The Federal Government has, for the third time, postponed the implementation of the 70 per cent tariff on imported used vehicles. Some stakeholders argue that the latest shift in date to July 1, this year will enable them keep their jobs as it will give the assembly plants enough time to produce adequate vehicles to meet local demands. TOBA AGBOOLA reports.
the Federal Government last year directed the Nigeria Customs Service (NCS) to collect 35 per cent as duty and 35 per cent as levy for imported used cars and buses from July 1. This implies that beginning from that date, imported cars and buses would attract cumulative tariff of 70 per cent.
The circular had explained that the new increases in duty were in line with the Federal Government’s new automotive policy of revamping the automotive industry, encouraging local production of vehicles, enhancing entrepreneurial inclusiveness and generating employment for Nigerians.
Consequently, the government approved import duty waivers on imported Completely Knocked Down (CKD) components while Semi-Knocked Down (SKD) components will attract only five per cent duty without any levy.
No doubt, the reasons the government proffered for raising the tariff are laudable. The policy will not only attract investors to the country but also enhance employment opportunities. It is instructive that since the policy was announced, many automobile industries have expressed interest to begin manufacturing vehicles in the country with some already at the stage of rolling out locally made vehicles. But the government postponed the July 1, 2014 implementation date and decided to implement the policy in two phases of 35 per cent to January 1, this year. It was again postponed to July 1, from April 30, 2015, bringing the number of times the tariff implementation date will be shifted to three in six months.
The Nation confirmed that the government’s decision to further extend the implementation date was informed by the fact that none of the assembly plants has manufactured vehicles in commercial quantity. In addition, there were issues bordering on standardisation, as well as the stiff opposition from some stakeholders. However, the implementation of the second phase of the 70 per cent tariff would have made Nigerians pay more for imported second-hand vehicles from April 30, 2015, thereby depleting the dwindling purchasing power of the masses.
It would be recalled that government while beating a retreat in July 2014, had stated that the postponement was to enable local vehicle assembly plants to ramp up production in order to meet the nation’s growing demand for brand new vehicles. But so far, the new vehicles produced by Innoson Motors and Stallion Motors costs between N1.3million and N1.6million
An end of year statement issued by the National Automotive Council (NAC) said government deferred the implementation of the new tariff to April 30, 2015, due to the delay in the establishment of a vehicle finance scheme.
Some industry watchers are however praising the decision by the government. Many of them noted that the opposition was already waiting to cash in on it, in the vain hope that the backlash of the implementation of the policy would have created a spiralling inflation and a new disequilibrium in the economy.
According to the Managing Director, First Rit Nigeria Limited, Mr. Eric Umezurike,the implementation of the policy will no doubt throw many agents out of job, adding that the postponement would enable the agents have jobs to do in the main time while looking for other alternative means of livelihood.
He stated that agents were ready to look government in the face over its implementation. “We were waiting for government to begin the implementation; we wish to make a point. The issue would have been used not only to paint Mr. President black, but also as a heartless person, who does not want Nigerians to have access to even tokunboh (second-hand) cars,” Umezurike said.
He was, however, quick to add that it was not that the agents were averse to any policies that would encourage Nigerians to use new cars, only that the present approach was considered too hasty and lacking in proper implementation.
The Director-General, NAC, Aminu Jalal, who noted that Nigeria imports about 400,000 units of vehicles annually, with about 300,000 being second-hand, said staff of the collaborating bank, Wesbank of South Africa, delayed their planned trip to Nigeria to set up operations from September 2014 to January 2015. He added that this led to the shift in the date, then.
“The arrangements for the establishment of the affordable vehicle finance scheme suffered a delay of about four months due to the Ebola Virus Disease,” he said.
National Coordinator, Maritime Advocacy and Action Group (MAAG), Alhaji Alhassan Dantata, who confirmed the development, praised the presidency for having a listening ear.
According to him, the extension is a confirmation of the fact that government can listen when confronted with genuine facts about issues.
“MAAG wishes to use this opportunity to thank the President, Dr. Goodluck Jonathan, the Minister of Industries, Trade and Investment; Dr. Olusegun Aganga and the Director General of NAC, Alhaji Jalal for seeing reason with the position of MAAG on this issue,” he said. Dantata explained that even though MAAG is in support of the auto policy, a proper and realistic roadmap needs to be designed for its proper implementation.
His words: “While we are not opposed to the new policy, our position has always been that the infrastructures must be visible on a level playing field and that the automobile plants must not take advantage of it to the detriment of the average Nigerian. Already, there are fears that prices of imported, used and new vehicles will skyrocket, but we are happy that the extension has been granted”.
President, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Alhaji Badaru Abubakar called on the Federal Government to further delay the take-off of the policy because of its potential to inflict hardship on the masses.
He said the delay is necessary to enable stakeholders resolve the lingering controversies generated by the policy and reach a consensus on how to effectively implement the policy for the benefit of the sector’s investors and the economy at large.
“Having reviewed the lingering controversies between government and auto industry stakeholders on the implementation take-off date of the new auto policy in Nigeria, the chamber wishes to add its voice by expressing some concerns on the short moratorium period given on the effective take-off date of the policy. If implemented, it will not only constrain them to operate optimally but also negatively affect sustainable transformation of the economy as it would lead to fall in demand of imported used vehicles,” Abubakar said.
According to him, this will invariably affect negatively the transportation sector; erode the welfare of the citizens by reducing their purchasing power; breed unnecessary monopoly due to privilege/insider information about the government policy; result in increase in unemployment, low income, and inflation, amongst others.
He said to ensure that the good intention of government on the policy becomes a realityand all interests addressed , there is need for the Federal Government to put its house in order before commencing full implementation of the policy.
He said this is because it is capable of further encouraging diversion of cargoes to neighbouring countries if it is not halted to allow for sufficient moratorium period given to auto industry operators/stakeholders. He said: “NACCIMA believes that the implementation of the sharp increase in import duty on fully built vehicles to 70 per cent (35 per cent duty plus 35 per cent levy) from 22 per cent (20 per cent duty plus 2 per cent levy) will place the cost of vehicles beyond the reach of about 90 per cent of Nigerians, increase the cost of transportation by at least 50 per cent, increase inflation level and create huge gap between demand and local supply capacity of automobiles due to infrastructure challenges.”
According to him, supply currently stands at a pathetic 45,000 units while demand stands at 800,000 units per annum. He said smuggling activities from neighbouring countries will boom, especially from Cotonou Port with imported vehicles still dominating the market place since Nigeria has about 1,400 illegal entry routes, over 80 poorly manned borders and a yet to be fully-equipped Customs structure, and so on.
Another stakeholder, Chairman of Oris Velvet Autos, Mr Alfred Omoghiade, advocated for a 10-year incubation period before it can be fully implemented by the Federal Government. He said: “Based on certain fundamentals in the nation’s economy, the auto policy ought to have been given at least 10 years of incubation before its full implementation. This is to ensure that the right enabling environment is in place and consequently guarantee its success.”
Omoghiade noted that with the hurried implementation, the nation would see undue advantage being given to a few people who are cashing in on the policy to milk the nation dry through unscrupulous practices to make huge money at the expense of the national economy. The policy which, he said, had failed to yield the expected dividends because the local production of cars and vehicles as key elements of the policy is not being met just as the nation is losing much revenue at the ports.
He, therefore, called on the Federal Government and its agency, NAC, to take urgent steps to review the current policy in the interest of the nation’s economy. Omoghiade recalled that the policy came into effect early July last year with the aim of localising the manufacturing of vehicles with the assembly plants projected to roll out an aggregate of 300, 000 vehicle units within the next two years and specifically 23, 000 vehicle units of various brands of automobiles produced by the plants between June and December 2014.
“The policy, in the thinking of government, would not only help reduce the pressure on foreign reserves by discouraging importation but also lead to massive job creation and enhance the wellbeing of the economy. Accordingly, with the full implementation of the auto policy, tariffs jumped from 20 per cent duty on passenger cars (PC) and 10 per cent on commercial vehicles (CV) to 70 per cent and 35 per cent, respectively, he said, adding that Federal Government should as a necessity wade in and review the policy especially in view of the prevailing economic situation in terms of job losses at the ports and retarded business activities of other stakeholders.
He noted that while the policy was a noble vision, the implementation had been hasty leading to contradictions and no concrete benefits yet to the nation as planned.
Last week, the National President, Association of Nigerian Licensed Customs Agents (ANLCA), Prince Olayiwola Shittu, recounted his disapproval over what he considers a counterproductive strategy. “We have always been critical of this automotive policy and we have not changed our position. By the time July comes and the 35 per cent levy is added, it will be a problem because there will be no cargo through here, our people will lose jobs and we will lose the whole revenue,” he said.
The policy, which has five components, includes most importantly the promotion of market development and protection of local manufacturers. In order to support this, tariffs will be increased on fully assembled vehicles until the local production of cars and content procedures become much more competitive.
Recently, Jalal said the implementation of the 35 per cent import levy on used cars will now begin on July 1, as the Federal Government has once again shifted the commencement date by two months. He said a circular had been issued by the Federal Ministry of Finance deferring the implementation of the levy to that day.
