Nigeria’s non-oil exporters have called on President Muhammadu Buhari to intervene in the difficulty they face in accessing the approved arrears of Export Expansion Grant (EEG) through the promissory notes programme.
They exporters said the recent introduction of Reverse Auction Process (RAP) by the Debt Management Office (DMO) in the implementation of the grants was shifting the goal-post in the middle of the game.
But DMO has denied this claim, saying it is a federal government policy and that its reversal is beyond its control.
Speaking on behalf of the exporters, a company director, Sadiq Kassim, lamented the challenges Nigerian non-oil exporters encounter through the delay in the payment of the grant owed them between 2006 and 2016. He said many manufacturing companies have folded up as a result of the unpaid debts by the government, while others have run into huge debts.
Mr Kassim is one of the directors of Tropical General Investment Group, a conglomerate of non-oil exporting companies that deals in the exportation of sesame, cotton, cocoa, among others.
Earlier in April, an umbrella body for private exporters in Nigeria, the Organised Private Sector Exporters Association (OPEXA), had written the president on behalf of the non-oil exporters, seeking urgent intervention over the introduction of RAP.
The letter, which was signed by the group’s Executive Secretary, J.P Olanrewaju, was dated April 10.
According to the body, the decision by the Buhari administration to approve the payment of the backlog of arrears owed its members since 2006 at a Federal Executive Council Meeting in 2017 was a welcome development. However, it noted that if the reverse auction process is introduced, it would compound the creditors’ woes.
History of reintroduced EEG
Since 2015, the Buhari administration has expressed a commitment to growing Nigeria’s non-oil export and stopping market monopoly through the introduction of various initiatives, including the Home Grown Feeding Programme, and the reintroduction of the implementation of Export Expansion Grant (EEG).
According to the exporters, the EEG, which is aimed at diversifying the country’s economy due to dwindling oil revenues, was introduced in 1986 but payment of creditors was suspended in 2006 due to irregularities in implementation.
Under the reintroduced EEG, the Federal Executive Council in July 2017 announced the payment of N2.67 trillion through promissory notes to contractors, manufacturers, and other creditors of the Federal Government.
However, the payment required approval from the National Assembly. Thus in January 2019, the National Assembly reportedly approved the payment of N195 billion of claims as EEG to non-oil exporters.
In April, as part of the payment process, the DMO announced the introduction of the reversed auction process, which has been described as a way of discounting payment due to creditors.
The payment plan also suggests that redeeming the issued promissory notes could span 10 years.
The Debt Management Office (DMO) has, however, said it does not have the power to change what was approved by the Federal Executive Council. It said the introduction of the reverse auction process was not by the DMO.
Speaking with PREMIUM TIMES, DMO’s Director of Portfolio Management, Dele Afolabi, said the term reverse auction process as approved by FEC means that the creditors have the option to give a discount of what they are being owed to the government.
“The approval is that the promissory note will be issued over a period and will mature over a period of 10 years,” he said.
According to Mr Afolabi, there are 13 categories of affected creditors. He said the delay in payment is due to the verification processes as mandated by FEC.
“The involvement of the DMO in this EEG scheme is just through the promissory note programme, which is simply to settle the inherited debts. There are 13 categories of creditors under the scheme and they include construction companies, small holding contractors, state governments, oil marketing companies, arrears of salaries and allowances, among others,” he said.
“It is true that in 2017, the Federal Executive Council approved N2.67 trillion to settle the accumulated debt but the National Assembly has been approving this in batches. In fact, not all those in the EEG category have been approved by the National Assembly but some were approved in January this year. We are in the process towards settling them. We have held meetings with exporters and the Nigeria Export Promotion Council. But we must also understand that FEC also said documents evidencing claims will have to be ascertained by an international accounting firm operating in Nigeria. A firm has already been appointed in line with the Procurement Act.”
Surprised by the development, the exporters said the new payment plan strategy is frustrating and discouraging. They said it negates the administration’s agricultural stimulation drive, employment generation and expansion of foreign exchange earnings.
In its letter to the President, OPEXA noted that the DMO has not been forthcoming with any further details about the mechanisms of reverse auction process but that it involves offering and acceptance of discount in their claims before disbursement.
Also speaking on the implication of the new development, Mr Sadiq said Nigerian exporters who had run into ‘troubles’ over the delay in payment, would now be made to suffer double jeopardy with the discount “if discount is what the reverse auction process means.”
“First, we need to understand why the EEG is important. It is important for businesses that operate in the international arena. This is because coming out of Nigeria is with so much baggage in terms of the disadvantages. As a Nigerian manufacturer, you are the provider of your own light; you provide your own road, water, and so many other amenities that manufacturers in other countries as near as Ghana and Benin Republic enjoy without stress. So by the time Nigerian manufacturers get to the international market, they are already disadvantaged.
“So for us, the EEG is to help us cushion the effect of the disadvantages on infrastructure that we suffer. So if I am getting 15 per cent from the EEG, then I can afford to give 15 per cent discount on my products at the international market. It means that if the cost of production of my product is N12, I can afford to sell the product at N10 because I am sure I will get a rebate from the government. This will enable me to compete favourably.
“But what happened was that from 2006 when the government stopped the utilisation of the EEG, manufacturers who had received payment, in terms of what then was called the negotiable duty credit facility, but could not utilise it due to bureaucratic issues, have since been left with certificates with a worthless face value. Now that promissory note is to be given to us on redemption, we learnt it will now be issued through reverse auction, which we are yet to know what it means.”
Mr Sadiq said apart from the prolonged years to redeem the notes, the discount policy, if allowed to stay, would mean that “N10 owed in 2016 when paid with discount may have reduced to N2 in 2019.”
The exporters have, therefore, appealed to the president to order the withdrawal of the reverse auction process and take more steps to ensure that the challenges they are facing are addressed.
The letter also reads, “Government (DMO inclusive) should also restrict themselves to issuing the promissory notes as per the shortest tenor feasible for it given the different norms and covenants it must adhere to regarding sovereign debt issuance. More importantly, there should be equal treatment of all categories of promissory notes programme beneficiaries for issuance for promissory notes for each tenor.
“The exporters should be issued promissory notes with a shorter (spread evenly over a maximum period of three years) given the fact that they have already suffered a delay of three to 12 years on the payment of their claims. Also, some positive considerations to exporters would serve to jumpstart the production and investment in this strategically important sector thus helping in generating additional foreign exchange and also in creating additional livelihoods and jobs for additional thousands of Nigerians.”