Insight

Importers groan over failed auto policy, low patronage, smuggling

The automotive policy has derailed from the Nigeria Industrial Revolution Plan (NIRP) envisaged by the Federal Government and has affected the Nigerian economy negatively as it failed to address smuggling and massive importation of used vehicles, BAYO AKOMOLAFE reports

With the various auto assembly plants licensed by the Federal Government, automobile merchants and importers have said that the skyrocketing prices of both used and new vehicles have put their sales to low ebb since the beginning of the year. Also, they complained that the implementation of new tariffs and the current exchange rates have adversely affected the cost of shipment, clearance and sales of automobile in the country.

Regardless of the complaints, in 2020, the National Bureau of Statistics (NBS) said that the country spent N1.28 trillion to bring used vehicles into the country. Although, government had explained in its new Finance Act that import duty on tractors had been reduced from 35per cent to 5per cent; mass transit vehicles (transporting more than ten persons) and trucks cut from 35 per cent to 10per cent and import levy for cars, 35per cent to 5per cent, noting that the reduction in import duties and levies was targeted at reducing the cost of transportation, but this does not seem to have affected the sector positively so far.

However, findings reveal that the Nigerian Automotive Industry Development Plan (NAIDP) 2014—2024 designed to meet the country’s demand has so far failed to achieve its purpose. According to data obtained from the United Nations’ comtrade portal, United States exported $589million worth of used and new vehicles into Nigeria in 2017. Also, it exported used vehicles valued at $714million in 2018 and $710million in 2019 to Nigeria. Besides, China exported $365million worth of vehicles in 2017, $500million in 2018 and $399 in 2019, while India shipped $228million worth of vehicles into the country in 2017, $480 million in 2018 and 252million in 2019. According to the United States Department of Commerce (USDC), Nigeria imported some 131, 079 units or 31.9 per cent of the vehicles from America alone. Worried by the high cost of clearance, the automobile importers told New Telegraph that the exchange rate and the delay by the Nigeria Customs Service (NCS) in enforcing the tariff have affected their auto mart,especially the new cars. According to the Sales Manager, Peters Autos Nigeria Limited, Mr Bolaji Rotimi, only passenger buses importers were not feeling the heat in the market.

He noted that other importers had not benefited from the deal. Rotimi added that the idea to reduce duties on tractors and other vehicles for transportation of goods from 35 to 10 per cent was good, saying that the reduction in duties on cars from 35 to five per cent would not affect the local auto assemblies. According to him, the local assembly plants have no capacity to meet the annual demand of 800,000 units of vehicles, noting that all the plants have no combined capacity to produce 20,000 vehicles yearly.

Issues

The former Director General of the Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf explained that the policy had not only failed to achieve the desired outcome, but has adversely impacted the cost of doing business, the welfare of the people, government revenue and the capacity of the economy to create jobs. Yusuf noted that other implications of the auto policy to the economy include, high transportation cost resulting from the prohibitive cost of vehicles largely because of the high import tariff and levy, increase in smuggling resulting from the high import duty and huge loss of Customs and Nigeria Port Authority (NPA)’s revenues as vehicle imports from official channels drop and smuggling increases. He said: “The automotive policy, in its current form is not sustainable. It is also not in consonance with the Nigeria Industrial Revolution Plan [NIRP], which is the main industrial policy document of the current administration.

Failure

Yusuf explained that the NIRP supports the strategy of resource-based industrialisation, however, eight years into the implementation of the auto policy, he noted that not much progress had been made, even though over 50 vehicle assembly plant licenses have been is-sued as manufacturers and other subsector of the economy and investors suffer from the high cost of delivery vehicles and sharp increase in haulage cost.

High side

According to him, “car ownership is completely beyond most of the middle class. These unintended consequences and collateral harmful effects on the economy and welfare of citizens are incalculable.” However, he said that the auto policy should be immediately reviewed in the light of its copious shortcomings.

For instance, Yusuf noted that import levy on imported vehicles should also be reviewed and government should give further tax concessions and waivers to the assembly plants in the spirit of the auto policy. He said: “Semi Knocked Down (SKD), should all attract 5per cent, while Completely Knocked Down (CKD), should attract zero duty to incentivise domestic vehicle assembly.” Echoing him, the Director-General of the Manufacturers Association of Nigeria (MAN), Mr. Segun Ajayi Kadiri explained that the reduction in tariffs on fully built vehicles does not promote the government’s earlier policy on the automobile sector and the policy will negatively affect auto assembly plant investors.

