Category: Industry

The Federal Government has been urged to review the new policy that discourages the importation of rice and vehicles due to adverse effect on the economy.

The Maritime Workers Union of Nigeria (MWUN) which made the call in a letter signed by its President General, Mr Anthony Nted and the General Secretary, Mr Aham Ubani, said reviewing the policy would help reduce smuggling of the commodities into the country.

The union lamented that many vessels conveying rice to Nigerian ports have been diverted to ports of neighbouring countries during the festive season due to the announcement.

They said: “The policy has made it difficult for genuine rice importers to bring in their products through our ports. The effect is that revenue accruing to the nation is lost to neighbouring countries and some Nigerians who genuinely work in the ports are also denied their source of livelihood.”

They said although they are supportve of the measure, adequate plan must be put in place to serve as alternative.

The union said rather than discourage importation, smuggling is now the order of the day, as poor quality rice has found its way into the markets.

They said inferior rice is not fit for human consumption because of its health implication and effects on the economy, noting that the new tariff and levies are too hasty and could have negative implication on jobs and revenue, adding that 95 per cent of Nigerians who work in Roll On/Roll Off (RORO) terminal were specifically meant to handle imports and exports of vehicles.

The union called on the government to create the enabling environment for vehicles to either be manufactured, or assembled in Nigeria.

“There should be local production of vehicles spare parts, steady power supply and necessary infrastructure,” MWUN said. The workers contended that the policy, if reviewed, would enhance vehicle clearance at the ports and create employment.

The Seaports Terminal Operators Association of Nigeria (STOAN) added its voice, urging the Federal Government to review the policy on rice imports in the interest of the nation’s economy.

The spokesman for STOAN, Mr Bolaji Akinola, said Nigeria loses N1billion daily to the policy on rice importation and the attendant high level smuggling.

“`Before Jan. 2013, rice importers paid 60per cent duty, but when duty was increased to 110 per cent, importers shunned Nigerian ports for neighbouring countries,” Akinola said.

He said vessels bearing rice had been going to neighouring ports where they pay far less duty and the smugglers end up bringing the same rice into the country illicitly.

Akinola said the announcement has also affected the revenue gneration capacity of the Apapa Command of the Nigeria Customs Service.

There has been infighting in the auto industry since the Federal Government unveiled a policy. Some firms are accusing a major competitor of having prior knowledge of the policy, which they it used to its advantage. The Stallion Group has since refuted the claim of Elizade Motors, Coscharis Ltd., CFAO, SCOA and Toyota, among others, but the dust has yet to settle. OKWY IROEGBU-CHIKEZIE examines the policy vis-à-vis its implication for the economy.

SINCE the Federal Government unveiled the automotive policy on October 3, major players in the industry have been trading words. On one side is the Stallion Group, which is in support of the policy; on the other are those against it. The antagonist believe that the Stallion Group owned by the Vaswani brothers got wind of the policy before it was unveiled.

This “insider information”, they claimed, gingered the Stallion Group to import some cars in order to escape the hammer of the policy. Stallion has since denied their claim. The policy aims at discouraging the importation of cars and encourage local manufacturing of vehicles, to facilitate the gradual phase out of used cars, popularly known as ‘tokunbo’.

Under the policy, duties on new and used cars were reviewed to 70 per cent, comprising 35 per cent levy and another 35 per cent duty, from the previous 20 per cent flat rate. While duty on fully built buses meant for commercial purposes will now be 35 per cent instead of the previous 10 per cent. The policy imposes high tariff on vehicles to discourage importation.

Analysts believe the new duty regime will shoot up the prices of new and fairly used cars beyond the reach of the average Nigerian worker.

Analysts argue that prices of imported cars currently hovering between N3m and N5million will, balloon to between N4.8million, and N8million, Tokunbo currently selling for about N800, 000 depending on the year and type, will go for a minimum of N1.28million.

Critics of the policy include Elizade Motors, Globe Motors, Coscharis Nigeria Limited, CFAO Motors, SCOA and Toyota Nigeria Limited acting under the aegis of Auto Manufacturers’ Representatives Group in Nigeria.

