How FG grants discretionary duty waivers to companies
March 6, 2013 | 9:06 am| | | Start Conversation
A complex regime of regulations of industrial and commercial incentives combined with a clear lack of supervision and proper use of discretion by government officials is helping to sustain the import duty waiver scam that has gripped the steel sector, according to BusinessDay investigation.
The findings are the latest of damning insight into the waiver scam that has played out across many sectors of the Nigerian economy as well, and which have pointed the finger of blame at both the presidency and the ministry of finance.
Yesterday, BusinessDay reported how Nigeria has already lost N40 billion from duty waivers in the steel sector alone this year. Sources who spoke to BusinessDay on how the whole scam is acted out, called on President Jonathan to act. One called it ‘sanctioned smuggling’.
In 2008, a report written by the Presidential Committee on the Review of Incentives, Waivers and Concessions, led by Senator Udo Udoma, highlighted how the lurid circle of incentive schemes and discretionary duty waivers granted to importers is championed.
The report noted that while some of these discretionary duty waivers were submitted to the president for approval through the ministry of finance, others were sent to the president, through other officials, and were only forwarded to the ministry of finance for implementation.
The committee also reported that it was not able to establish any clear articulated policy objectives on the basis of which these discretionary waivers were granted. “Those granted the waivers were not required to report back to the government with information as to the impact, or effect, of the grant, and indeed, there were generally no concomitant obligations on the recipients and no institution with responsibility of following up or monitoring, even to check that the recipients used the waivers only for the purpose specified in the grant,” the report noted.
This lack of oversight function is being hugely abused by beneficiaries of the grants in the steel sector who investigations show, have wantonly imported non ferrous materials as steel items.
This is particularly underscored by the waiver two companies, Zarcon Manufacturing Company Ltd and Monaplex Industry Nig Ltd, with registered addresses on Ikorodu Road, Lagos, when they put in identical requests for waiver to the Ministry of Finance.
Both companies wrote in identical words, and on the same day, November 21, 2012, application for the establishment of $100 million and $120 million investment incentive respectively. Both companies in their applications said the investment would create 700 jobs directly and many more indirectly; and in their words, “thus contributing toward the [sic] employment enhancement in the country.”
Both applications were received the same day, November 27 2012, by a senior official in the Ministry of Finance.
Stakeholders irked by the development drew BusinessDay’s attention to items on WEMPCO’s list covered by zero duty and VAT exemption, which can be sourced locally when it was granted its waiver to build its steel factory. They include among others, tables, floor walls, lamps and lamp holders, cables; fuses, relays, lamp holders, plugs and sockets; various electric lamps; electric wires and cables.
Also on the list of items, are one million pieces and two million pieces of cables respectively. They argued that several items listed as construction materials were not construction materials, but items brought in free of duty and sold in the open market.
Details obtained by BusinessDay in the case of Monaplex Industries Limited, of 16 Ikorodu Road, Ojota, Lagos, and Zarcon Manufacturing Limited of 383 Ikorodu Road, Ojota, Lagos show that Monaplex applied for $120 million zero duty waiver and levy on November 19, 2012, for the establishment of cold rolling steel complex of 200,000 metric tonnes per annum capacity; while Zarcon applied also for zero duty waiver and levy on November 15, 2012, to establish a cold steel rolling mill complex valued at $100 million, with a 200,000 metric tonnes capacity.
In March 2011 Verod Steel Limited got approval for importation of 250,000 metric tons of iron rods, which the company said was to meet demand of the building industry. The value of the money the federal government handed out to Verod on the deal was $137.5 million or N21.4 billion and which translates to about 8,333 trailers of iron rods, given to just one company in an industry with an array of players.
Quits Aviation Limited was granted a waiver to the tune of $83.3 million or N12.9 billion to build aviation hangers at the Murtala Mohamed Airport, Nnamdi Azikiwe Airport and Abuja Airport respectively.
Among the items the company imported for the project, are aluminum windows, doors, door frames, roofing sheets, office fittings, office equipment, cables, lamps and bulbs.
African Oxygen and Industrial Gases Limited was also granted extended waivers on plant, machinery, equipment and consumables. Among the items imported under the waiver grant were goggles, aprons, uniforms, power supply backup items, generators and chalk.
Africa Hydro Agric Chemicals Limited received a whopping N9.887 billion concession, and among the items it imported were liquor tanks and electrical fittings that could easily be produced locally. Africa Glass Limited, Africa Fertiliser Limited and Africa Foundries that received N634.875 million, N593.486 million and N301.285 million respectively have on their list, items which could be locally manufactured.
Shockingly, all of these companies are traced to one shipper registered in Dubai, called Africa Commodities with office address as Suite A to E, Level 22 AG Silveri Tower, Jumeirah Lake Towers, Dubai-UAE.
This company is also the sole opener of Letter of Credit (LoC) for the shippers and clearing agents – in most cases to two companies, namely Supermaritime Nigeria Ltd and Seewealth Ventures Ltd. In one of the shipments made to African Foundries by the company, the name of Quits Aviation and African Wire and Allied IND Ltd were listed as consignee of stock lot for rolling steel. Both companies had also applied for waiver to import similar consignments.
Like many analysts BusinessDay spoke to, the Senator Udoma lead Committee observed that many of the waivers granted to individual companies have rather than helping to stimulate local production, simply conferred unfair advantages on the beneficiaries with little, if any positive effects on the economy, as a whole.
“The value of what they are importing in all cases are higher than the cost of establishing the company they say they are building,” one analyst told BusinessDay
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