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Auto policy: Importers seek duty review

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Auto policy: Importers seek duty review

As the cost of importing used and new vehicles rise by 400 per cent, importers are pressing for a downward review of import duties. BAYO AKOMOLAFE reports

Four years after, the national automotive policy introduced to revive ailing Nigerian auto industry has brought hardship to importers.

The policy was originally intended to encourage local manufacturing of vehicles and discourage importation of cars in order to gradually phase out used cars in the country.

It was an import substitution strategy to reduce importation of vehicles and boost the capacity of domestic vehicle assembly plants.

The implementation of the policy commenced in July 2014, shortly after it was introduced in October 2013 with high-priced tariff on imported fully built vehicles.

The policy also offered tariff rebate for Semi Knocked-Down (SKD) meant for assemblage of vehicles in the country.

Effects

However, the economic recession and subsequent crash in exchange rate of the naira led to high cost of imported vehicles and a drastic drop in automobile sales in the country in the last three years.

It was leant that roll on -roll off vessels were coming to Lagos port with only 20 per cent of their capacities because of high tariff and forex scarcity.

For instance, between this week and next week, New Telegraph gathered that  eight vessels would berth at Port and Terminal Multi-services Limited (PTML), Tincan Island Port with two 600 units.

The vessels expected include: Togo, 300 units; Tema, 400 units; Senegal, 300 units;  Lagos, 400 units;  Brasile, 250 units; Cotonou, 400 units;  Cameroun, 300 units and Silver Ray, 250 units.

According to the Lagos Chamber of Commerce and Industry (LCCI), there has been an increase in the number of vehicles by between 100 and 400 per cent.

The chamber’s Director-General, Mr. Muda Yusuf, explained that inflation had made  a new car of 1.8 litre engine capacity to cost as high as N18 million, while a two-litre engine capacity costs N20 million, three-litre new Japanese car costs N30 million, a 30-seater bus costs N45 million and 18-seater bus costs N29 million.

Lamentation

He explained that the affordable vehicles promised by government at the inception of the policy were yet to be seen.

Yusuf noted that the economy had suffered incalculable consequences and shocks as the cost of vehicles had attained levels that were unprecedented in the history of the country.

The director general pointed out that the increase in duties on imported vehicles introduced four years ago to encourage investment in local assembly plants had failed.

Yusuf said the policy was detrimental to most investors in the automobile sector in Nigeria as the high cost of vehicles had created low sales and massive erosion of profit margin.

With a zero per cent duty on the SKD, the director general explained that more jobs would be created in the automobile industry, maritime sector activities will be boosted,  car assembly plants would  be better off and the middle class would have better access to vehicle ownership.

Efforts

It would be recalled that in 2013, the Federal Government raised the import duty on cars from 22 per cent to 70 per cent and crashed import duty on SKD/CKD components.

Despite the step taken by the government, the automobile sector had been hit by over 100 per cent currency depreciation.

Yusuf added: “The vehicle assemblers are dependent on imports just like  the importers of vehicles.

“This is not in consonance with the objective of import substitution strategy, which thrives better in the context of high domestic value addition.

“The economy could only benefit from the inherent values of import substitution, which includes backward integration, multiplier effects, conservation of foreign exchange, job creation and reduction of import bills.

According to the director general, high-end corporate organisations are now buying used vehicles for their organisations.

Yusuf explained that the set up was inappropriate for an economy that was heavily dependent on road transportation.

Review

Managing Director of  Okpoto Logistics Limited, Mr. Samuel Elem,  urged the government to immediately  review the nation’s automotive policy.

He said that the Federal Government should slash the import duty of 70 per cent on new vehicles to 35 per cent in order to make vehicles affordable to Nigerians.

Elem stressed  that the import duty on commercial vehicles and used cars should be reviewed downwards to 20 per cent while importation of Complete Knocked-Down (CKD) and Semi Knocked-Down (SKD) components should  fall to zero duty.

Last line

Government should review the auto policy in order to strengthen the local assembly plants and create more jobs for the youths.

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