FG Grants ₦70bn Export Expansion Grants to Manufacturers

The Export Expansion Grant (EEG) is a non oil revenue buffer set in place to give tax credits to companies that create value for the Nigerian Economy through Exports. They are issued through Export Credit Certificates. The Nigeria Export Promotion Council (NEPC) had asked Companies to submit their Baseline Data, for a review between the 20th of November & 29th December 2017. The results show that amongst the major Multinationals granted 70bn in tax savings through the export credit certificates are Olams Nigeria, Cadbury, Flour Mills of Nigeria, Guinness Nigeria, Royal Mills & Foods Limited, Aarti Steel, African Industries Group, Louis Dreyfus

The Ministry of Trade & Investment in coordination with the Nigeria Export Promotion Council are hoping to use the EEG as a tool to buffer foreign export to Sub Saharan African Countries as a means to boost export revenues and reduce the dependence of the Nigerian Economy on Oil receipts.

The 2018 Appropriation Bill shows that Oil receipts will generate 2.4trillion of 8.61trillion the FG needs to fund its budget. Encouraging Companies to manufacture and sell to other Countries which achieves more tax revenues for the Federal Government as well as foreign exchange income through certificates of capital importation by companies who earn money abroad for trading across borders.

Early in November, Moody’s (International Rating Agency) downgraded Nigeria’s Sovereign Rating to B- with a stable outlook on fears that the Government is not doing enough to diversify its revenue away from oil, which might make it prone to shocks from unexpected shocks in the Oil market, it also indicated that the practice of giving undue tax credits to Nigerian Companies and not doing enough to widen the tax bracket is detrimental to the long term sustainability of the income sources for the Federation Account.

The Nigerian Government hopes that it can bring foreign exchange income for companies which will improve balance of trade, that currently sits at a surplus of 1trillion, it also hopes it can lead to the creation of more private sector jobs by more companies expanding their production and delivery line, along with the tax revenues it will bring in for the Federal Government.

 

Kelvin Emmanuel

About Kelvin Emmanuel

The Oil producing Angola in the Southern part of Africa faces what Nigeria faced 12months ago; a distortion in its exchange rate with a difference between the official markets and the parallel black markets. One dollar through the official window buys you 166 kwanza, while one dollar through the black market buys you 400 kwanza. Nigeria faced the same challenge 12months ago, when the distortion between the official and black markets was as much as the official markets trading at 306 with the parallel market ranging from 450 through to 510. The Central Bank Governor of Angola, Jose de Massano Junior announced in Luanda “We will stop having a fixed foreign exchange, we will adopt a floating regime of foreign exchange”. Angola faces exactly the same challenges and has been applying the exact same responses to an exchange rate crisis like using its foreign reserves that was sitting at $26bn to defend the currency kwanza, with no success so far, even though the external reserves has dropped to $14bn. Angola relies on Oil receipts for 80% of its government revenue, 90% of its inflow and 50% of its GDP. Angola is a $194bn economy that has been growing at an average of 10% on the back of rising oil prices since 2002 when its 27 year old civil war that started in 1975 ended. The state national oil company Sonangol reports that it produces up to 1.8m barrels of crude oil daily, however the government that until now has being led by the family dynasty Jose Eduardo dos Santos until recently when succession saw power transferred to Joao Lourenco, reports that the oil price rout in 2015/2016 that saw prices drop to as low as $28 per barrel caused ripples across the economic structures of the government, upsetting government revenues, its ability to fund its budget, capital project funding, foreign direct investments into the economy as a result of a currency crisis that was driven by the widening of gap between the official and street window of the kwanza, that until now has been pegged in a fixed exchange rate regime to the US Dollar.