Elephant Group, one of Nigeria’s biggest commodity traders, is enmeshed in a fresh scandal following a near clandestine import last week of a vessel-load of rice using expired import papers.
In what would amount to a double exploitation of the already weak Nigerian economy, the company used questionable documents to by-pass approval for $5.52 million in foreign exchange from the Central Bank to import a commodity clearly listed by the Federal Government as unqualified for forex approval.
Under the current fiscal policy of the President Muhammadu Buhari government, aimed at conserving scarce foreign currencies and at relaxing pressure on the already weak Naira, rice is one of the 41 import items on the exclusion list of the Federal government and as such is excluded from forex approval.
Documents obtained by PREMIUM TIMES show that the name of the vessel that brought in the rice imported by Elephant Group is Auckland Spirit. The import which came in through Apapa Port was for 30,650 metric tonnes of rice.
The Rice Racketeering
Disturbed by the nation’s huge import bill, the President Goodluck Jonathan administration in 2014 came up with a new rice policy to fast-track national self-sufficiency in rice production.
The policy specified that owners of existing rice mills and new investors with verifiable backward integration in the rice value chain will be allowed to import rice at 10 per cent duty and 20 per cent levy (30 per cent); while merchants who have nothing to contribute to local production in the form of rice farms or mills will be charged 10 per cent duty and 60 per cent levy (70 per cent). Technically, it was a subsidy aimed at building local capacity in rice production.
In an investigation published in December 2015, PREMIUM TIMES had detailed the corruption that plagued the 2014 Rice Import Quota Allocations. This newspaper reported that 26 companies were involved in the N117 Billion rice subsidy. Not all of the 26 companies selected for the scheme made the list on merit.
Elephant Group was among those not deemed qualified for the subsidy at the time. It, however, found a smart way to benefit from the programme by soliciting and obtaining a quota originally given for “donated foodstuff” to a religious organization, the Jama’tul Nasril Islam (JNI).
Some industry players had at the time cried out that the bulk of the rice imported by Elephant using the quota was sold in the open market. The company denied any wrongdoing.
The 2014 rice import quota expired in December of the same year. A botched attempt to obtain new import quota was made in April 13, 2015 when a list of 22 beneficiary companies was released by the Federal Ministry of Agriculture after what was supposed to have been a laborious due process.
However the joy of the new beneficiaries were short-lived when nine days later, on April 22, the same Agric Ministry reversed itself and cancelled and withdrew all allocations.
Permanent Secretary of the ministry, S. T Echono, had hinged the cancellation on a new information reaching the ministry to the effect that some Nigerian rice farmers were unable to sell their paddy to local rice millers due to a flooding of the market with imported rice, which he said was threatening the objectives of the quota policy.
PREMIUM TIMES had also reported that a few hours to the expiration of President Goodluck Jonathan’s tenure, papers for a huge rice import quota worth billions of Naira were rushed in for the president’s accent, ostensibly as parting gifts to cronies and businessmen close to the power corridor. That import quota was signed by the President on his last day in office. However, the new government of President Muhammadu Buhari failed to recognize the quota and thus Customs refused to honour it.
Because the two quotas issued in 2015 were both cancelled, the Central Bank had since the advent of the Buhari administration not opened Form M for any company to import rice. But that did not stop the Elephant Group from testing the resolve of the new government.
Shipping documents obtained by PREMIUM TIMES show that in late November 2015, weeks before Christmas when rice is usually in high demand, the Elephant Group made its first attempt to discharge 33,000 MT of rice import using an expired import quota.
The company met a brick wall in the form of the new Comptroller General of Customs, Retired Colonel Hameed Ali, who turned down Elephant’s request to clear the import by paying 31.5 per cent duty instead of 71.5.
Had the Customs boss compromised, the Elephant Group would have succeeded in getting a cash-strapped Federal Government to subsidize its private business by 40 percent.
Buzz in Apapa Port
Since the berth last week of the vessel Auckland Spirit, tongues have been wagging inside and outside the Apapa Port. With the throwing away of the two rice import quotas issued in 2015 by President Jonathan, the Buhari government has so far not announced any new quota.
Indeed the government has placed a technical ban on rice import.
Barely one month after the new government came in, the Central Bank of Nigeria (CBN) announced in June 2015 that it would no longer approve forex for rice imports. For importers, this meant an indirect ban on rice. Since import of rice from overseas has to be paid for in foreign currency, usually the US dollar, the pronouncement from the CBN was seen as a technical embargo.
Even though the CBN also mentioned that people can import rice if they have their own source of forex, the same apex bank ceased to approve Form M, which is mandatory before anyone can import any commodity into the country.
Prospective importers that went further to declare they have their own forex and will not seek foreign exchange from the government or banks in Nigeria failed to get Form M approval from the CBN.
After its failure to get the Customs to allow it discharge rice at 31.5 per cent duty, Elephant Group then chose to dust up an old Form M originally valid for forex. PREMIUM TIMES investigation reveals that this Form M was obtained by Elephant Group on May 22, 2015, seven days to the exit of the Jonathan government.
The validity of this Form M was for one year. It expired on May 16, 2016. Elephant claimed it got the Form M extended by six months but there was no proof of that in the accompanying documents. The process of the said extension remains hazy.
