Why government should review Customs duty on imported vehicles

It is no longer news that the Customs duty on imported vehicles is currently at an abnormally high rate and many are dissatisfied with the present regime. Owing to the high Customs duty importation of vehicles has reduced in the ports while many have opted for a less expensive option – smuggling. With over 1500 entries into Nigeria from neighbouring countries vehicle smuggling has become easier and the apparent better option than paying outrageously high Customs duty on imported vehicle. The current rate is 35% with another surcharge of 35% totalling 70%. Things were different and normal until the former administration introduced the auto policy aimed at encouraging car manufacturing and assembling in the country. To protect the prospective investors in the auto industry the government increased the duty on imported vehicles in order to force Nigerians to patronise locally made vehicles.

It is clear that the auto policy has not worked in this regard and the increase in import duty has taken a toll on business in the import. Our country does not have the capacity yet to meet the local demands for vehicles, which is even more compounded by the high cost of such vehicles. The reality before us is that many Nigerians cannot afford brand new vehicles, especially the ones assembled in the country. The Nigerians that can afford brand new vehicles would always take that option even when there is the option of importing a fairly used vehicle. But those who cannot afford a new vehicle can only take comfort in the available fairly used ones, but this has become difficult because of the high Customs duty, which has slowed down business for some people in the port. The National President ofthe Association of Motor Dealers of Nigeria (AMDON), AjibolaAdedoyin, recently pleaded with the federal government to reduce the customs duty from 35% to perhaps 20% because the cost is naturally transferred to the eventual vehicle buyers. Many auto dealers saw importation through land borders as the available legal alternative in order to stay in business, even that was to be banned by the current government. But for the intervention of the Senate, the government would have carried out its plan to ban importation of vehicles through the land borders, which would have successfully placed auto dealers and their business in a perilous situation.

In a regime where the exchange rate has doubled and still remains high, sustaining the high Customs duty appears as a deliberate effort by the government to extinguish some people’s legal means of livelihood and make it difficult for some Nigerians to acquire vehicles. By the way why do we keep a policy that will likely not generate more income for the government? The high import duty means reduced number of vehicles will be imported through the seaports and that will also translate to lower revenue for the government. But reduced import duty will encourage more people to import vehicles using the port and that will generate more income for the government. The more activity our ports record, the more revenue for the country and the eventual benefits that accrue to stakeholders in the Port business. In addition, a review of the policy will aid the government’s effort at tackling the menace of smuggling. The best way to curb illegality is to provide appealing legal alternatives.

Our government needs to understand that the high Customs duty on vehicles is Nigeria creating another source of income for neighbouring countries. Our regime is currently the highest in West Africa and that makes it easier for people to import to those countries and smuggle into Nigeria. Our loss is their gain. The performance of the policy since its introduction is enough to compel the current administration to revisit it. Reducing the customs duty on vehicles will not create a shortfall in government revenue; it will rather lead to increase in government revenue because more people will be encouraged to import vehicles using the Ports. There is no better time for the government to do this than now. The government needs money to finance the budget and has listed some assets for sale in order to finance the budget. Our country may not need to sell assets to finance budget if we can do the right things in our Ports to make business flourish. The continuous clampdown on auto dealers to verify if the duty on a vehicle has been paid will not be needed if the duty is affordable and considerate. A policy or law must be obeyable for it to last. This policy is not friendly to auto dealers and the Nigerian society at large, now is the time to review it.