construction, installation and transportation whose forex funding source are from cash calls and, operators sourced foreign loan do pay their foreign vendors billions of dollars in contract payments on annual basis without any significant payment of all applicable taxes, levies and likewise.

“These companies were not being incorporated in Nigeria nor have affiliates in Nigeria as statutorily provided for in the Companies and Allied Matters Act,” he alleged.

Adopting the motion, the House directed the Committees of Finance and Banking and Currency to conduct public hearing by looking into the various originating documents from CBN, banks, forex dealers, Federal Inland Revenue Services (FIRS), importers and other beneficiary companies.

It also mandated the committee to identify the perpetrators and atrocities committed based on verifiable documents obtained from the valuable records as well as making a formal report of findings and recommendations towards the correction of the problems.

The green chamber charged the committee to report back to the House in 12 weeks, explaining that the move was aimed at putting a stop to the menace in the future.