He said: “We have indicated our position before that we did see that the reduction in tariffs on fully built vehicles does not promote the government’s earlier policy on the automobile sector. Those who have made investments in the assembly plants are going to be negatively impacted by this development.

So, there is no way the policy was being helped by the more recent policy of the government in reducing the tariffs and bills. I don’t think it has helped us.” Also, a car importer who identified himself as Bobade Aina said that the auto policy had not favoured business owners, noting that the delay in clearance was frustrating and demurrage were on the high side. He lamented that no government policy had favoured anyone in the country, even business owners.

Aina noted: “The exchange rate is not helping at all and the dues keep going up. The closure of the borders has also influenced smuggling. The truth is nobody can pay a complete duty of a vehicle. The risk and demurrage is on the high side. The government has not made things easy for importers because we have to always go through the agents and we cannot know the actual amount of duty to be paid.” Also, the Managing Director of Faflay Nigeria Limited, Ademola Ogungbemi said that nothing has changed since the proclamation of tariff reduction.

He complained that automobile market was not moving because of the high exchange rate which has affected the cost of clearing at the port. However, he noted that there was no way the country’s need would be met if vehicles were not imported. Ogungbemi explains: “What I expect government to do is to force its agencies to patronise locally made vehicles for official assignments, while government should encourage importation pending the time the local assembly plants will meet the country’s auto demand.” Similarly, the General Manager, Sales, Oktopo Logistics Nigeria Limited, Mr. Samuel Okafor, explained that automobile sellers were yet to feel the effect of the duty reduction. He noted that devaluation of naira had become an obstacle to the sector since the last quarter of 2020. Okafor, however noted that more imports were still coming into the country despite the difficulties in sourcing forex at the current exchange rate. Reacting, the NCS, Tincan Island Port Command’s Public Relation Officer, Mr Uche Ejesieme, explained to New Telegraph that the service had commenced the implementation of the fiscal policy on duty reduction for some categories of vehicles following the presidential directive.

He said: “With regards to cars, the circular only affected brand new vehicles which hitherto was paying 35 per cent duty and 35 per cent levy, but now reduced to the same rate of duty and 5 per cent levy as against 35 per cent. “For used vehicles, the same rate remains, 35 per cent without levy. Apart from these there is nothing like other charges from Customs. Issues pertaining to duties, including Value Added Tax (VAT), surcharge and ECOWAS Trade Liberalisation Scheme (ETLS) are all statutory collections.”

Ejesieme explained that the implementation of new tariff on vehicles and tractors slashed had taken off as promised by the government. Also, the spokesman at the NCS’s Port and Terminal Mult-service Limited Command, Mohammed Yakubu explained why there was variation in the valuation of duties paid on vehicles at every terminal, saying Customs had uniformity and guideline for importers on automobile. According to him: “If you have accidented vehicles, you are entitled to duty rebate, if you have a new vehicle of year 2020 model with 8,000 speedometers it does not attract levy. The disparity comes from the levy payment which is determined by the speedometer of the vehicle.

If it is a brand new vehicle, the importer will pay the same duty in all the ports.” Yakubu also stressed that VAT does not come to Customs, saying that the service collects the 7.5 per cent on behalf of Federal Inland Revenue Service (FIRS). In 2020, the Customs Comptroller General, Col Hameed Ali (rtd) had urged the Federal Government to reduce the levy on imported cars to 10per cent in order to decrease smuggling from neighbouring countries. Already, the Federal Government had assured that the decision to slash duty on imported vehicles was not an attempt to kill the nation’s automobile manufacturing industry, saying that the reduction in import duty would boost the transportation industry and that it would have positive effect on other industries, especially the manufacturing sector. Ali explained that the vehicle tariff reduction, as contained in the 2020 Finance Act was initiated by Customs to ease the cost of transportation in the country. Also, Minister of Finance, Budget, and Na-tional Planning, Zainab Ahmed, said that the reduction in import duties and levies would lead to reduction in transportation cost.

Between Q3 2019 and Q2 2020 Nigeria, the National Bureau of Statistics (NBS), recorded the sum of N1.28 trillion as the value of used vehicles imported into the country, compared to N899 billion recorded in the corresponding period of Q3 2018 and Q2 2019. Statistics by the Nigerian Ports Authority (NPA)’s shipping position has revealed that the country took delivery of 410,443units of used vehicles through the Port and Terminal Multi-services Limited (PTML), Five Stars Logistics and Lagos Port in the last three years.