In a petition to President Goodluck Jonathan, the group alleged that Stallion Group of Companies had unfair access to the contents of the policy before it was unveiled, thereby creating an unfair competition over others.

The group warned that if the policy is allowed to take-off in its current form, the country would lose about N134billion in revenue due to information leak, which allowed Stallion to use its knowledge of the policy to its advantage.

Stallion, it alleged, made use of the privileged information to open letters of credit for $382 million which covers three years of import for 20,000 cars. The group also alledged that the speed with which Stallion opened the letters of credit on October 2 while the Federal Executive Council (FEC) was still deliberating on the policy indicated it did so to beat the deadline and gain unfair advantage over its competitors.

It claimed that the action was inconsistent with the usual practice of Stallion Group, which was learnt, usually opens such, credit for $100million annually. “It is obvious from this that the proposed automotive policy has been compromised and has resulted in providing undue advantage to one single group”, the petitioner alleged.

The group warned: “ The Federal Government will be committing a grave error if such a group is giving monopoly on the automotive industry in Nigeria.” It urged that a fair and level playing field be provided for all the importers.

The group is seeking a review of the policy, the inclusion of representation from stakeholders and the government to review the policy and report within six months. They also want the policy deferred for two years so that stakeholders can continue their on-going feasibility studies into establishing motor assembly plants in Nigeria.

Mr. Cosmas Maduka, Managing Director of Coscharis Nig Limited , importers of BMW cars, said major auto importers were not opposed to the policy but needed a level playing ground in addition to being carried along in the implementation of the policy.

He said: “Considering the size of our country, with over 167 million people, one million units of vehicles in the automobile industry are very low compared to what you can see around the world. Once the capacity is developed, the automobile industry will be the second biggest industry in Nigeria. If we are not ready to produce, it means that we have thrown away our future.”

“Our concern is for the government to provide a level playing field for every interested party”.

President , Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) Alhaji Mohammed Abubakar wondered why government was in such a hurry to increase tariff on imported cars when no industry is known to produce cars locally. He said: “Government should graduate the levy gradually, may be yearly and also go further to put in place policies to revitalise ailing industries before crippling the sectoral growth with the ill-thought out policy”. He warned that the policy would not only endanger the sector but heighten unemployment. Former Lagos Chamber of Commerce and Industry president Mr. Goodie Ibru said the policy was premature and would lead to job cut. He asked government to have a rethink and do the needful first before implementing the policy.

Mr. Olutoyin Okeowo of Metropolitan Motors said the Original Equipment Manufacturers’ representatives in the country would support the policy.

He dismissed the allegations that members of the auto dealers’ group were not carried along in the documentation of the policy.

The Senate Committee on Trade and Investment also believe in the policy. The committee met industry stakeholders at the National Assembly to aggregate the opinions of industry players on the policy.

Chairman of the Committee stakeholders, Senator Esther Nenadi Usman said at the end of presentations by stakeholders the views showed that they support the policy.

Usman said her committee would ensure that the policy was implemented without imposing further burden on Nigerians.

She said it was obvious from the summation of presentations that “everyone agrees that the automotive policy was welcomed and the implementation accepted”.

Mr. Tokunbo Aromolaran, Managing Director, VoN Automobile Nigeria, who represented Stallion, said the firm had been looking forward to an auto policy that would ensure that vehicles are manufactured in the country.

The company, he said, believed in backward integration.

He said if the policy was extended for two years, there was no guarantee that those complaining would change their mind.

For him, a step forward should be taken to kickstart the manufacturing and assembling of vehicles in the country.

Towards building a car industry, the goverment in the 1970s formed partnership with Peugeot, Volkswagen, Fiat and Daimler-Benz. By the 1980s, most of the companies had stopped operating because of poor domestic patronage, low capacity utilisation, high operating cost and government change of mind on the implementation of the automotive policy then.

Nigerians took to imports, including used cars, thus driving parts dealers out of business because of the high cost and competition from smuggled imports.

In the past, tyre manufacturing companies, such as Dunlop and Michelin, had plants in Nigeria, but today, they have relocated to Ghana because of the hostile operating environment. The challenges facing industrialisation are many. The biggest is the lack of political will to restructure the economy.

