Proposed Reduction of Duties for Imported Vehicles

A proposed policy by the Federal Government in the 2020 financial bill, seeks to slash duties and levies on imported vehicles, has raised conflict of opinions among investors.

While some argue it will stifle the local automobile industry and worsen the unemployment crisis, others hail the idea, saying it will boost the economy.

The controversy came just as the Federal Government tried to push the policy by explaining that it was meant to cushion the harsh socio-economic situation in the country.

In the draft 2020 Finance Bill, the Federal Government proposes a reduction in duties on tractors from 35 to 10 percent; from 35 to 10 percent on vehicles for transportation of goods; and 35 to five percent on vehicles for transportation of persons (cars).

Vice President Yemi Osinbajo had explained in Abuja last Monday at the opening plenary of the 26th Nigeria Economic Summit (NES#26) that the decision to slash duty on imported vehicles was not an attempt by the government to kill the nation’s automobile manufacturing industry but to reduce the cost of transportation in the face of growing economic challenges.

He also argued that, with an annual demand of about 720,000 vehicles, as against 14,000 local productions, the national need would not be met if vehicles were not imported.

The new policy, according to him, does not mean that the government has jettisoned its commitment to boosting local production. Also, Minister of Finance, Budget, and National Planning, Zainab Ahmed, had told journalists that the reduction in import duties and levies would lead to a reduction in transportation cost.

“The reason for us is to reduce the cost of transportation, which is a major driver of inflation, especially food production,” she had explained.

The Director-General, National Automotive Design and Development Council, Jelani Aliyu, who had last year hinted that about nine automotive manufacturing companies were assembling vehicles in Nigeria, did not respond to phone calls and messages from The Guardian on the new development. Aliyu had listed the companies as Peugeot Automobile Nigeria, Nissan Motors, Honda Motors, Innoson Vehicle Manufacturing Company, Hyundai Motor Company, Ford Motor Company, GIC Motor Companies Ltd, JAC Motors, and Kia Motors.

Before Nigeria shut its borders, there had been an outcry against the increasing rate of smuggled vehicles into the country due to the high import levy and tariff.  Comptroller-General of the Nigeria Customs Service, Hameed Ali, had at some point noted that the 35 percent levy discouraged importers and created opportunities for neighboring countries.

Among those who have expressed support for the move to reduce charges on imported vehicles is the National President of the Association of Nigerian Licensed Customs Agents (ANLCA), Tony Nwabunike. He stated that the reduction in levies clearly showed the government had the welfare of the masses at heart. Arguing along the lines of the Federal Government, Nwabunike said Nigeria did not have the capacity to manufacture cars to meet local demand.

He observed that, although Innosson had worked hard to get it right, other local assemblers had not shown similar acumen. Describing the move by the Federal Government as good, he said the masses would benefit from more importation of vehicles.

“The local manufacturers or assemblers cannot meet the demands of the masses, they shouldn’t bother much about it,” he said.

Similarly, the Director-General, Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Yusuf, welcomed the idea. He said the current high tariff had resulted in massive smuggling of vehicles and loss of revenue to the government, making auto dealers that complied suffer over the years because they could not compete with car smugglers.

He, however, advised policymakers to be cautious not to jeopardize existing investments in the auto assembly sector. He added that tariff concessions given to importers of vehicles should be extended to auto assembly firms across the country.

The National Coordinator of Save Nigeria Freight Forwarders, Importers and Exporters Coalition (SNIFFIEC), Dr. Osita Chukwu, also applauded the move. He said the importation of good cars would reduce the cost of transportation towards overcoming the economic recession. He urged the government to make the plan a reality by ensuring its passage and transmission to relevant agencies for implementation. Local manufacturers, he said, should not be threatened by the proposal since it was only meant to complement their efforts.

“How many cars can our local automobile companies produce? Nigeria is 200 million in population and let’s assume that 80 million use cars, how many can our local companies produce and how many people can afford those cars?

“The least car is sold about N5 million, who can buy that car? Some people are buying fairly used imported cars for N1.5 million. If the cars coming from outside are cheaper, then we will use them.”

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