Auto policy: High import duty on used vehicles encouraging smuggling

Steve Agbota

The Goodluck Jonathan administration in 2013 introduced the National Automotive Policy to encourage production of vehicles in Nigeria and discourage importations.

Before the policy came into being import duty on vehicles coming into Nigeria was 10 per cent with an additional 10 surcharge effectively making it 20 per cent. But what Jonathan did was to raise it up to 35 per cent plus 35 per cent surcharge to effectively make it 70 per cent, thus, making Nigeria ports uncompetitive compared to West and Central Africa.

But observers believe the policy has not done the nation’s economy any good but has rather opened door to high level smuggling of vehicles into the country through the land borders as importers are now diverting cargoes to neigbouring countries such as Cotonuo, Abidjan and the rest just to avoid high duty tariff charges. For instance, Cotonou 10 per cent import duty on imported vehicles and additional 10 per surcharges, which make it 20 per cent in total compare to 70 per cent Nigeria’s authority charges.

Importers get their vehicles cleared cheaper in Benin Republic and then smuggle them in through land borders. The implications are obvious that government is losing revenue while Nigeria is developing the economy of Cotonou, Abidjan and the rest.

Going through Nigerian ports today, old and dented vehicles constitute the large number of vehicles being imported into the country since the implementation of the auto policy. As result of high duty charges imported vehicles, importers have now flooded Nigeria ports with old and dented cars because they attracted lower tariff while the wholesome vehicles imported are smuggling in from Cotonou through the land border especially Seme border.

Stakeholders who spoke to Daily Sun said that the auto policy was good but it was poorly implemented, which has made things worse the economy.

Paradoxically, five years after the policy was introduced, it has not helped the Nigeria’s automotive industry. Instead, the volume of cars imported and going to Cotonou has increased to 70 per cent.

Daily Sun learnt that another issue that constitutes problems around Nigerian ports was the ineptitude of customs to auction seized and abandoned cars in the last six to seven years. Presently, vehicles worth over N20 billion are currently rotting away at various ports and warehouses of the service. Aside the over N10 billion worth of seized cars rotting away in Customs warehouses across the country, about 6,000 vehicles worth over N10 billion have been abandoned by importers at the Lagos ports.

The Managing Director of PTML Terminal, Tin Can Island Port, Lagos, Ascanio Russo, identified infrastructural deficit and unfavourable trade policies as some of the challenges facing Nigerian ports and placing the ports at a disadvantage compared to the ports of neighbouring countries.

However, he lamented that the Federal Government’s National Automotive Policy introduced in 2013 to encourage investment in local assembly plants has failed.

He added: “After the policy was introduced, what we have seen rather is that used vehicles are still coming to Nigeria through the border, one way or another, and the sad thing is that the good quality vehicles are coming through Cotonou. This is because the rate of duties is much lower (in Cotonou) and so they can afford for them to be discharged there while the old vehicles; the accidented ones are coming to Nigeria.”

Russo, whose firm owns the biggest terminal for vehicle importation in West Africa, said as result Nigeria is losing more than half of its cargo to the port of neighbouring countries due to unfavourable trade policies thereby causing huge revenue loss to the government.

According to him, the policy is not adding any value to the nation’s economy but has given rise to smuggling of Nigeria- bound vehicles discharged at the Port of Cotonou through the nation’s porous land borders.

Speaking to Daily Sun, Spokesman of Seaport Terminal Operators of Nigeria (STOAN), Bolaji Akinola, said the idea of the policy was on paper, saying the policy was purely conceived and it was hastily implemented. He said that one of the ill-advised aspects of the policy was the tripling of customs import duties on vehicles.

He added that government needs to reverse the policy because it is not doing the nation’s economy any good, which is why the port in Lagos are filled up with old and dented vehicles because people want to avoid payment of high duties.

He explained: “If you bring in a one million naira vehicle for instance through the port, you pay almost N700 to government as duty and that shut up the cost of vehicles coming into Nigeria astronomically. So people started avoiding Nigeria ports. We have porous borders by the way all over the country. Those vehicles that coming into Nigeria, people would rather land them in Cotonou, Abidjan and the rest of them and then smuggle them into Nigeria, that is why we have a high level of smuggling of vehicles into the country.

“The dented vehicles attracts lower tariff. When imported as dented, they get a reduced duty rate that is why Nigerians now prefer to bring in dented cars but the newer ones still coming to Nigeria illegally through the land border, that is the problem.” He bemoaned that Cotonou port, port of Abidjan and the rest of them are ripping off Nigeri, adding that they are making the money Nigeria should be making here.

Said he: “And when these vehicles are smuggled in, brought in illegally, government doesn’t get anything. They short-changed government of due revenue, they don’t pay what they should pay to Customs even to the Port Authority. We are losing at both end and it also takes away jobs from Nigeria, while we are feeding the economy of other countries and providing jobs for the youths of other countries at our own detriment because some ill-advised, ill-conceived, poorly implemented policy of government which they find so difficult to reverse. I don’t know why it is taking forever to reverse it.

“Import duty on vehicles in Nigeria is 30 per cent while Cotonou charges 10 per cent. So who will bring new cars into Nigeria and pay 70 per cent when you can pay 10 per cent in Cotonou and then smuggle it in through Seme border. When you are paying N700,000 here on a vehicle of N1 million, you are paying N100,000 in Cotonou on the same vehicles.

“On a N10 million vehicle, you are paying N7 million duty in Nigeria whereas in Cotonou, you pay N1million only. Where would people discharge their cargo, they will discharge it in Cotonou and then maybe spend another N500,000 to smuggle it into Nigeria.”

He said presently more than 80 per cent of the vehicles imported into Nigeria are smuggled in and are not imported into the ports because people want to avoid that high import duty.

On the way forward, urged government to take tariff back to pre-2013, which is 10 per cent import duty on imported vehicles and additional another 10 per surcharge.