BEVERLY HILLS, January 28, (THEWILL) – There is a divergence of opinion among stakeholders over the implementation of the new tariff on imported vehicles, which is scheduled to commence in February.
A section of the industry believes it will reduce financial pressure on Nigerians through more affordable automobiles and ease in transportation; others, however, express concerns that the policy might impact negatively on local assembly plants.
The Comptroller-General of the Nigeria Customs Service (NCS), Hameed Ali, had told journalists on Wednesday in Abuja that the management of the Service was expecting an official communication from the Ministry of Finance on the matter.
The Federal Executive Council {FEC} had as contained in the draft 2020 Finance Bill, approved the reduction in duties on tractors from 35 to 10 per cent; on vehicles for transportation of goods from 35 to 10 per cent and 35 to five per cent on vehicles for transportation of persons (cars).
THEWILL findings revealed that the proposal has been generating diverse opinions among stakeholders since November last year when it was announced.
While some argue it will stifle the local automobile industry and worsen the unemployment crisis, others hail the idea, saying it will boost the economy.
Vice President Yemi Osinbajo, had inadvertently sparked the controversy as he tried to push the policy by explaining that it was meant to cushion harsh socio-economic situations in the country.
Osinbajo at the opening plenary of the 26th Nigeria Economic Summit (NES#26) explained that the decision to slash duty on imported vehicles was not to kill the nation’s automobile manufacturing industry, but to reduce the cost of transportation in the face of growing economic challenges.
He had also argued that, with an annual demand of about 720,000 vehicles, as against 14,000 local productions, the national need would not be met if vehicles were not imported.
The new policy, he maintained, does not mean that the government has jettisoned its commitment to boosting local production. Minister of Finance, Budget, and National Planning, Zainab Ahmed, had also told journalists that the reduction in import duties and levies would lead to reduction in transportation cost.
“The reason for us is to reduce the cost of transportation which is a major driver of inflation, especially food production,” she had explained.
Data from the National Automotive Design and Development Council (NADDC) revealed that as of last year, about nine automotive manufacturing companies were assembling vehicles in Nigeria.
The companies include, Peugeot Automobile Nigeria, Nissan Motors, Honda Motors, Innoson Vehicle Manufacturing Company, Hyundai Motor Company, Ford Motor Company, GIC Motor Companies Ltd, JAC Motors and Kia Motors.
A number of companies equally assemble trucks, including Dangote, while Bua had recently indicated interest in the industry, the council also revealed.
Stakeholders believe that with the implementation of the African Continental Free Trade Area (AfCFTA) pact now in force, it has become imperative for the country to streamline its tariff lines, in compliance with the protocols.
The rise in duty and depreciation in value of the naira drove prices of new cars far above the purchasing power of the fast diminishing middle-income earners.
Automobile dealers have also lamented a sharp decline in sales volume due to higher landing cost of imported vehicles, which has been further amplified by higher tariffs.
The federal government had In November 2013 announced the introduction of a new automotive policy, which was geared towards discouraging the importation of wholly assembled automobiles and encouraging local manufacturing.
The policy allows local assembly plants to import completely-knocked-down vehicles at zero percent duty, and semi-knocked-down vehicles at 5 per cent duty, while importers pay a 70 per cent duty on new and previously-owned vehicles.
The main thrust of the policy was to encourage local car production/assembly plants while cutting importation through raising import duties.
However, seven years down the line, the policy has failed to achieve the desired outcomes, as Nigeria’s domestic vehicle production capacity remains under-utilized.
This has continued to have very heavy consequences on the economy, thereby prompting the slash in duties.
Commenting on the proposed duty cut, Director-General, Lagos Chamber of Commerce and Industry, Dr. Muda Yusuf, noted that the present tariff regime is not only making vehicles unaffordable, thereby causing high cost of transportation, it is also making smugglers to take over the automobile sales business, leaving the legitimate dealers disadvantaged.
Yusuf spoke in a telephone interview conducted by STAR FM 101.5 on the Early Rush Show on Monday and monitored by our correspondent in Lago.
He believes that rather than go back on the proposed slash on tariff, the government should encourage those who have invested in vehicle assembly by reducing the import duties of their raw materials.
Government should also reduce other forms of taxes for them, insisting that the interests of both the citizens and investors matter in economic policies.
His words: “You see, in economic policy process, the interest of the citizens matters; the interest of investors also matters. There has to be a good balance.
“A situation where we’re imposing a tariff of 70 percent on vehicles, that’s outrageous. Because what has been happening now, especially for new cars is that you pay 35 percent levy, you pay 35 percent duty. So, you’re bringing a car of about $100, 000, you have to pay that plus $70, 000. It is too much.
“Now the government is saying reduce the levy component to 5 percent, and the duty component which is 35 percent is still there. So 35 plus 5, that is still 40 percent. Is that not fair enough to protect any industry?
“If you impose a tariff of 40 per cent to protect an industry and that industry did not survive, then there must be something wrong with the industry.
“We have to be careful not to unduly penalize the citizens in the process of automobiles. Look at how costly cars are; is it a crime to ride a car?
Fairly used automobile dealers visited by our correspondent said the policy would be a big relief to them if only those with vested interest will allow it to see the light of the day.
“We are waiting to see the implementation. It will be a very good thing if those who see it as a threat to their business interest allow it to happen”, Dominic Peters, a car dealer in Ikeja, Lagos, told THEWILL.
But the Customs chief appears certain that commencement of implementation is around the corner.
“We are the proponents of the new tariff. I’ve been torn apart by many people criticizing it, saying I used my connection to get it done. But it is in the overall interest of Nigeria’, Ali told journalists.
“Now, it has become a law. We are waiting for the finance minister to give us a formal conveyance of that Act. Once we receive it, we commence implementation immediately and inform our commands.”
However, a source conversant with happenings at the ports told THEWILL, on the condition of anonymity, that the new tariff may not lead to significant drop in prices of vehicles as NCS may still take what the importers will save from the duty cut by increasing other charges.
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