April 10th, 2006 MEDIA REPORT #5

A conference report from the 2004 Comptroller-General’s Annual Conference which was held in December in Calabar, capital of Cross River State has alleged that AIICO Insurance refused to honour its obligation under Manufacture-in-Bond Scheme (MIBS) guarantee. In delivering a paper, Industrial Incentives: Problems and Prospects, Assistant Comptroller-General of the Nigeria Customs Service, Mrs. F. E. Umoh observed that one of the problems that had hindered effective use of the policy in developing export manufactures is weak structures that support the scheme. Specifically, Umoh noted that insurance companies which guarantee the scheme do not always fulfill their promise, thus contribution to the failure of the policy alleging that AIICO failed to pay duties on an export it guaranteed. 

According to her, “insurance companies with little financial strength and integrity” who are attracted to most of the MIBS traders do not honour their obligations. “These companies do not honour the conditions of the bonds which they guaranteed,” she alleged. She singled out AIICO for refusing to pay the Customs Service nearly ₦64million in import duty on behalf of its client, Messrs International Fractionation and Margarin Product, Lagos. The figure represents duties on red palm oil imported by the manufacturing company and which “one of its derives products palm stearrim was unlawfully sold in the domestic market without permission form the Honorable Minister of Finance as demanded by law.” However, an official of the insurance company who identified himself as Odunayo told vanguard on phone that all matters pertaining to the duties have been duly settled by the underwriter and as such has no outstanding liabilities on the said transaction, but insisted on personal contact with the head of claims department who was said to be away at the time of going to press.

Insurers of export manufactures and other products complain that guaranteeing exports is highly unpredictable as most importing countries in Europe either reject the order for failing to meet standards or specifications. Consequently, in most cases, they say from the onset there is no guarantee that the goods will be accepted and when it is accepted, the oversea importers crash the prices. On the Customs welfare insurance scheme, Umoh acknowledged that NICON paid over ₦125 million as either death, retirement or other benefits to some personnel or their next-of-kin in 2004. “Also during the year applications from retired officers and men and 212 death claims were lodged, processed and forwarded to insurance broker, Hogg Robinson,” the official stated. Besides MIBS guarantee by insurers, all imports are expected under Nigerian laws to be insured locally. But only a small fraction of the imports are insured while a significant number of imports are not insured at all. According to insurers, those who insure are corporate clients leaving out majority of individual importers with either paper insurances to assist discharge of their cargo or inadequate cover. 

Story By Ifeanyi Ugwuadu

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