KNOCKS, KUDOS TRAIL NEW IMPORT POLICY
Martins-Kuye
The recent policy by the Federal Government to remove some items on the import prohibition list has continued to generate mixed reactions from stakeholders, especially real sector operators whom the policy seems to have affected the most.
To signify the failure of yet another government economic measure, Finance Minister, Mr. Olusegun Aganga had, in November issued a circular removing the ban on importation of cassava, furniture, textile and toothpicks and to substitute import duties and levies which add up to 35 per cent ad valorem for cassava and 40 per cent for the others.
Health and energy drinks have also been introduced to the tariff regime and attract the combined import duty and levy rate of 20 per cent. While international traders and freight forwarders received the news with jubilation, some members of the Manufacturers' Association of Nigeria (MAN), have criticized the economic policy.
Apparently yielding to pressure from importers of vehicles and freight forwarders, government also raised the age limit on cars from 10 to 15 years. Since government announced the measure, many had read different meanings into the policy decision with some saying the lifting of the ban was based on political considerations. The former Obasanjo administration had placed a blanket ban on importation of some items to protect local manufacturers and the environment from pollution, which was hailed by economists and experts.
But the policy has not gone down well with operators in the organised private sector, especially as it relates to the lifting of ban on textile materials. Analysts in the textile sector noted that a government that has provided about N150 billion through the Bank of Industry (BOI), towards the revival of the moribund textile industry which used to be the largest employer of labour in the past is the same government truncating its own efforts.
The sector operators maintained that the injection of the fund into the textile sector was received with joy and optimism that the sector would once again bounce back to full industrial activities which, it said, was capable of taking a handful of unemployed youths, off the streets. But the question on the lips of the sector operators is that; why would a government that has strived so much to inject life into the textile sector be the same government frustrating its own efforts.
Besides, the operators argued that if the policy was not reversed, there was no way local manufacturers can compete, with the implication being that they would default in the repayment of their loans.
Again, the experts posited that most of the imported textile materials are of low quality compared to the ones produced locally, adding that the penchant for foreign products has further compounded the woes of local manufacturers.
In an interview with Daily Sun, Legal Adviser, National Association of Government Approved Freight Forwarders (NAGAFF), and Maritime lawyer, Mr.Fred Akokhia said the policy was a good development. 'When there was no ban, Asian manufacturers of textiles were smuggling in these items and passing them as manufactured. Government was losing revenue as no duty was paid on them. This is because it is cheaper for them because when these items are smuggled, the manufacturer does not have to pay duty and coupled with the fact that there machines are obsolete to produce textiles that can withstand international competition, 'he said.
On the issue of furniture, he noted that the items were also being smuggled, adding that what was produced locally was not enough to meet demands. He said that it was better for the items to come in, thereby encouraging competition, ditto for cassava which, he noted, when there was no ban, Nigerians were exporting them and there was not enough available locally, thereby making the price of garri to skyrocket.
Apart from manufacturers, labour is among the critics of the ban lifting placed on the items. Labour said the ban lifting was not in the interest of the economy. General Secretary of the National Union of Textile, Garment and Tailoring Workers of Nigeria (NUTGTWN), Mr. Issa Aremu described the development as tragic for local industries. He argued that the recent lifting of the ban on textile materials, furniture, toothpicks and cassava products and the raise in the age limit of imported used vehicles from eight to 15 years was wrong.
'It is indeed tragic for a country that is striving to be one of the 20 leading industrialists,' the statement said. Aremu described government's decision as a complete policy somersault from the thrust of growing the non-oil sector in general and manufacturing in particular. According to him, the ban of these products in the past was due to the realization that wholesale importation undermines local manufacturing firms.
'Wholesale and indiscriminate importation of goods such as toothpicks, textiles and furniture of which Nigeria has comparative advantage was one of the factors that killed local industries,' the NUTGTWN scribe said.
