What is the benefit of waivers for a developing economy like Nigeria; and how has government managed issuance of the instrument over the years?
WAIVERS are assessed based on the category of the goods; they are not blanket instruments. They are accessed on a case-by-case basis, depending on the kind of imports, especially when the government wants to enhance the use of a particular commodity. The products are usually brought in to fast-track the industrialisation programme in the economy. Companies that are in such industries are granted waivers so that they would be able to produce more. This is the economic perspective to it.
There is also a political perspective. In achieving certain political goals, the government might grant a company waiver, and this has no economic justification.
The Government can grant waivers because of corruption. If the government wants to pay for benefits it has gotten from the owners or promoters of a company, it could waive some duty for them. In this sense, it is a form of pay back. It could also be to assist some political stakeholders. So it could either be for economic or non-economic reasons.
Given that we have had instances where waivers have been abused and used by private concerns to enrich themselves to the detriment of others; what has been the cost of these abuses on the Nigerian economy?
The cost of abuses can better be imagined than determined. It is as a result of corruption that government gives waivers for political reasons because they want to satisfy some political stakeholders or government wants to steal from the commonwealth. This is because the amount that would have been paid is collected as bribes by public office holders. Those at the very high level of governance partake in the corruption embedded in import waivers. If somebody is to pay N2b, but because he doesn’t want to pay that, he goes to give somebody N200 million as bribe. These are the negative effects. And when you do that, if the commodity for which waiver is granted is not deserving of such, from the economic perspective, it affects local industrialisation programme.
This is because those at that industry cannot sell at competitive prices because something is coming in cheaper as duty is not paid on it. When this happens, it crowds out local producers from the market, resulting in the decline in growth and making our country a dumping ground for foreign products. It is sincerely not in our best interest. When the waivers are not given on sound economic reasons, it could be very injurious to the economy.
One of the reasons for the cancellation of waivers is to shore up revenue, especially from the customs service; given the perceived rot at the institution; are we likely to generate enough money to meet the deficit in the budget?
When the government grants waivers, revenue accruable to it would fall. But when duties are paid as appropriate, we discover that government would make more money. In this era when the government wants to increase the value of non-oil revenue, they want to look for different instruments to run the budget. The waivers that would have been granted, even if they had economic implications, would no longer be allowed so that government can make more money and run its programmes.
In the light of the cancellation, what becomes of companies that are genuinely using the waivers in the march towards industrialisation; isn’t this, really, a huge setback for the industries?
There is nothing like 100 percent benefit when it comes to policy-making; there is always a trade-off. If you want to make more revenue and you impose duty on every good that is coming in, it may have some negative effects for other policies that a country is implementing. The new directive may not bode well for local industrialisation. For example, if you have granted waiver for some raw materials and you discontinue the scheme, you make more money, but at the same time, dampen the productivity of certain sectors. There is nothing like 100 percent benefit when it comes to policy because there is always policy conflict. If revenue is the major focus, some other areas that may need attention could suffer some setback.
The critical thing is that there should be a net benefit when you compare the setback with the benefit. They should do a cost-benefit analysis and ensure that it is high before they proceed with the policy. For example, with the issue of backwards integration, we have seen that corruption deprived Nigeria of gains it ought to have made. There is corruption in many of these activities. Some conditions could not be satisfied fully by the beneficiaries.
With the effects of waiver removal biting hard on manufacturers, there could be job losses in coming months; isn’t this a precarious position for the government to be in, in the light of its promises for job creation?
There would always be job losses. The argument is neither here nor there. The Government would only need a clear objective of what it wants to achieve with the cancellation of waivers. There are priorities to be considered. And even at that, those who would drink garri while others have jobs would always be there. But at the same time, people would still leave jobs in sector, to take up other jobs in another sector. People may lose jobs in a sector but because the government has a focus to develop other sectors, the losses would be mopped up. There may be 10 jobs in a sector and at that same time government would stimulate the creation of 20 others in another sector. So it boils down to government’s objectives at any particular point in time. All of these would be driven by government’s policy on job creation.
How should manufacturers, especially those who depend on imported raw materials, adjust to new directive?
Government policies come with costs and benefits. Manufacturers are definitely going to suffer from lack of raw materials occasioned by the loss in concessions. But the effect of this would be cushioned by government’s commitment in driving growth in certain sectors. There may be focus, on sectors, which government intends to grow, thereby deepening industrialisation. While waivers may be removed in certain sectors, sometimes there may be need to allow for such concessions in other sectors, where there is a germane need to provide support for growth. There is no one way to it. If some industries suffer, there are many others where the government may aim to develop.