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By Pita Ochai
Since the Federal Government announced the increase in tariff for the importation of fairly used vehicles (Tokunbo) into the country under the “New Automotive Industry Policy Development,” the hope of some low income earners owning their cars seems dim
Under the new policy announced in October last year, imported vehicles are expected to attract an effective tariff rate of 70 percent comprising 35 percent import duty and 35 percent surcharge as against the current 20 percent paid. The increased tariff was imposed to discourage importation of used vehicles and revamp local assembly. TheEconomy’s findings reveal that a Toyota Camry of 2000 model which was previously cleared with about N100,000 using 20 percent duty, now takes over N300, 000 as import duty under the new automotive policy of 70 percent. The effective date for the implementation of the policy was April, this year.
However, the policy has seen several controversies since it was announced. Interest groups including the National Association of Chambers of Commerce, Industries, Mines and Agriculture (NACCIMA), the Nigeria Labour Congress (NLC), Maritime Workers Union of Nigeria and car dealers among others have condemned the policy. The NLC President, Comrade Abdulwahed Omar, specifically berated the Federal Government for initiating anti-people policies. The Maritime Workers Union has threatened to embark on industrial action if the government implements the policy.
But President Goodluck Jonathan said that the vision of his administration in revamping the automobile industry to export locally manufactured cars would soon be a reality. Recently, the president, who was presented with three locally assembled Nissan vehicles – a saloon car, pick-up van and SUV, said that when he declared in 2013 that Made-in-Nigeria cars would be rolled out in the country in April 2014, and that Nigeria would soon be exporting cars, his critics doubted him.
Not a few have, however, faulted the new automotive policy. Stakeholders in the industry contend that the policy may not be successful given the porous nature of Nigerian boarders. They liken it to the ban on importation of foreign rice which was designed to encourage local production which compelled importer to resort to the smuggling of the product from neighbouring countries while Nigeria lost huge revenue that would have accrued to it.
Samuel Akpobome Orovwuje, founder, Humanitarian Care for Displaced Persons, said the new policy initiative appears well intended but the basic fundamentals were left out, particularly on the proposed implementation of the new automotive policy. To him, the policy is clearly not the way to go in Nigeria’s development agenda. It defeats any real or imagined attempt to jump-start industrialization process. The proposed policy should not be about the no-more-tokunbo-cars, but about local production and usage, and above all, consumption. “Sadly, the policy also infers, by good measures, that projects such as the Ajaokuta Steel mills, meant to supply iron, a vital component for manufacturing, will almost never be re-visited. The government lacks the real vision to birth a made-in-Nigerian car,” he said.
Orovwuje said that Nigeria makes so much motion without movement about its aspiration to be among the 20 leading economies in the world by 2020. According to him, China, Brazil, India and South Africa have real intentions to fundamentally define their industrialization as making serious efforts to deepen local production. “The National Automotive policy without local content is also a mirage. All the Technology Incubation Centres meant to build capacity for industrialization have been abandoned and are just conduits for siphoning money from the public purse. The question now is what is the government’s ambition about a made-in-Nigeria car? Besides, how many jobs will be created by a local car assembly plant with very low downstream activities (production) and same for the upstream activities (marketing) in the value chains?,” he asked.
Orovwuje believes that the policy will only produce a vehicle assembly plant of cars whose parts would not be made or fabricated in Nigeria. “The sad reality of the policy is that it will grant Nissan and others all manners of tax concessions to the point of allowing them to engage, practically, in dumping. For instance, the concession that allows Nissan and any other potential car assembly plant to bring in totally knocked down parts at zero percent tax tariff is alarming and unthinkable,” he said.
Many see the increase in car importation tariff by 70 percent of the value as an anti-people policy. In the global north, where cars are locally manufactured and sold, most cars are bought on credit. In Nigeria, interest rate on loans is about 21-29 percent with all manners of hidden charges. By and large, credit facilities are given to foreign businesses and governments, whilst the majority of the people in the informal economy literally have to pass through the eyes of the needle to secure loans from banks.