He noted that Nigeria was already a dumping ground for all manner of imported goods, including arms and ammunition. But the Federal Government in a swift reaction to the series of criticisms generated by the lifting of the ban has defended its action, saying the new policy on was in line with what operates in other West African countries. Minister of Commerce and Industry, Senator Jubril Martins-Kuye, said this after the presentation of technical report on Textile and Garment Industry Sector a case study of Nigeria by the United Nation Industrial Development Organisation (UNIDO), Country Representative in Nigeria, Mr. Masayoshi Matsushita.
Faulting the argument of the Federal Government, the Director-General of the Nigeria Textile Manufacturers Association, Jaiyeola Olarenwaju, said the lifting of ban on the importation of textile materials would endanger the repayment of loans taken under the Textile Cotton Revival Fund.
He said the loan beneficiaries are being exposed to unfair competition through unbridled importation of textile materials. He added that the policy of allowing textile imports into the country could lead to the total collapse of the ailing indigenous textile industry.
Jaiyeola noted that about 10 members of the association had benefited from the fund by taking loans from the Bank of Industry, the fund administrator, which recently claimed to have received about 50 applications for the loan and disbursed about N30 billion as at November 2010. He said there was no way the textile manufacturers could operate competitively to repay the loan if they were not protected.
The minister, however, argued further that the reality on ground informed government's decision to streamline policy on importation of goods based on what operates in Benin Republic, Togo and Ghana which, he said, would yield more revenue to government, stating that the policy was devised to stem loss of revenue to Nigeria through smuggling activities at the country's borders.
Kuye said stakeholders in textile industry have agreed with government to unban certain textile products which cannot be made in Nigeria and take on the ban list certain other items that the country has local capacity to produce.Though, efforts to confirm the ministers claim from NTMA proved abortive as the DG could not be reached as at the time of filling this report.
'We are not surrendering to the will and wish of World Trade Organisation (WTO). We are just doing what is right, proper and appropriate to our economy and for our People. By reviewing the ban list, goods can come in and duty and levy will be paid which can be used to develop other sector of the economy.'
He said if government continues to put goods that cannot be produced locally on the ban list, unpatriotic Nigerians will find a way to circumvent the law and the goods will find their way into various markets and homes.
'Nigeria will be losing on both sides,' Martins-Kuye said. Further justifying the reversal, the minister said neighbouring countries allowed aged cars and other items into their countries which eventually find their way into Nigeria. He said the new duty and levy of 35-40 percent would enable Nigeria Customs to generate more revenue for government which would eventually spread to other sectors of the economy.
He maintained that in the short term, the policy will subsist while the ministry intends to produce a memo for the medium to the long term for the revival of the automotive sector of Nigeria.
Kuye reiterated that the focus of this government was on industrial revolution based on the fact that the industrial sector has the capacity to generate employment more than any other sector, adding that government was striving to ensure that electricity which takes 30-35% of production cost of local manufacturers bounce back to improve the competitiveness of our local industries.
Also faulting the Federal Government's decision, the Ogun State council of Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, accused the Federal Government of deliberately bringing up policies that are detrimental to the development of the industrial sector in the country.
The chamber, in a recent statement signed by its President, Mr. Sakirudeen Labode, said that the lifting of ban on some items, like textile, tooth-picks and cassava by the government would not augur well for the economy. Labode, who is also the second Vice-President, Association of National Accountants of Nigeria, added that the current policy summersault by the government amounted to putting the cart before the horse. 'Some operators in the textile industry have just been given some funds. They have started utilising the funds and you are lifting the ban on the importation of textile; how will they feel.'
He said the economy might not witness any significant growth next year, adding that there were no clear-cut policies on the ground to effectively tap into the nation's abundant human and natural resources by the government. Also, the Director-General, Nigeria British Chamber of Commerce, Mr. Sola Obadimu, said the Nigerian government is known for policy inconsistency. The same government according to him may wake up tomorrow and decide to place a ban again.
