IN many developing countries, governments provide incentives, which include import duty waiver to encourage capital formation in selected sectors. These incentives take the form of waiving of customs duty, which is an integral part of the tax system. Governments use this routinely to influence economic and industrial development with the sole aim of furthering national goal.
In Nigeria, these incentives are governed by two main laws, which are the Customs and Excise Management Act (CEMA) Act No. 5 of 1958 (CAP 84 of 1990) and the Customs and Excise Tariff etc., the Consolidated Act No. 4 of 1995. The CEMA Act of 1958, for instance, charges customs, immigration and prison service board with the responsibility of controlling and managing the administration of the customs and excise laws and collecting the revenue for customs and excise duties, as well as account for the revenues. This law guarantees the concept of fairness to prevent subjectivity and arbitrariness in the administration of CEMA, when it forbids the supervising ministry of the board from interfering with the board by way of instruction or order in respect of any particular person requiring it to increase or decrease any assessment of duty made or to be made or any relief given or to be given or to defer the collection of any duty.
The second Act that governs the charging and waiving of custom duty in Nigeria is the Customs, Excise Tariff etc. Consolidated Act No 4 of 1995. The schedule 1 of the Act lists the duties chargeable on all imported goods, while schedule 2 indicates goods that are exempted from duty payment. But Section 11 of the same Act gives the president and commander-in-Chief of the Federal Republic of Nigeria power to grant waivers outside the laws. It specifically states that the president may, on the recommendation of the Tariff Review by order, impose, vary or remove any duty or levy; add to or vary any of the schedules or delete the whole or any part of any of the schedules or substitute a new schedule or schedules thereto.
To ensure transparency in the exercise of the power of waiver, Section 11 (3) stipulated that, “An order made under sub-section (1) of this section shall have effect from the date of its publication in a Gazette.”
By this provision, no person or agency of government has prone power to grant waivers to businesses or individuals arbitrarily, without making such waiver a public knowledge.
The effective use of import duty waiver dates back to 1999, the year Olusegun Obasanjo became the civilian president of the Federal Republic of Nigeria.
Since then, other presidents have constantly abused Customs duty waiver. The National Assembly had attempted to amend the laws to strip the president of the power to grant duty waivers, which were done outside the boundaries of the law.
Initially, the Obasanjo government respected the laws governing the administration of Customs duty and waivers. He made it clear in the year 2000 budget speech to the National Assembly, when he said explicitly that it was his administration’s intention to adhere to laid down process of granting import duty waiver sthrough states.
Soon after the promise, however, it became the order of the day for various government functionaries to grant indiscriminate approval of duty waivers. This continued until the Nigeria Customs Service issued a circular Number NCS/DGG/CUS/018/8.4 Vol. 8 of October 5, 2000 and sent to all zonal co-ordinators and Customs controllers, and officers. Specifically, the circular directed officers to ignore requests and grants of import duty waivers unless approved personally by the President.
Rather than follow the legal procedure of granting waivers, the Obasanjo administration appropriated it by granting frivolous waivers. Given the security nature of the waiver granted, especially as the legal and proper mechanism was not followed, information on such granted waivers became difficult to come by, except those made available through the media, when there is a change of government or dispute among the ruling class.
The Obasanjo administration granted about 1,843 import duty waivers in 2007, which amounted to about N165b losses to the economy. A breakdown of this showed that the highest amount of N42.598b was recorded in 2007. In 2006, the waivers stood at N19.379b; N18, 394b in 2003; N33.970b in 2004, while it was N41.65b in 2005. Customs report said government lost N9.512b in the first three months of 2008. However, the value of imported items within a five-year period stood at N901.9b.
The report said Dangote got “concession of five per cent for raw sugar and exemption from payment of 10 per cent sugar levy. The exemption is still running and has no time frame.” Similarly, it secured “two years concession from payment of duties on the import (importation) of tomatoes paste.”
The five per cent sugar levy paid by all sugar importers for the development of the sector is kept with the Central Bank of Nigeria (CBN). As at March 31, 2008, the account had hit N2.24b. Importers of steel were allowed to pay 20 per cent levy instead of the normal 50 per cent.
Given the economic consequence of granting and waiving import duty, the process naturally came under intense pressure and lobby from economic and political operators.
Some of the earlier beneficiaries of waiver and concession include; Dangote Industries, Aswani, Stallion and other rice importers, the Redeemed Christian Church of God, Messrs. Western Metal Product Co. Ltd., International Hotels, Le Meridian, as well as Grand Ikoyi Towers and Resort. Others are members of Diplomatic Corps and companies fronting for top government functionaries.
Between 2000 and 2008, Nigeria Customs Service had recorded a loss of N276.9 billion to Customs duty waivers.
In May 2007, when Obasanjo handed over power to the late President Shehu Musa Yar’Adua, the latter directed that issuance of waivers, exemptions from duties, taxes and tariff to individuals, companies or organisation be suspended in order to plug leakages. The Customs also raised an alarm that a particular waiver was granted three times to indicate the worrisome nature of the procedure and how CEMA had been compromised.
Apart from the earlier beneficiaries, in 2012 and 2013, Shell Petroleum Development Company Nigeria Limited, Netcoo Dietsmann Company Limited and Guinness Nigeria Limited among others reportedly topped the list of organisations that benefitted from waivers bazaar, which ran into trillions of Naira loss in government revenue. In one of the import duty granted the oil company, over N7trn was lost as the list of items granted waiver were classified as plant, machinery, spare parts and accessories for new and ongoing gas projects.
Waivers were also granted to other companies, ministries and government departments in the iron and steel sector, the Federal Ministry of Mines and Steel development, Messrs. Koch Nig. Ltd., Messrs. Xath Resources, Zuma Coal Ltd., Mangrove Tech Construction and Engineering Ltd., Royal Salt Ltd., as well as Strong Tower Infrastructure and Development Limited, were said to have got waiver of not less than N1.5b between 2012 and 2013.
Also, operators in the Nation’s agric sector benefitted from the waiver bazaar. They included; PZ Cussons Nigeria Ltd., Rivers State Government, Messrs. System Trade Services Ltd., Tripple Vision Ltd., Enugu State Government, Olam Nigeria Ltd., National Poverty Eradication Programme (NAPEP), Cocoa Association of Nigeria, Akure, Federal Ministry of Agriculture and Rural Development and Neto Diets Man Company Ltd., Abuja.
Many operators in the gas sector also benefitted from the largesse. They are Guinness Nigeria Limited, Netco Dietsmann Company Ltd., Nigerian Petroleum Development Company, Benin City, Golden Sugar Company Ltd., Lagos and many others.
The power sector was not left out of the waivers spree, as Sokoto State Government, Gas and Power NNPC, Abuja, Gas and Power Ltd., Abuja HMF, Ministry of Power and Energy, Rivers State Ministry of Power and Niger Delta Power Holding Company Limited also benefitted.
Perhaps the inability of the Nigerian Customs Service’s authority to meet its revenue target is attributable to the indiscriminate waivers granted by the Federal Government to companies and individuals listed or not listed under the schedule two of the common External Tariff for import duty exemptions.
Last year alone, the government granted about N19.6b in waivers and exemption to energy firms in the country between January and May and the effect is not seen anywhere, as darkness continues to envelope the nation.