But Olusegun Aganga, Minister of Industry, Trade and Investment, insisted that the initiative would promote massive investments in affordable made-in-Nigeria cars to limit excessive imports. Aganga explained that his visit to South Africa resulted in the signing of a Memorandum of Understanding (MoU) to secure more inputs into the new policy as well as technical-know-how. He added that he discussed with global car manufacturers on the need for them to set up plants in Nigeria. “The policy will not result in banning of the importation of vehicles in Nigeria but focus on promoting investments in affordable made-in-Nigeria vehicles. What government will do is to raise the tariff on importation of such vehicles to discourage influx of used cars into the country and encourage local manufacturers to enhance capacity utilisation in the local industry. Importation of Tokunbo vehicles will not pose a threat to the new plan,” Aganga said.
In the same vein, Aminu Jalal, Director General, National Automotive Council (NAC) described the new policy as a step in the right direction. “Nigeria spent N550billion on importation of cars, buses and trucks, which does not include tractors and military vehicles. We also spent about N500 billion on spare parts and N150 billion on tyres. Now with the new policy, we will support local car plants to make standard cars at globally competitive prices, which will boost the local content policy of government. To assemble a car locally, we need about 2,500 different parts. If many cars are made locally and sold in the country, that will encourage local manufacturing of these parts, thereby creating more jobs and wealth for our economy,” Jalal said.
According to government, increase in tariff will reduce the huge amount expended annually on importation of cars, as report shows that Nigeria spent about N550billion importing cars in 2010 and about $3.4billion in 2012.
No doubt, the project if well implemented, would create employment opportunities locally, and boost technological development. It is also projected that this will reduce significantly the $3.4 billion expended on vehicle importation annually. To bring the dream to reality, three automotive clusters would be created in Lagos/Ogun, Kaduna/Kano, and Anambra/Enugu states as the locations of the new vehicles to enable them share resources and reduce cost of investments. Government believes that this measure will lead to the revival, expansion and development of the petrochemical and metal/steel sectors which in turn will culminate in the return of tyre manufacturing industry to support the automotive sector. As incentives, government proposes to make use of only locally assembled vehicles as official cars as it was the case in the Murtala/Obasanjo (1976-1979) era.
However, these measures are not really novel, as the country had gone through the same route in the past; which culminated in the establishment of five assembly plants – ANAMMCO in Enugu, Steyr in Bauchi, Leyland in Ibadan, Peugeot in Kaduna and Volkswagen in Lagos. But the plants died gradually due largely to government’s lack of commitment, insincerity and unfaithfulness to its policies as well as corruption in high places, inconsistent policies and misplacement of priorities.
Indeed, some car dealers who spoke with TheEconomy, were worried about the policy inconsistencies of government. Mr. Adel Charles, the manager of Adel Motors, Ikorodu, Lagos said this is not the first time government is talking about automobile policy in Nigeria. “The problem with this government is policy inconsistency and lack of adequate implementation framework, even on important issue that affects national development,” he said.
Mr. Paul Nwosu of Pauline Motors, Apapa, Lagos urged the government to give sufficient time line for the local automobile industry to be adequately restructured before increasing the tariff on imported Tokunbo vehicles. “This is because aside from the effect this policy may have on micro auto dealers, a lot of people now depend on these Tokunbo vehicles for transportation across the country. So, government must take everything into account before implementing the new policy,” Nwosu said.
According to him, the big car manufacturers are in partnership with only few local companies to distribute their brands in Nigeria while numerous dealers operate on a small scale just trying to survive in the business. For example, Honda brand is distributed by Stallion Motors, BMW is solely distributed by Coscharis Motors, the most sought after Toyota brand is distributed by Toyota Nigeria Limited and Elizade Motors, KIA Motors handles the distribution of KIA and CFAO Motors is in charge of Mitsubishi brand.