The Nation investigation showed that currently Peugeot Automobile Nigeria and Anambra Motor Manufacturing Company (ANAMMCO) are barely surviving. Only Innochris Motor Manufacturing Company in Nnewi, Anambra State, is manufacturing buses.

An engineer, Mr Eto Iyagba argues that there is no reason for the government, to release the policy now,without considering its implications on the public and the economy.

Policy makers, he said, failed to recognise that processes are gradual, especially for foreign investors. The Thai auto industry, he said, experienced its complete transformation over 30 years. The first phase of capacity creation lasted about 10 years, according to him, while the development of integrated local capabilities took another 20 years.

He said: “This suggests that the policy initiative (especially the implementation of an appropriate import tariff regime) has to be gradual and sequential with a logical and people-oriented framework. A significant lead-time is required from initiation to execution of the policy.”

A Lagos car dealer, Mr. Williams Osagie, said the long-term goal for the policy should be the attainment of a net exporter status, especially in West Africa and more generally, sub-Saharan Africa. He advised government not to be in hurry to achieve that that”.

He said: “Thailand, in its own case, achieved a net exporter status after 30 years, supplying Southeast Asia, United Kingdom and New Zealand among others”.

He advised the government to place emphasis on sustainability with a target of developing a fully integrated value chain by attracting foreigners to achieve the transfer of progressive technology and skills in addition to locally develop the required capabilities and competence

The Minister for Industry, Trade and Investment, Mr. Olusegun Aganga, said government planned to re-ignite the auto industry and use it to underpin a new industrial era. He claimed to have identified the pitfalls of past attempts and promised to address them. When he visited South Africa in May, he secured that country’s input into the policy, including technical assistance and information about South Africa’s own policies.

He also approached Nissan and Toyota in South Africa to set up plants in Nigeria. Following the visit, Nissan , in partnership with Renault, indicated its readiness to start assembling semi-knocked-down kits with its exclusive Nigerian distributor. Is this a sign that the policy will work?

Duty Free Alliance Limited, a partnership between Ghanaian investors and Duty Free Holding International, will build and operate duty-free retail shops at the country’s borders at Aflao (Togo border), Elubo (Côte D’Ivoire), and Paga (Burkina Faso).

A duty-free shop is a retail outlet that is exempt from the payment of certain local, or national taxes and duties, on the basis that goods will be sold to travellers who will take them out of the country.

According to Viktor Molnar, a representative of Duty Free Alliance Limited, the shops will provide shopping convenience for passengers and serve as a vehicle to strengthen bilateral relations with neighbours, promote tourism, encourage the consumption of locally-made products and provide employment to the local people.

He said Ghana’s stable democratic environment and the positive economic outlook naturally make the country an attractive place for business and leisure in sub-Saharan Africa, adding that the volume of foreigners using Ghana’s borders either for transit, business or leisure is bound to increase.

“These foreigners will spend money, and the development of more duty-free shopping options is one way of affecting the purchasing decisions of these foreigners. A well-positioned duty-free shop can be used to promote local products and influence Customs revenues.

“Aside from our resolve to meet all legal commitments necessary to obtain endorsement, we also hereby offer to improve drastically the infrastructure and service levels at the border crossing territories. We intend to provide expertise and border checkpoint governance as well as new cabins for the customs and immigration officers on duty next to our shop.

“Ghana stands to benefit significantly from this project. Aside fromcreating huge direct and indirect employment for the people, this project will pay appropriate taxes to the state. The project will also, undoubtedly, improve the shopping experience for travellers,” he said. The project is expected to be completed by early 2014.

The Deputy Minister of the Volta Region, Francis Ganyaglo, said development of the country needs collaborative efforts between government and the private sector, so a project like this is commended by government.

He urged custom officers to give investors the necessary support to build the shops as soon as possible, “because it is a good project that will create jobs for the people and enhance trade”.

The Sector Commander of the Customs Division of the Ghana Revenue Authority (GRA), Ben Beckley, said GRA will give them the needed support to ensure they operate successfully.

