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EEG: ‘N527bn debt burdens non-oil export growth

The recent revelation by Nigerian exporters under the auspices of Manufacturers Association of Nigeria Export Promotion Group (MANEG) that debt owed them by government on Export Expand Grant (EEG) surpassed N500 billion, is a pointer to crippling the export segment if not urgently resolved. Taiwo Hassan reports

The negative trajectory hitting the country’s non-oil export sector is raising serious concerns at a period the impasse of the COVID-19 crisis is yet to be abated. Sadly, the risk posed by the refusal of the present administration of President Muhammadu Buhari to pay in full EEG backlogs meant for Nigerian exporters is definitely affecting manufacturers export activities since 2014. Just as time flies, the unexpected stoppage of EEG payment has risen beyond even government’s expectations, thus becoming a burden and setting backward Nigeria’s non-oil export activities growth.

Advantages

The EEG is an initiative of the Federal Government designed to encourage exporters of non-oil products, including agro-commodities in order to cushion the effects of infrastructural deficiencies and reduce the overall unit cost of production. It was introduced through the Export Incentives and Miscellaneous Provisions Act, Cap 118 of 1986 to enhance the contributions of non-oil export to the national economy. The mechanism is such that a financial credit is applied to the value of exports of products from Nigeria, ranging from five per cent to 30 per cent. The financial credit is not cash funded but provided as Negotiable Duty Credit Certificate, which can be applied against import duties on other items. It was suspended by the Federal Government following allegations of abuse of the scheme by exporters in 2014.

Snags

Interestingly, the Federal Government had set-aside only N5.12 billion for payment of EEG in the 2019 budget for non-oil exporters looking to keenly seeking for amount to ease their export trade. Indeed, there were high expectations then that some of the backlogs would be cleared before third quarter ended 2019, but the delayed implementation of the 2018 budget, under which provisions were made for some debt payments, further prolonged the issuance of promissory notes to the beneficiaries. Industry operators have stated that exporters are owed approximately N350 billion towards the revised Export Expansion Grant (EEG) scheme claims that are due to them for the year 2007 to 2016; but the Nigerian Export Promotion Council (NEPC) put the figure at about N1.2 trillion. Although the proposal to issue Promissory Notes in lieu of EEG claims for the legacy EEG claims of non–oil exporters was approved by the Federal Executive Council (FEC) in 2017, the EEG claims have been processed and approved in series of meetings of the EEG Implementation Committee (EEGICM).

Update

During the MANEG’s third annual general meeting in Lagos, it’s Chairman, Chief Ede Dafinone, a chartered accountant, told journalists that the non-challant attitude of the present administration to prioritise the EEG payment up to date (full payment) had made the debt to surpass N500 billion. He said the Federal Government was currently owing Nigerian exporters about N527 billion in EEG payment. According to him, this is having grave consequences on the country’s non-oil export sector, with some manufacturing firms involved in export struggling to find their feets amid the huge debt crippling their export activities. Additionally, the MANEG chairman also said the non-payment of all the EEG debt to the Nigerian exporters was fueling uncertainty and instability in the country’s manufacturing export. Consequently, this debt is affecting the country’s non-oil export revenue target for this year, which is put at N5 trillion.

Breakdown

While giving an insight into the breakdown of the total amount, the renowned chartered accountant said that the approved amount by the National Assembly for Nigerian exporters participation of promissory note for EEG was N197 billion, which has been delayed. Also, there is a further N130 billion that is yet to be approved by the National Assembly and current backlog for EEG outstanding is approximately N150 billion to N200 billion. Outside of that, the renowned exporter stressed that there was a backlog being created for the period of 2017 of which only 17 per cent has been paid by government whereby that of 2018 and 2019 is still fully outstanding. Dafinone said: “The total amount approved by the National Assembly on issue of promissory note in respect of Export Expand Grant payment that have been delayed came to about N197 billion. The Debt Management Office (DMO) split that into batches for payment and they are currently on the third batch. The aim is to pay off a debt amounting to N197 billion. “Sometime in 2019, the NEPC issued export credit certificate to exporters for the 2017 EEG, but at the time, only 17 per cent of the amount that has been approved was paid using those export credit certificates. The balance of 83 per cent is yet to be paid and we are engaging the NEPC and the Federal Ministry of industry, Trade and Investment on their plans to pay the 2017, plus the 2018 and 2019 that are also outstanding.”

Effects

Speaking on the effects of the debt, Dafinone warned that the continued delay and backlog was stalling the country’s non-oil revenue of N5 trillion from exports. He said that the association had been engaging NASS, NEPC, DMO to ensure that full payment to encourage non-oil export in line with the present administration’s policy to increase revenue base through non-oil export promotion. “The non-payment of EEG is greatly affecting non-oil export as we stand. oil prices crashed in March this year and it highlighted the need for the federal government to diversify their revenues away from oil towards non-oil. With the stoppage of EEG from 2014 to 2018, there was a complete drop in the amount of non-oil over that period. “It is very clear that with EEG, nonoil export significantly grow when that has been paid. What we found is that exporters who are beneficiaries of the grant have priced their products to break into new market by pricing them at a lower price that they can afford to sell normally in other to take a stake in the market in foreign countries and a situation where the EEG has not been paid, the exporters find it unprofitable to break into those market and retreat back towards our own local market which clearly is not good for the Nigerian market.”

Backlogs

According to him, “the total amount of the backlog yet to be paid by the Federal Government by promissory notes is in two parts; there is a N197 billion that has been approved by the National Assembly for participation in the promissory note programme and there is a further N130 billion that is yet to be approved by the National Assembly and we are pursuing that with NASS to get that approval. “Outside of that, there is a backlog being created for the period of 2017 of which I said only 17 per cent has been paid, where 2018 and 2019 is fully outstanding. The current backlog will be approximately N150 to N200 billion which is again bad because they are creating a fresh backlog and this would bring another batch of promissory note to be issued in order for exporters to be paid.” Speaking on FG’s cash position, Dafinone noted: “I raised the argument lately that the federal government maybe cash scrapped therefore would not be to pay fully, but this is a scheme based on government promising to pay and exporters made commitment in view of that promise to pay given by government.”

Last line

Indeed, the payment of the N527 billion is critical at this period in order to bring seamlessness into export and also generate the much needed foreign exchange to turn around the economy.

 

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