A Customs source told this newspaper that it is puzzling how Elephant Group got its Form M extended.
“I say it is puzzling because you have to look at the technical details. By the time the Form M expired, the CBN had discontinued with the old import regime, so how can something that was legally no longer in existence be extended and by who?” the Customs source queried.
In searching for why and how the old Form M got extended, PREMIUM TIMES discovered that some companies that also got, in the same manner as Elephant, Form M approval in the dying days of the Jonathan’s administration had theirs rejected for import. One of the companies is Viscous Global.
A closer scrutiny of Elephant’s import documents reveals other anomalies that raise serious questions about due process. It was discovered that the Form M used for the import expired in May 2016.
The rice cargoes were stated in one document to have been loaded in April and May 2015, yet in another document the Manifest was filed with the Nigeria Customs Service, 13 months later, on June 10, 2016. At the time the Manifest was filed, Elephant Group was doing so using an expired Form M.
In what is probably the clearest case of a fraudulent process, the Pre-Arrival Assessment Report (PAAR) number was given as20150509514/TOT and dated May 25, 2015. Although PAAR can be issued before the Manifest is filed by the importer, the same cannot be said of the Single Goods Declaration (SGD).
In the case of Elephant Group, the Manifest was filed on 10th June 2016 while the PAAR was dated a year earlier on May 25, 2015.
The SGD used for the rice import by Elephant Group was dated May 25, 2016.
In shipping procedures the SGD can only be filed after the Manifest is filed, esperts said. This is because the Manifest must be referenced while filing the SGD. The Manifest in this case was filed on June 10, 2016, about 16 days after the SGD.
A Customs official with a deep knowledge of shipping procedure explained that a Manifest must capture all the details of the ship, the cargoes it is carrying and the port of discharge among other things.
It is after the Manifest is filed that the importer is given a rotation number by the Customs, he said. This rotation number must be quoted on the SGD and the same number is needed for duty assessment.
In the controversial import made by Elephant Group, the SGD appeared to have been filed before the Manifest to show that the transaction happened before the Form M expired or on a date not too far off.
Elephant Group reacts
Contacted by PREMIUM TIMES, Mr. Tunji Owoeye, Founder/Group Managing Director of Elephant Group insisted that the allegations against his company were “false and baseless and possibly the handiwork of those who do not mean well for the economy of our great country. We are a company that believes in this country.”
Steering him back to specifics, PREMIUM TIMES asked to know how an expired Form M issued in the old regime could had been valid for $5.52 million forex, especially when CBN had ceased to issue or allow forex from whatever source for importation of certain items including rice. This newspaper also sought to know why all the documents used for clearing the rice cargo brought in by MV Auckland Spirit were filed in reverse order.
Mr. Owoeye was silent on the forex transaction but said that his Form M was valid for one year and could not be said to have expired. His answer contradicts the information on the documents supplied by his own company one of which was that the Manifest was filed on June 10, 2016 at which time the Form M obtained on May 22, 2015 had, after one year, expired on May 16, 2016.
Stating that he was not too familiar with shipping and Customs technicalities, the Elephant boss was unable to explain how his SGD came before his Manifest when the later was a requisite for the other to be decided. He only added that the documents were computer generated and that if there was any irregularities, the system would have rejected it.
“In any case, Manifest is an independent thing. Manifest is handled by government, not us,” Mr. Owoeye submitted.
Speaking to PREMIUM TIMES on the transaction, a staff member of Elephant Group, Mr. Murphy Alabi added a twist to the controversy saying the rice import was paid for in Naira, not in US dollars. He said his company had an agreement with its trading partner in Thailand to accept Naira.
Mr. Murphy however refused to name the trading partner.
Nna Godwin, a freight forwarder of over 23 years in experience told PREMIUM TIMES that he had never seen a clearing process that generates first the SGD before the Manifest.
“I have never seen that before. It is like working from the answer. Even when we were using the Risk Assessment Report (RAR) which is now replaced by PAAR, you still needed to have your Manifest before the assessment can be done. So what will the assessment be based upon when you don’t have your Manifest?” Godwin pondered.
Reminded that before the current import brought in by MV Auckland Spirit, Elephant Group had been involved in two controversial rice imports, all aimed at beating the system, Mr. Owoeye explained that his company got involved with the religious organization JNI because the later had neither the experience nor capacity to directly utilize the quota given to it by President Jonathan.
He insisted that of the 100,000 MT approved, only 16,000 MT was imported before the expiration of the quota in 2014. He denied that the rice imported in the name of JNI was sold in the open market.
Mr. Owoeye also denied any wrongdoing in November 2015 when Elephant Group, claiming quota status when none existed at the time, attempted to make the federal government to fund 40 per cent of its import.
He did not explain why his company wrote a letter to a new Comptroller General of Customs asking to be allowed “on compassionate ground” to pay only 31.5 per cent duty when government had cancelled every form of rice subsidy and when Elephant Group was not involved in local rice production and had no investment in the rice value chain that needed government protection through subsidy.
He owned up to aborted deal but said the transaction was disallowed by Customs not because it was fraudulent; rather because the new Customs Comptroller insisted that his mandate was to generate revenue for government and nothing else.