How Govts Abuse Waivers, Tax Concession

As the Federal Government grapples with measures to block leakages in revenue generation by canceling some waivers granted by past administrations, a study by a group of senior academics at the University of Nigeria, Nsukka (UNN), has implicated successive governments since the return to democracy of abusing the fiscal policy package — and in the process sacrificing economic growth for political patronage.

They accused former presidents of masterminding the bastardization of the policy, which by last year had denied the country over N750b in just three and a half years, according to former Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo Iweala.

The Federal Ministry of Finance explained that the embargo on waivers was aimed at revving up the much-needed revenue to close up the widening gaps in the budget, following the continuous fall in crude oil price.

At the presentation of the 2016 Budget Estimates last December, the deficit level was pegged at around N2.2trn on an oil price benchmark assumption of $38 per barrel, but with the recent developments in the economy and with a struggling manufacturing sector unable to balance out foreign reserve drop, it appears past misdeeds may have cost the country more harm than was anticipated.

In 2014, Iweala declared that the country had lost a whopping N797.8b between 2011 and May 2014 to import waivers and tax holiday concessions. Of the amount, N25.8b was lost between January and May of that year.

However, an in-depth study of the waivers and tax holiday administration by four senior academic staff in the Department of Banking and Finance at the University of Nigeria (UNN), accused the federal Government under Olusegun Obasanjo of setting a bad precedence for the abuse of waivers and tax concessions.

Published by the Lleiden, the Netherlands-based African Studies Centre, the study was conducted by Nwanneka Modebe, Okoro Okoro, Chinwe Okoyeuzu and Chibuike Uche. While the first three are of the UNN, the last contributor is with Netherland-based Centre.

In the report titled, The (Ab)Use Of Import Duty  Waivers In Nigeria, the authors contended that government abused the policy through selective favoritism of cronies, which gave them undue advantage over other sectors players as well as made them instant billionaires overnight.

According to the researchers, “The brazen abuse of custom duty waivers in Nigeria is a consequence of the rentier nature of the Nigerian state, which has progressively eroded the inherent internal controls for prudent fiscal relationships among the various tiers of government in a federal state.

“Since the Obasanjo civilian administration in Nigeria, custom duty waivers have been consistently abused by all Nigerian Presidents. Such abuses have culminated in the current attempt by the National Assembly to amend the Customs Act in order to strip the President of powers to grant duty waivers. This however, cannot be the solution.

“The problem is not with the existing law but with its implementation. This is so because the granting of indiscriminate customs duty waivers were all done outside the boundaries of the law. The basic requirement that such waivers be gazetted before they become effective is rarely adhered to. An effective strategy towards addressing this problem would be for the National Assembly to hold the President accountable when duty waiver laws are flouted. Admittedly, this will not be easy in an oil rent economy like Nigeria.”

Arguing that extant law were abused, the study states, “Although it is unclear when this began, what is obvious is that indiscriminate approvals of such duty waivers by various government functionaries culminated in a directive from the Department of Customs and Excise to try and curb such abuses. This was done through a directive issued in Circular No.12 of 2000 dated October 5, 2000, reference number NCS/DCG/CUS/018/S.4/vol.8 and sent to all zonal coordinators and customs area controllers, customs officers.

“Specifically, the above officers were directed to ignore requests and grants for import duty waivers unless approved personally by the President. Rather than follow the legal process for granting waivers, past administration decided to illegally appropriate such powers to the President.”

The researchers said that given the secret nature of granting waivers, especially as the legal and proper mechanism of making such waivers public had been sabotaged, information on such waivers granted is difficult to come by.

They also said that the waivers were granted for political patronage or personal favours, alleging that an associate of a former president received an import waiver in 2003 under the pretext of engaging in construction work in the Niger Delta. Instead, the beneficiary used the waiver to import iron rods and rice, raking in more than 100 billion naira in personal gains.