For a long time, Nigeria’s foreign exchange earning has been largely from crude oil exports. However, due to the government’s diversification efforts, non-oil products are now making a significant contribution to the country’s foreign exchange earnings.
Recognising the potential that is laden in non-oil exports, certain incentives have been established for the benefit of non-oil exporters/export companies. This helps to boost the nation’s economy as well as deal with its apparent foreign exchange challenges.
Here, we discuss some of the non-oil export incentives that have been set up by the Nigerian government.
Export Expansion Grant (EEG)
This grant is a scheme that was introduced in 1986, with the aim of beefing up the volume of non-oil exports in Nigeria. There have been considerable positive changes seen in the non-oil export industry as a result of this grant. The grant was established in order to render assistance to active exporters who had the intention of increasing their foreign operations. Being a post-shipment incentive, it incentivizes exporters to amplify the value and volume of their product, which will in effect give Nigerian products a competitive edge in the international market.
Exporters are set to receive a minimum of 5% of their annual export value as a grant under the EEG, although this largely depends on the category of their product. Also, the certificate issued upon the receipt of this grant (known as the Negotiable Export Credit Certificate) entitles the exporter to certain benefits including purchasing Federal Government Bonds, payment of all Federal Government fees, and settlement of federal government taxes amongst others. To qualify for the grant a company has to follow the guidelines laid out by the Nigerian Export Promotion Council which include the following:
- Be a registered company with the Corporate Affairs Commission (CAC) and Nigerian Export Promotion Council (NEPC).
- Must have conducted formal exports and had your earnings repatriated to a Nigerian bank account and provide a CBN confirmation to this effect.
- Must be a manufacturer/producer or sell Nigerian locally made goods.
- Must have a yearly turnover of at least N5,000,000.
- Must provide proof of the confirmed deposit of the export revenues to a Nigerian domiciliary account and also submit the relevant data to NEPC among which are tax clearance certificate, export expansion plan, audited financial statements, and operational capacity information.
Export Development Fund (EDF)
This scheme was established under the Export (Incentives and Miscellaneous Provisions) Act CAP E19 LFN, 2004. It was intended to assist exporters and exporting companies in mitigating the intended expenses for their export promotion activities. These activities include advertisements and publicity campaigns in international markets, supporting MSMEs exporting companies in conducting their conformity assessment tests, market research and survey, in organising workshops, training courses, and symposiums amongst others. The fund’s major target is exporting companies in the private sector. Companies that intend to benefit from the fund must:
- Be registered with the CAC and NEPC.
- Have obtained its tax clearance certificate.
- Be a manufacturer/producer or seller of Nigerian-made goods.
There are no charges attached to the application for this fund.
ECOWAS Trade Liberalisation Scheme (ETLS)
This scheme was set up by the Economic Community of West African States as a means to enhance trade and commerce between its Member States. The scheme was established in 1976 during the Head of States Summit in Lome, Togo. Nigeria being an ECOWAS member State signed the ETLS protocol on 29 May 1979 and had it ratified on September 12, 1979. The ETLS is concerned with industrial, agricultural, handicraft, and crude products.
This scheme guarantees an exporting company and other businesses in Nigeria free trade amongst ECOWAS member States. This way businesses are not expected to pay customs charges and are free of other non-tariff barriers. For an export company/product to be approved under the ETLS, it needs to be examined by the National Approvals Committee that is available in each Member State. Upon the export company/product approval, the member State then communicates this approval to the ECOWAS Commission, pursuant to which the commission will then notify all Member States, and then the company/product can export and be exported freely within the region.
Tax Relief on Interest Income Scheme (TRII-S)
This is one of the schemes established by the government to incentivize the manufacturing of locally-made goods for export. The scheme is intended to encourage the granting of credit facilities to Nigerian exporters by Nigerian banks. Upon securing the credit facility under this scheme, the exporter will be issued an Export Manufactured Certificate (EMC) as well as a Negotiable Export Manufacturer Certificate (NEMC).
An export company that intends to benefit from this scheme has to meet the following criteria:
- Be registered under the CAC and NEPC.
- Must submit its up-to-date company profile.
- Must be a company actively engaged in manufacturing for export with at least half of its manufactured goods that are sold in its yearly account being disposed of outside the country and not re-exported in Nigeria.
- Must be a company that manufactures/produces or sells Nigerian locally-made goods.
- Must have conducted formal exports and had their earnings repatriated to a Nigerian bank account and provide a CBN confirmation to this effect.
- Must have updated tax clearance.
- Must be ready to provide all relevant data including documentation on operational capacity, financial statements, and loan applications to be reviewed by the committee.
Upon application for the scheme, the exporting company shall be inspected for verification and validation of information and also impact assessment of the scheme. However, where the company is in violation of guidelines it shall be dealt with by the Presidential Committee on Trade Malpractices alongside the Economic and Financial Crimes Commission as well as the Implementation Committee.
Non-oil exports have the potential to make valuable contributions to the Nigerian economy through increased foreign exchange earnings. We are already seeing considerable positive impacts of increased non-oil exports. It is therefore impressive that there exists a myriad of incentives that Nigerian exporting companies can take advantage of and increase the value and volume of their exports as well as make Nigerian products to be more competitive in the international market.