The huge imports were recorded as the various vehicle assembly failed to meet demand, leading to used vehicles’ importation to soar to N1.52trillion ($4.17billion) to Nigeria between January, 2017 and December, 2019. In 2013, the new automotive policy was introduced by the President Goodluck Jonathan administration as part of the economic transformation agenda towards reducing the huge import bills on vehicles. Government’s intention was to promote investments in affordable made-in-Nigeria automobile. For the auto policy to succeed, the Federal Government in 2014, announced a hike in tariff for new and old imported vehicles to make bringing them into the country commercially unattractive. As a result, the government raised tariff on duty from 10 per cent to 35 per cent. It also raised the levy from 10 per cent to 35 per cent, making it 70 per cent for both duty and levy.

Findings reveal that despite the National Automotive Design and Development Council (NADDC)’s proposal to impose higher import tariffs of 100 per cent on Fully Built Units (FBUs), and 125 per cent on used cars, the surge on the imports has continued to flourish at the ports. Worried by the trend, the Director, Policy and Planning of the council, Mr Farouk Umar said while listing some proposed amendments in Abuja at the Stakeholders’ Review on Draft Automotive Policy and Nigerian Automotive Industry Development Plan (NAIDP), that the NAIDP would include plans to ensure that all licensed assemblies achieve a 20 per cent local content inclusion target within three years from the adoption of the review. Umar listed other proposed amendments to the policy and NAIDP to include proper definitions for what constituted Semi Knocked Down (SKD), and Completely Knocked Down (CKD). On local content, he explained that the NAIDP would include plans to ensure that all licensed assemblies achieve a 20 per cent local content inclusion target within three years from the adoption of the review. He added that the NADDC protections list of locally assembled vehicle should be populated with vehicles at CKD level that are able to reach an annual volume of 5,000 units. Also, NADDC Director-General, Mr Jelani Aliyu, explained that the draft policy was re-inaugurated in 2013 and a definite plan for implementation, while NAIDP has announced with clear fiscal guidelines and programmes. The NAIDP, which was to run initially for 10 years with periodic properly phased reviews, has its main objective to bring back vehicle assembly operations and develop local content. So far, 49 licenses have been issued to automobile manufacturers in the country to assemble vehicles of all kinds. But only few of them have so far been able to commence operation, they include Peugeot Automobile Nigeria (PAN), Nissan Motors, Honda Motors, Innoson Vehicle Manufacturing Company, Hyundai Motor Company and Ford Motor Company.

Others are GIC Motor Companies Ltd, JAC Motors and Kia Motors, KOJO Motors (Yutong Buses), Caledonian Motors and Metropolitan Motors among others. Notwithstanding the number of assembly plants in the country, it was gathered that there has been massive smuggling of used vehicles through the various porous borders in the country. Importers and key players in the automobile and shipping industry, who expressed their displeasure towards the impact of the auto policy in the country called for a review of the policy in order to reduce the rate of smuggling of vehicles and promote automobile business in the country.

Statistics

Regardless of the complaints and explanation, findings by New Telegraph revealed that no fewer than 10 vessels berthed with 3,400units at the Port and Terminal Multiservices Limited (PTML), Tincan Island Port in April, 2021. According to the Nigerian Ports Authority (NPA)’ s shipping position, expected at the terminal include Grande Congo laden with 350 Units; Grande Cameroon, 450units; Grande Lagos, 300units; Grande Sierra Leone, 400units; Grande Luanda, 400units; Grande Costa D’’avorio, 350units; Grande Tema, 400units; Pagnanella, 350 units; Grande Togo, 300units and Repubblica Argentina, 400units.

Last year, the NPA shipping position’s statistics revealed that Grande Marocco offloaded 350units of used vehicles this month. Others were Grande Tema, 400units; Grande Costa D’avorio, 350units; Grande Lagos, 400units; Grande Cameroun, 350units; Rep Del Brasile, 300units; Hoegh Singapore, 400units; Grande Sierra Leone, 350 units and Grande Dakar, 400units. Also, between January and September 2019, a total of N116billion revenue was generated from vehicle importation. The NPA import statistics revealed that between September and August, 2019, 5,200 used vehicles were offloaded at the terminal.

In September, Grande Togo with 350units; Hoegh Xiamen, 400units; Grande Tema, 400units; Grande Cameroon, 350units; Grande Lagos, 400units; Rep Del Brasile, 300units; MSC Christiana, 400units and Grande Congo, 350units. Also in August, when the borders were closed, 2,250 units of used vehicles were off loaded from six ships, with Heogh Xiamen leading with 400units; Grande Tema,400units; Grande Lagos, 400units; Grande Morocco, 350Units; Grande Ghana, 350units and Grande Togo, 350units.

 

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