Nigeria has huge comparative advantage in most sectors of the economy compared to other West African countries. But inconsistent policy and lack of political will have been the bane of the nation’s economy.
This has always caused a set back on Nigeria’s ability to compete effectively in the global market. For instance, so many policies have been formulated and implemented in the maritime sector. Regretably, most of the policies have not really contributed to the development of the nation’s economy but rather boosting neighbouring countries’ economies.
The National Automotive policy of the Federal Government, which was re-launched in 2013 to trigger industrial growth in the country, is being described as one of those policies that never had much effect on the country’s economy. The reintroduction of the policy by former President Goodluck Jonathan administration was to boost local production and assembly of vehicles in the country.
In order to make the policy effective, friendly regime of duties and levies were implemented to encourage local capacity while inflexible measures in terms of higher tariff were imposed on vehicles imports to protect local production. The policy makes provision for commercial vehicles to attract 35 per cent duty without a levy.
Meanwhile, cars are to attract 35 per cent levy charged on the Fully Built Units (FBU), in addition to the 35 per cent import duty.
Also, the Federal Government gave incentives of zero percent, five per cent, and 10 per cent respectively to assembly plants who imported Completely Knocked Down parts (CKD), Semi Knocked Down parts I (SKDI) and Semi-Knocked Down parts II (SKDII) to be used by local assembly plants.
Apparently, assembly plants importing FBU for cars pay 35 per cent duty without a levy, whereas commercial vehicles attract 20 per cent duty without a levy, in numbers equal to twice their imported CKD/SKD kits.
However, Daily Sun learnt that the beneficiaries that were given these privileges are using the opportunities to maximise profits for themselves and nothing goes into government coffers in terms of national revenue.
Ironically, less than 20 per cent of vehicles were virtually assembled or even coupled here in Nigeria because 20 per cent of the components of the automobiles are from Nigeria while 60 per cent are imported from Europe, America and other Asian Tigers. And no account was made of the remaining 20 per cent.
However, the insincerity in the policy has given rise to smuggling of Nigeria-bound vehicles discharged at the Port of Cotonou through the nation’s porous land borders.
The good and new vehicles are going to Cotonou because it takes only 10 to 20 per cent to clear vehicles over there while old and accidented vehicles are coming to Nigeria due to high cost of 70 per cent for clearance.
Meanwhile, the National Council of Managing Directors of Customs Licensed Agents (NACMDCA) urged the Federal Government to review the nation’s automotive policy in line with the international standard.
Even, Comptroller-General of the Nigeria Customs Service (NCS), Hameed Ali, also recommended recently that the Federal Government should crash the clearance cost of vehicles to about 10 per cent.
“We have 35 per cent duty and 35 per cent levy, and so if you import a brand new vehicle into Nigeria, you pay 70 per cent duty. From what we have done, and based on statistics, we discovered that this duty has now driven most of our importers to our neighbouring ports and also it has increased the rate of smuggling into this country of new vehicles.
“Having interacted with our stakeholders, we discovered from what they said that the sudden increase in duty is what is driving them. And since 35 per cent duty cannot be tinkered with, the one that can be tinkered with which is a policy by the Nigerian government. The 35 per cent was put in order to encourage our automotive industry to ensure that it is developed. If we reduce the levy, the volume of cars that would be imported into Nigeria will increase and the revenue from the NCS will increase,” he added.
Ali further stated: “So we are advising that the government review the levy and we are asking that it should be reduced to about 10 per cent. If you do that, then it will mean that the collective duty on a new vehicle will be about 45 per cent. That is 35 per cent duty and 10 per cent levy. With that, we will eventually get an increase in the volume of vehicles that are imported, smuggling will be reduced and, therefore, we will realise more revenue and the lives of our people will be saved.”
Meanwhile, the President of NACMDCA, Mr Lucky Amiwero, has made an appeal in a letter he addressed to President Muhammadu Buhari, and the Minister of Finance dated February 2, 2019 that there was urgent need to review the nation’s automotive policy in line with the international standard, adding that the development was killing businesses and investments in the country.
On the negative implications of the policy on the economy, he said NACMDCA as a body urged the Federal Government to consider the appeal in line with the campaign promises made to the masses to make life meaningful to them.
According to him, the present automotive policy had resulted in huge loss of Customs revenue to government that depended on the 7 per cent collection from import duty.
He further explained in the letter that there were massive smuggling due to high demand of motor vehicles in the country as a result of non-availability of affordable domestic production, that was in place to meet up with domestic demand. He also decried high cost of vehicles in the country, due to the increase in tariff from previous duty rate of 5 per cent, 10 per cent 20 per cent and 35 per cent to the present rate of 35 per cent-70 per cent on all imported vehicles as against situation in neighboring West African countries rate.