Economy

Nigeria loses N40bn from duty waivers on steel

by Editor

March 5, 2013 | 11:15 am
  |     |     |   Start Conversation

  Five years after a presidential committee on the review of incentives, waivers and concessions, recommended the abolition of discretionary waivers, the Federal Government has continued the process, leading to the loss of about N40 billion in concessionary waivers to only seven companies in the steel sector.

Analysts and sources close to BusinessDay dismissed the concessions, exemptions and waivers granted the companies as spurious, and raised numerous questions bordering on the integrity, transparency and desirability of the grants.

The analysts asked: could it have been that one could not smell a rat when considering a request for duty waiver from a so called prospective investor who claims he wants to set up an investment of $250m in Nigeria, and is applying for duty waiver to bring in building materials worth more than $500m?”

And can such request for duty waiver pass the credibility test when it is obvious that the materials being imported are mostly tradable goods, which can leak into the open market without a trace?

Why is it that government officials will give serious attention to a so called prospective investor seeking duty waiver to import 250,000 metric tons of iron to build a factory, when steel guzzling projects like the Abuja National Stadium used only 10,000 tons of steel, the South African World Cup wonder, Soccer City that seats 94,000 spectators, used only 13,000 tons of steel, the Allianz Arena in Munich, which also hosts Europe’s largest parking

structure used only 22,000 tons of steel and the new 90,000 capacity Wembley Stadium draped with the world’s longest single span structure, used only 23,000 tons of steel?

Why is it that Nigeria front-loads incentives to so called investors by making it possible for them to receive benefits even before their investments are consummated, whereas other nations insist on investors receiving their incentives after their investment is on ground and begins to contribute the required benefits to the real economy?

Why is it that the government which is so ready to approve duty waivers to its friends does not go on to establish a credible surveillance process for monitoring the imported items once they arrive the country, to ensure they do not enter the open market and also to determine if the so called investment is made and benefitting the real economy?

And how honest are government officials who have called a meeting for Abuja tomorrow to deliberate on the outcry over the spurious granting of duty waivers, and the only invitees to the meeting are the favoured, the beneficiaries of waivers who will go there to say everything is fine, the waiver scheme is working well and benefitting the larger economy?

These questions and more are the posers being asked by analysts who have been reviewing data from an extensive investigation by BusinessDay editors on the large-scale abuse of the Federal Government’s duty waiver scheme.

As at the last count, Nigeria had lost about N40bn in duty waivers granted to only seven conglomerates in the steel sector alone, since November 2012 to date.

The Senator Udo Udoma led Committee which was inaugurated in September 2007 by the late president Musa Yar’Adua delivered, a 137 page report, that showed a total loss of N258 billion between January 2004 and August 2007 through the granting of 796 waivers to 316 beneficiaries. The Committee found that 75 percent of these were for finished goods.

“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 Committee report stated.

The biggest beneficiaries in the latest waiver concession in the steel sector are Kam Industries limited, which has benefited as muchN7.7 billion as waiver. Rite Aid Wire Industries Limited, granted N3.547 billion as waiver. African Oxygen and Industrial Gases Limited has benefited to the tune of N634.875 million, while African Fertilizer and Chemicals Nig Limited has ripped a cool N593.486 million.

Africa Hydro Agric Chemicals Limited, Africa Foundries Limited and Africa Steel Mills Nigeria Limited received N301.285 million, N164.473 million and N1.526 billion respectively.

One of the biggest recipients is Verod Steel Limited, granted waiver to the tune of N15.805 billion while Quits Aviation Services Limited and Western Metal Products Co Ltd received N5.409 billion and N3.928 billion respectively, in waivers.

The waivers are applied for and approved literally in the dark, as no expressions of interest are advertised in the media and the public is not invited to scrutinise any application and to provide any objection if there is a strong reason so to do.

In fact, there is a case of a conglomerate whose waiver grant was suspended and the letter from the Ministry of Finance to the Customs and Excise department to enforce compliance was never delivered to the Customs until the memo lost its relevance.


by Editor

March 5, 2013 | 11:15 am
  |     |     |   Start Conversation

Big Read |  

Analysis

What Nigeria must do before signing AfCFTA

Nigeria’s President Muhammadu Buhari last Wednesday gave a hint that he would sign the African Continental Free Trade Area (AfCFTA)...


Top 100 (300 x250)

MTN Felele

WSE

Newletter Ecomomic Intelligence