RESTRICTED
WORLD TRADE G/SCM/Q2/NGA/4
10April 1997
ORGANIZATION(97-1508)
Original: English Committee onSubsidies andCountervailing Measures
SUBSIDIES
Replies ofNIGERIA to
Questions posed bytheEUROPEAN COMMUNITY1,JAPAN2,
andtheUNITED STATES3
Thefollowing communication, dated 26March 1997, hasbeenreceived fromthePermanent
Mission ofNigeria.
_______________
Asyouknow, Nigeria submitted totheWTO on17July1996, itsnotification ofsubsidy
programmes. Thenotification wasmade onthebasis ofgood faith, ourcommitments tothe
Organization, aswellasourcommitment toincrease transparency.
Nigeria hereby confirms thatspecific incentive schemes exist, asnotified, which areaimed
atboosting theGovernment 'sefforts ateconomic development. Some oftheincentive schemes are
alsodesigned tofacilitate thedevelopment ofeconomically disadvantaged areas, regions, andstates
within thecountry.
However, Iwishtoinform youthatthese incentive schemes arecurrently under review by
Government consistent withthecurrent policy ofderegulation, liberalization andstructural adjustment.
Theincentives under review include theDuty-Drawback/Suspension, Manufacture-in-Bond andthe
Export Expansion Grant Fund, aswellasother incentive schemes. Thereview process willconsider
phase-out timetable options within thecontext oftheprovision ofArticle 27.3oftheAgreement. Nigeria
isconvinced thatthese incentive schemes, currently under review arenotinconsistent withPartVIII
on"Special andDifferential Treatment ofDeveloping Country Members", andhaving regard alsoto
Annex VIIoftheSCM Agreement.
QUESTIONS FROM THE EUROPEAN COMMUNITY
I. NOTIFIED SUBSIDY PROGRAMMES
(a) Income taxexemption forexport profits
- Could Nigeria explain theconcept of"non-traditional exports"?
- Could Nigeria giveanoverview ofthesectors which have benefited from this
programme?
1G/SCM/Q2/NGA/2,2G/SCM/Q2/NGA/1 &Rev.1,3G/SCM/Q2/NGA/3.G/SCM/Q2/NGA/4
Page2
- Nigeria states thattheduration oftheprogramme hastobedetermined bytherelevant
authorities. Inthisrespect, canNigeria provide thetableindicating howthissubsidy
willbephased out?
II. SUBSIDY PROGRAMMES NOTNOTIFIED TOWTO
TheCommunity examined thedifferent policies oftheNigerian authorities withrespect to
incentives tothelocal industry. Inthisrespect, thefollowing programmes areavailable inNigeria
andwerenotnotified totheWTO.
- theNigerian Export Promotion Council (NEPC) aimstoencourage thedevelopment
ofnon-oil exports fromNigeria. TheCouncil administers various incentive programmes
including dutydrawback programme, theExport Development Fund, taxrelief and
capital assets depreciation allowances, andaforeign currency retention programme.
- DutyDrawback System ormanufacturing in-good programme isdesigned toallow the
dutyfreeimportation ofrawmaterials toproduce goods forexport, contingent on
theissuance ofabankguaranteed bond. Theperformance bond isdischarged upon
evidence ofexportation andrepatriation offoreign exchange.
- theExport Expansion Programme isafundwhich provides grants toexporters of
manufactured andsemi-manufactured products. Grants areawarded onthebasis of
thevalue ofgoods exported, andtheonlyrequirement forparticipation isthattheexport
proceeds berepatriated toNigeria.
TheCommunity would likeclarification onwhythese programmes werenotnotified toWTO
andrequests that,ifappropriate, Nigeria supplies anotification under Article 25,using thestandard
format. Inaddition, theCommunity would likeNigeria tocomment onthecompatibility ofthescheme
withitsobligations under theSubsidies Agreement, andtoindicate whether thereareanyplans tophase
outthese subsidies.
Answer
1. Asobserved bytheEuropean Community, Nigeria wishes toconfirm thatspecific incentive
schemes existandareaimed atboosting theeconomic development efforts oftheGovernment. Some
oftheincentives arealsoaimed atfacilitating thedevelopment ofeconomically disadvantaged
geographical regions. Inthisregard, incentives likePioneer Status, Capital Assets Depreciation
Allowance, TaxRelief onInterest Income, etc.canbeenjoyed byallcompanies operating inNigeria,
onanon-discriminatory basis. These incentives therefore cannot bedescribed asexport subsidies and
donotfallunder theSCM Agreement.
2. Inlinewithitscurrent deregulation andliberalization efforts, theGovernment ofNigeria is
presently reviewing incentive schemes liketheDuty-Drawback/Suspension, Manufacture-in-Bond and
theExport Expansion Grant Fund. These measures could notbenotified because ofthereview exercise.
Theappropriate incentives applicable totheprovisions ofArticle 25.2oftheSCM Agreement would
bedetermined oncetheEnabling Lawisenacted. Itisonlyatthatstage thattheincentives under
reference would bedulynotified.G/SCM/Q2/NGA/4
Page3
Clarifications onnotified subsidy programmes
(a) Income taxexemptions forexport profits
(i) Theconcept ofnon-traditional exports
Non-traditional exports refer tosemi-processed andmanufactured products, which
Nigeria hasnotbeentraditionally known toexport. Traditionally, Nigeria hasbeen
known toexport mostly crude oilandother agricultural produce likecocoa, rubber,
cotton, groundnut, etc.
(ii) Overview ofthesector tobenefit from income taxexemption
TheExport Processing Zones scheme asearlier notified, isthesector tobenefit from
income taxexemption forexport profits. Since theintroduction oftheStructural
Adjustmentprogrammein1986,oneofthemajorobjectivesoftheNigerianGovernment
isthediversification oftheeconomy. Under thediversification programme, the
promotion ofnon-oil exports isacardinal policy framework andtheExport Processing
Zones scheme isoneofthemajor strategies evolved toachieve thedesired objective.
TheEPZhastheobjective ofmanufacturing forexport. TheLawwhich established
theEPZclearly states thatindustries within thezonearefreetoimport, freeofduty,
rawmaterials, equipment andcomponents forthemanufacture ofgoods destined for
export. There areseveral other incentives under thescheme, which arespecifically
designed toencourage andattract investment intothezone. Among them isthe
exemption fromcorporate income tax.Itispertinent tonotehowever thatthepioneer
EPZ, located inCalabar, Cross River State, isyettobefullyoperational. Therefore,
nocompany orindustry hassofarenjoyed theexemption fromcorporate income tax,
within thezone.
(iii) Duration oftheexemption from corporate income taxunder theEPZ
Theduration fromexemption fromcorporate income taxbycompanies located inthe
zoneisforaminimum period offiveyears.
QUESTIONS FROM JAPAN
Income taxexemption forexport profits
Does thisprogramme constitute anexport subsidy referred toinArticle 3.1(a) oftheSCM
Agreement? Ifnot,please explain thereason whyitdoesnot.
Answer
(i) No.
(ii) Article 27.2 oftheSCM Agreement explicitly provides thattheprohibition of
paragraph 1(a)ofArticle 3shallnotapply to:
(a) "DevelopingcountryMembersreferredtoinAnnexVII"whichincludesNigeria.G/SCM/Q2/NGA/4
Page4
QUESTION FROM THE UNITED STATES
Asconcerns thenotified programme, "Income TaxExemption forExport Profits", could Nigeria
please provide information indicating theinception/commencement dateforthissubsidy?
Answer
Thesubsidy isyettocommence, astheCalabar Export Processing Zone isyettobe
commissioned.