INDEPENDENT NEWS

Cablegate: Nigerian President Abolishes Export Incentives

Published: Mon 12 Sep 2005 09:04 AM
This record is a partial extract of the original cable. The full text of the original cable is not available.
120904Z Sep 05
UNCLAS ABUJA 001692
SIPDIS
SENSITIVE
TREASURY FOR SEVERENS
USDOC FOR 3317/ITA/OA
STATE PASS USTR
E.O. 12598: N/A
TAGS: ETRD EINV EFIN NI
SUBJECT: NIGERIAN PRESIDENT ABOLISHES EXPORT INCENTIVES
1. (U) The federal government of Nigeria has withdrawn the
Bona-fide Manufacturers Scheme, and Manufacturer-in-Bond
Export Scheme - two incentives the government extended to
local manufacturers to be more competitive due to their
alleged abuse. The Bonafide Manufacturers Scheme allowed
manufacturers of certain products to import inputs duty-free
or at reduced duty. Under the Manufacture-In-Bond Scheme,
raw materials may be imported duty-free for the production
of export goods, on the basis of a bond issued by a
recognized financial institution. The bond is discharged
upon production of proof of export and repatriation of
foreign exchange. The incentives are administered by the
Nigeria Customs Service (NCS) under the supervision of the
Ministry of Finance. Government sources claimed that
Nigeria lost about N87 billion to malpractices in the
administration of such import duty waivers and concessions
in the last one and a half years. They also alleged that
some importers posed as industrialists, in connivance with
corrupt officials. Obasanjo cancelled all outstanding
approvals under the two schemes and apparently opposes any
import duty waivers on principle, aside from the potential
abuse. The President has mandated the Federal Executive
Council to re-appraise the schemes.
2. (SBU) The revocation of the schemes will throw many
manufacturers' production plans into disarray and make some
exports less competitive. The Pharmaceutical Manufacturers
Group of the Manufacturers Association of Nigeria (PMG-MAN)
has appealed to the President to rescind his decision to
save the manufacturing sector from further distress.
Similarly, MAN expressed shock over the decision, stating
that it would cause confusion in the manufacturing sector.
3. (SBU) Though U.S. companies have not yet brought concerns
to the Mission, most who have manufacturing concerns here,
whether they export or not, use these schemes to import
needed inputs. For example the MD of Nestle told the
Commercial Counselor recently that these incentives as very
important to his company here, though did not export much.
Coca Cola and Proctor and Gamble have used Embassy advocacy
in the past to help get needed import waivers.
4. (SBU) Comment: The constantly changing trade policy is a
serious problem for domestic and foreign manufacturers
alike. The high trade barriers make it impossible to do
many kinds of manufacturing without waivers, which are in
turn create a great opportunity for corruption. On the
other hand, poor infrastructure makes manufacturing more
expensive in Nigeria, leading to demands for protection.
Thus manufacturers oppose the plan to move to a common
ECOWAS tariff which would lower trade barriers. They prefer
to manufacture behind high protective walls, with individual
waivers. We can expect that some companies will be coming
to us asking for advocacy to help restore their particular
waivers. CAMPBELL
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