The Nigerian government established the Nigerian Export Promotion Council (NEPC) in 1976 with the aim of diversifying the productive base of the Nigerian economy away from oil and fostering a market-oriented, private sector-driven economy, through market-oriented export products development. The mandate of NEPC is to coordinate and harmonize export development and promotion activities in the country, take the lead in all national export programs and interface with international trade agencies on cooperation and capacity building. The establishment of NEPC introduced the Export (Incentives and Miscellaneous Provisions) Act and the EEG Scheme.
The Scheme, which is administered by NEPC, aims to support active exporters, expanding their international businesses through a post-shipment incentive designed to encourage Nigerian exporters to expand their export volume and value and improve the global competitiveness of Nigerian products. Although the Scheme was suspended in 2014 due to alleged abuse, it was redesigned and reintroduced in 2017 as a reflection of the Federal government's commitment to continue to promote export in Nigeria.
This article provides an overview of the Export Expansion Grant scheme in Nigeria since it commenced, an evaluation of its benefits to taxpayers and how taxpayers can proactively take advantage of the Scheme, going forward.
Potential Benefits of the Export Expansion Grant (EEG) Scheme
Upon application to NEPC and fulfillment of all required obligations, successful exporters qualify for a credit of up to 15% of their annual export value, depending on the exporters' product category. Based on the product category, successful exporters are paid through the instrument known as Export Credit Certificate (ECC) which can be used for any of the following:
- Settlement of all federal government taxes including Companies Income Tax (CIT), Withholding Tax (WHT), Value Added Tax (VAT), Capital Gains Tax (CGT) etc.;
- Purchase of all federal government Bonds;
- Settlement of all credit facilities by the Bank of Industry, Nigeria Export –Import Bank (NEXIM), Bank of Agriculture and any other facility introduced by the Central Bank of Nigeria (CBN);
- Settlement of Asset Management Company of Nigeria (AMCON) liabilities; and
- Transferrable at one's instance to a third party.
It is important to note that the EEG rate granted by NEPC to exporters solely depends on the categories of the exporters (basically 4 different categories). Exporters with fully manufactured products are entitled to the maximum EEG rate of 15%, while those exporting semi-manufactured products are entitled to 10%. Also, exporters with processed/intermediate products are entitled to a grant of 7.5%; while exporters of merchants/ primary agricultural commodities are entitled to 5% EEG.
Qualification Criteria for the Nigeria Export Expansion Grant (EEG) Scheme
Any Company that engages in export activities may seek to take advantage of the Scheme by registering with NEPC as an exporter, and must be a manufacturer or merchant. More importantly, such exporters must have carried out an export sale, with the proceeds of such exports repatriated into Nigeria within 300 days of carrying out the exports and the repatriation confirmed by the CBN.
In addition, such exporters are required to provide an Export Expansion Plan (EEP) and a Baseline Data (BD) which must include the Audited Financial Statements (AFS) of the Company for three (3) consecutive years. Where the intended beneficiary is a newly-incorporated company, such company is required to submit its current year management accounts and projected financial statements. The BD is required to determine the EEG rate for the current year and incentives to be enjoyed by the intended beneficiary, while the EEP is relied upon to evaluate the continuous eligibility of the exporter.
In addition to the AFS submitted, the exporter would also be required to provide additional information such as:
- Analysis of the company's turnover into local and export sales;
- Analysis/schedule of total export sales showing the conversion rates used;
- Details of additions to fixed assets during the year;
- Breakdown/analysis of cost of sales into local and foreign input (raw materials and packaging)
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
