The Wisdom Behind the Minister of Trade, Industry and Investment’s Policy To Increase The Tariff On Imported Vehicles.
Olusegun Aganga, Nigeria’s Minister of Trade Industry and Investment has recently approved a new national automotive policy purportedly aimed at encouraging local production and assembling new vehicles locally. The policy effectively increases the import tariff on cars at 70% (“Policy”)!!!!!
It is our concern that if the policy thrust of the government flowed from a desire to increase government revenue or to increase the number of car manufacturers in Nigeria or to boost the Nigerian economy by creating jobs, the formulators of the policy have clearly gotten it wrong for the following reasons.
1. Lack of Infrastructure.
Though commendable, there is a lack of inventiveness in the Policy. Private companies, including UAC, Leventis and Bewac, established Nigeria’s first auto-assembly plants in the 1960s. The government invested in auto and truck manufacturing in the 1970s, with joint ventures involving Peugeot, Volkswagen, and later GM. However it is trite that all these assemblers and enterprises are now moribund due to the lack of basic infrastructure required to support such ventures.
Whilst it is true that the Federal Government is making progress with regards to the privatization of the power sector, the success or otherwise of the recent acquisition of the power distribution and generation companies remains yet to be experienced.
2. It will foster corruption, promote smuggling as a more viable affordable option and further weaken Nigeria’s already porous territorial borders.
Importers faced with the option of either bribing customs officials to smuggle vehicles into the country on the one hand and paying import duty (which is almost double the price of the vehicle) on the other, would mostly take the former option to smuggle the vehicle.
Despite the ban on the importation of rice it is easier to purchase the banned products than the local rice, which is mostly non-existent. Therefore it will not come as a surprise that at nocturnal hours, those cars will make their way into Nigeria in the ‘usual’ characteristic manner prohibited goods such as rice, make their way into the country. It will promote business for devious officers of the Nigeria Customs Service who facilitate smuggling.
3. It will promote the economies of neighbouring countries.
It is no gainsaying that the manifest of the ports of neighbouring countries will rise exponentially when the federal government begins to implement Policy is finally adopted. These ports will become more attractive since they offer lower importation tariffs on vehicles. Accordingly, such countries will witness an increase in the number of imported vehicles, more than required by its citizenry and their economies, rather than Nigeria’s will thrive.
4. It is insensitive to the average Nigerian
One of the Minister’s rationale for the Policy is the creation of jobs. However, we wish to draw the government’s attention to the fact that globally, manufacturing companies are automated and consequently the requirement for human labour is minimal.
There is a mass transit system deficiency in Nigeria to say the least. The non-existence of a middle class In Nigeria is apparent. Majority of the citizens in the lower class strata are those who buy “tokunbo” cars, which they can barely even afford. The Policy will therefore further widen the gulf between the rich and the poor as only the former, which largely includes government officials will be able to afford such a drastic increase in the importation tariff on vehicles.
The Policy is yet another way by which the Nigerian government proposes and implement policies deliberately half-heartedly or ignorantly because it can be imagined that none of the formulators of this policy know that there cannot be industrialisation without power. It therefore appears that the government has put the cart before the horse regarding the Policy.
In our view, the imposition of the Policy should have followed the trend below:
1. Ensure the privatization of PHCN has fully metamorphosed and electricity supply is running at a minimum capacity of 80%;
2. Initiate mass transit programs and establish alternative modes of effective transportation;
3. Create awareness on the establishment of local manufacturing plants;
4. Establish manufacturing/assembly plants locally;
5. Gradually sensitize the public on the need to phase out imported cars and increase importation tariff.
In light of the above, we therefore urge all stakeholders in the Nigerian automobile industry to take note of this Policy being promoted by the Minister with a view to ensuring its reversal for the sake of well meaning Nigerians and ultimately the posterity of Nigeria.
Mr. President, please do the needful to ensure that the Policy does not bring your office to disrepute.
Sponsored by: Concerned Automobile Traders in Nigeria
About the Author