 

The annual budget of the Federal Government is central to the success of virtually all sectors of the economy. In Nigeria, delays and poor implementation have been its hallmark. OKWY IROEGBU-CHIKEZE writes that stakeholders in the manufacturing sector, at a forum, stressed the need for proper implementation of the budget to grow the sectors.

Operators have outlined steps to effective budget implementation. They said the late submission of budget proposals by the executive arm of government to the National Assembly and extended deliberation by legislators have remained stumbling blocks on the way of effective budget implementation.

Speaking at this year’s Seminar/Luncheon of the Financial Services Group of the Lagos Chamber of Commerce and Industry (LCCI), its President, Mr. Goodie Ibru, said: “Over the past decades, we have hardly seen budget implementation at the federal level begin in January of any fiscal year. In fact, it is difficult or nearly impossible for private sector operators to accurately forecast when the annual budget will be approved. To illustrate, it took an average of five months and two weeks from presentation to passage and approval of the Federal Government annual budgets in the last 12 years.”

He warned that unpredictable budget approval timelines make planning difficult and cause inefficient allocation of resources.

Ibru, who was represented by the Deputy President, Alhaji Remi Bello, frowned at the recent findings by the probe panel of the House of Representatives Committee on Budget and Appropriation that less than 45 per cent of the capital component of the Federal Government budget was implemented over the past 10 years.

Stressing the need for an early passage of the budget, he added that the private sector relies heavily on the Federal Government budget to take critical investment and financing decisions.

The LCCI chief maintained that beyond infrastructure deficit, weak institutions and corruption, delays and poor implementation of budget were increasingly inhibiting productivity and private sector growth.

Chairman of the Financial Services Group Mrs. Olajumoke Fashanu said budget implementation has become a major challenge at different levels of governance. She said though it has remained a major issue, the case of the Federal Government was quite pertinent considering that over 50 per cent of revenue is spent at the federal level.

Key implementation challenges she said included extra budgetary spending, procurement problems, poor revenue collection and remittance. She berated the government for what she described as weak budget monitoring with spending agencies not accounting for funds allocated to them.

Mrs Fashanu said this constituted a weak link in the budgeting process, resulting in a low rate of performance and inability of the government to achieve most of its target development goals and objectives.

The Director-General, Lagos Chamber of Commerce and Industry (LCCI), Mr Muda Yusuf, said the budget is predicated mainly on oil revenue and, therefore, vulnerable.

His words: “We have assumptions on inflation and exchange rate. If these indices fail, the budget is affected.”

He advised the government on budget conception, preparation and implementation, noting that poor skill in any of the above affects overall delivery.

“Our public servants can be better at implementing budgets through training and learning more about private sector strategies. There should be capacity building in the public sector for budget planners to improve on planning and implementation. The public-private partnership initiative can come in handy here,” he said.

He also said corruption was affecting the successful implementation of public sector budgets.

“Even where projects have been well articulated and approved, corruption often frustrates the delivery of value to Nigerians.

“There is so much talk about fighting corruption, yet there is little action. Unless we address this malaise, there will be no concrete outcome from our annual budgets.

“The issue of value-for-money needs to be tackled more seriously and the crusade against corruption should go beyond rhetorics,” he said.

Earlier, the Guest Speaker and Lagos State Commissioner for Economic Planning & Budget, Mr. Ben Akabueze, said the state internally generated revenue (IGR) accounted for 60 per cent of the state’s annual budget. He said the state accounted for over 70 per cent of national industrial investments and 65 per cent of commercial activities with the GDP estimated at N13.71trillion or $91.40 billion as at last year.

He said Lagos has infrastructural gap due to lean resources, adding to bridge the gap, it has courted the private sector.

Akubeze said: “Our policy focus is driven by public-private partnership, private sector-led growth, transparency and accountability, human capital development, good governance and participatory planning.”

To implement the state’s budget adequately, he said the government engaged in multi-year perspective to budget planning, revenue forecasting capacity, expenditure ceilings, participation of the public in budget preparation and effective procurement system.

Akabueze added that the measures, last year, improved budget performance from 80 to 89 per cent while it increased IGR in addition to improved public service delivery.

He said the state had demystified budgetary system and has remained a benchmark for the federal and state governments.