‘High Customs duty on cars fuelling smuggling’

High Customs duty on car imports aimed at boosting local production has reduced the number of vehicles brought into the country this year by a quarter and fuelled smuggling from neighbouring Benin Republic, the Nigerian Ports Authority (NPA) has said.

Car imports fell to 70,453 units in the first 10 months of this year, a 26.8 percent reduction on the same period of 2016, NPA figures showed.

The government imposed a 70 percent tariff on imported vehicles in December 2015 as part of attempts to stimulate local production.

Before that, the tariff was 20 percent. The Managing Director of the NPA, Hadiza Usman, said the policy meant local demand for cars was not being met.

“We appreciate the need for the government to have assembly and manufacturing in Nigeria but we are concerned that the capacity of the Nigerian market is beyond what is said to be assembled in Nigeria,” Usman said.

“We have seen a lot of cars being smuggled through neighbouring countries – mainly from Benin,” she added. Benin maintains low import tariffs compared with Nigeria, which for years been beset by chronic congestion in its ports.

Vehicle imports fell to 96,222 units last year from 131,994 in 2015, according to port figures. Usman said NPA expected a further drop in 2018 to 67,400 units.

The tariffs imposed in 2015 attracted U.S. car maker Ford, South Korea’s Kia Motors and Germany’s Volkswagen, which announced plans the same year to set up assembly plants in Nigeria.

But activity slowed soon afterwards as the economy slid into recession in 2016 due to low oil prices and a currency crisis. Although it emerged from recession in the second quarter of this year, growth is fragile and limited financing for new cars has stunted sales.

Ford’s local partner said it assembled 739 units of its Ranger pickup in 2016 and this year. Its plant in Nigeria’s commercial capital, Lagos, can assemble 5,000 cars annually.

Kia Motors, which has a plant in Lagos with a 20,000 vehicles capacity, said it assembled 1,800 units this year but did not give figures for 2016.

A representative of Stallion Motors, Volkswagen’s local vehicle assembly partner, said work stopped around August due to issues related to the exchange rate and production costs.

He said up to 30 vehicles were being rolled out monthly, although assembly did not happen on a regular basis.