The Federal Government plans to encourage local production of food items
Sugar manufacturing and processing industries in Nigeria will now pay nothing, 0 per cent, as import duty for any machines and equipment they import into the country for sugar manufacturing, the Minister of Finance, Ngozi Okonjo- Iweala has said.
The sugar companies that have also directly invested in the “sugarcane to sugar” value chain will also not pay tax for five years based on government approval.
Mrs. Okonjo-Iweala said this while briefing journalists on the highlights of the 2013 Budget presented by President Good luck Jonathan on Wednesday. She explained that the government wanted to increase local sugar production in order to eventually make the country self sufficient in sugar manufacturing,while also putting in place measures to discourage import of processed sugar.
“Import duty and levy on raw sugar will be 10% and 50% respectively, and refined sugar will attract 20% duty and 60% levy,” the minister said.
Nigerian billionaire and ally of President Goodluck Jonathan, Aliko Dangote, will be one of the greatest beneficiaries of the largesse as his publicly quoted company, Dangote Sugar Refinery Plc, is one of the largest sugar companies in Nigeria.
A similar policy had been put in place in the past for cement manufacturers;, a situation which some analysts claimed helped Mr. Dangote’s cement company grow at the expense of others.
Boosting local agriculture
Mrs. Okonjo- Iweala also said the Federal Government was determined to make the country self-sufficient in the production of sugar, rice and fish and reduce the $10billion import bill.
She said the federal government would continue to discourage importation of rice, one of Nigeria’s most consumed food; and encourage local production.
“Rice will attract a 10% import duty, with 100% levy applicable to both brown and polished rice,” she said, adding that machinery and equipment imported for use in the solid minerals sector would now attract 0% import duty and 0% VAT.
Planes and buses too
It is not only the companies in the agricultural sector that will get the government largesse, companies involved in the aviation and transportation sectors would get too.
The Nigerian aviation industry, which has witnessed several crises in recent times, will also get some relief. Airline companies will now pay nothing as duty and VAT for “importing” aircraft. The finance minister said some incentives have been put in place to improve the country’s aviation industry in order to encourage newer aircrafts to be brought into the country. These incentives include approval for zero percent duty and value added tax (VAT) for all commercial aircrafts and spare parts to be imported for use in the country.
Companies involved in road transportation were also not left out from the new government policy as incentives to promote public mass transit system have been put n place.
The federal government has removed the 5 per cent duty on Completely Knocked Down components for mass transit buses of at least 40-seater capacity, in order to encourage mass production of transit vehicles in Nigeria, Mrs. Okonjo-Iweala said.
She said there were also options for providing incentives for energy efficient vehicles from the 2014 fiscal year.
Prudent management of resources
The finance minister said government’s focus for 2013 would be on continuing the policy of inclusive growth by prudently managing available resources, bringing down the deficit, cutting down on domestic borrowing and re-channeling resources into infrastructure development of the power sector, transportation (rail, road), agriculture and women empowerment.
“The president has delivered on his promise to change the dynamics of budget implementation in Nigeria by producing the budget on time.” the minister said. “It is no longer the issue of implementing one’s year’s budget late into the next fiscal year.”
“This is the first time in about six years that government has been able to produce the budget this early in the year. We want to produce a system where the budget could be produced and the National Assembly is given three months to deliberate and pass it at the beginning of a new fiscal year,” she added.
Mrs. Okonjo-Iweala said government has been able to prune down the fiscal deficit from 2.85 per cent in the 2012 budget to 2.17 per cent of the gross domestic product.
Mrs. Okonjo-Iweala said government plans to empower women to realise their potentials economically; pointing out that government has developed an innovative approach to focus on gender issues and integrate them in the various sectors of the economy.
She said a pilot of the plan would commence with 5 pilot ministries – Agriculture, Health, Communication Technology, Water Resources and Works – pointing out that they have signed memorandum of understandings with the Ministry of Women Affairs to deliver on specific services for women.
The Ministry of Agriculture, she said, will work with the Ministry of Communication Technology to deliver mobile phones to 5 million women farmers and agricultural entrepreneurs to enable them access information on agro-inputs through an e-wallet scheme.
The Ministry of Health is to undertake the “Save a Million Lives” initiative, to ensure that one-third of young girls and women who are yearning for VVF treatment through surgery could receive treatment; while Ministry of Works would ensure that about 35 per cent of all road projects by Federal Road Management Agency (FERMA) engage female contractors.
Crude benchmark good at 75%
On the controversy surrounding the $75 per barrel oil benchmark announced by the president against the insistence of the lawmakers for the price to be raised to $80, the minister said government believes this was the most sensible price that would shore up the economy and ensure macro-economic stability.
“The $75 per barrel benchmark is based on an econometric model that uses averages that does not allow the numbers to be taken from just anywhere to develop it, just like many other countries that have benchmarks,” Mrs. Okonjo-Iweala said.
“Other countries that are oil-dependent like Algeria has $37; Qatar $55; Kuwait and Saudi Arabia $60; Oman and Angola $75,” she added.
She said if Nigeria decides on a higher benchmark than $75, a lot of liquidity would be required to stabilise the economy, “since it is not just the federal Government that we have to worry about, but also the monies that go to the states.”
“Even if we are trying to reduce the fiscal deficit for the Federal Government, a lot liquidity can trigger a higher inflation in the economy, as the states would still be spending,” she said.
The minister said the government does not want to expose the country to global uncertainty, particularly at a time the World Bank and IMF have just revised global growth downwards, having forecast that there is going to be slow commodity demand.
“For countries so overly dependent on one commodity, they have to approach it with care and be very prudent, so as not to bring the country to a situation where there is no demand, and their prices are too high,” she said.