'You see, all this shifting of goal posts is because we have not set specific goals for ourselves in Nigeria, short or long-term. We do not have aggregate national plans sub-divided along industrial or sectoral lines. I mean, goals that are cast in stone, irrespective of the governments in power. The Nigerian government just spends money as soon as it comes in; sometimes even before revenue accrues, we have spent it ahead. And we live in denial. People get irritated when you say the truth.
'Issues of banning or unbanning are usually, in seriously planned economies, tied to specific goals meant to be realized within specific periods of time, with government agencies/departments keyed in, and institutions such as Bank of Industry also keyed in to support investments in particular areas as a part of a larger goal. 'We don't seem to know too much of what we are doing or where we are going. Government needs to share its goals more with Nigerians. The days of manifestoes need to come back as campaign strategies. Unfortunately, people have been disempowered and they are hungry and the moneymen continue to have their ways most of the time,' Obadimu argued.
Also, the Furniture and Allied Products Manufacturers Association of Nigeria (FAPMAN), enjoined the Federal Government to stay ban on imported furniture, so that members of its association can enjoy what they have invested in the sector.
Besides, the association also disagreed with the Federal Government's position to lift the ban because of the existing gaps that may push many local manufacturers out of production, reiterating that such decision to lift ban at this point in time may have far reaching negative consequences on local manufacturers.
The association also dwelt on the relocation of most local manufacturers to neighboring countries, where there are better infrastructure like adequate power supply and friendlier tax regime, adding that most local manufacturers would be forced to abandon production and start importation, which it said will lead to job losses of over 1,230,000 employees that will aggravate unemployment and criminal activities and insecurity of lives and property.
FAPMAN maintained that the problem of curbing losses through smuggling may still persist due to porosity of Nigerian gateways and most companies will be sold off in order to enjoy the cost advantage of importation rather than manufacturing. Also, it will lead t strangulation of the local market as patronage for locally made products may decline and Custom men should stop the resale or auction of confiscated furniture to the public. Instead it should be sent back to the country of origin.
FAPMAN recommended in a press release signed by its President Segun Adetiba, that pioneer status should be given to the local manufacturers through the association, noting that furniture products should be banned until such a time that there would be adequate infrastructure in the power sector to enable the association produce uninterrupted as well as compete favorably with other industrial world.
FAPMAN also proposed the following namely: Not more than 5 percent duty must be levied on imported raw materials, government should include the association and Manufacturers Association of Nigeria (MAN), so as to look into the area of developing a policy on categorization and standardization of furniture products.
'Also, government should ensure that should there be any need to meet up any shortfall on higher category of furniture requirement in the country, only furniture manufacturers certified by the FAPMAN or MAN should be allowed to import such higher category, in the same way government did in the case of the cement industry.
• That all couriers companies from across the world and their vehicles be notified not to bring in prohibited furniture items into the country, otherwise, they would be sanctioned; and that all prohibited items imported or smuggled must be returned to their country of origin through the carrier vehicle that brought it into the country.
• Government should be proactive enough to identify smugglers of prohibited furniture items for Economic and Financial Crime Commission (EFCC) investigation on their activities on money laundering, and that FAPMAN is ready to partner with government in identifying fake furniture products from any country of the world as to forestall their entry into the ports.
However, The Kano Traders /Customs Relations Committee has faulted the stand of MAN, saying its posture against the FG's policy to unban some items remained antagonistic. The body led by its chairman, Alhaji Habibu Abdullhai and his deputy, Alhaji Hamisu Abbah disclosed that the new policy deserves praise and not condemnation or antagonism.
They argued that since the Federal Government barred the importation of textile and other materials 14 years ago, essentially to boost local manufacturing, these industries have continued to collapse.
They also argued that throughout the 14 years of import prohibition, most of the affected items have flooded the Nigerian markets through the activities of smugglers and their ilk while denying the Federal Government the revenue they would have made from duties on the items.
Accordingly, they held that these industries fail due to the absence of relevant infrastructure like electricity which results to increase in cost of production.