Hike in vehicle tariff will inflict more hardship on Nigerians, says expert

A maritime economist and Executive Director of ABN Consults, Mr. Harrison Agada, has advised the Federal Government to halt implementation of the hike in tariff of imported vehicles to save the masses from further hardship.

He said contrary to claims by senior government officials, implementation of the import duty hike will place the cost of vehicles beyond the reach of about 90% of Nigerians, increase the cost of transportation by at least 50% and increase inflation before the end of this year.

While speaking with journalists in Lagos on Tuesday, Agada said: “I believe the new automotive policy will be bedeviled by several problems. First, there is a huge gap between demand and local capacity. Local production capacity of automobiles by all the assembly plants in the country today stands at a pathetic 45, 000 units per annum while demand stands at 800,000 units per annum.

“Secondly, the price of locally-made vehicles is way out of the reach of average Nigerians and this is mostly as a result of the collapse of public infrastructure including power supply. Imported second hand cars have an average price N1.5 million while the cheapest locally assembled car sells for N3.5 million – more than twice the price. It is just too expensive to manufacture in Nigeria and President Jonathan’s argument that Nigeria would soon begin to export cars is a mere pipe dream. Who does he plan to sell the cars to and for how much? Under the current production environment in Nigeria, can any manufacturer churn out products that can compete with those made in China, Japan and Korea?”

Agada said infrastructural challenges including poor power supply and bad roads will make it impossible to produce enough cars locally for the Nigerian market.

He also said that locally assembled cars cannot compete with imported ones on price.

“The imported vehicles will still dominate the market place. If government makes it too difficult to bring them into the country legitimately, importers will do so through unapproved means. And with over 1,400 illegal entry routes, over 80 poorly manned borders, and an ill-equipped and largely corrupt Customs structure; smuggling will boom. So the federal government is inadvertently promoting smuggling through its ill-conceived policy.

“There is a precedence in the obnoxious rice policy that has cost this nation well over N300 billion in one year – an amount that would have been sufficient to upgrade and fix some bad roads in the country or build more hospitals or more schools.

“The ugly consequences of President Jonathan’s ill-conceived and hastily implemented policy on rice, introduced in the first quarter of 2013 still stares us in the face. It is similar to the new automotive policy,” Agada stated.

The maritime economist stated that the only beneficiaries of the new automotive policy and the hike in import duty of vehicles from 10% in 2013 to 35% with an additional levy of 35% will be smugglers and ports of neighboring countries especially Cotonou Port.

He said: “It may interest Mr. President to know that if his policy is implemented this year, over 600,000 vehicles will be smuggled from the ports of neighbouring countries mainly Benin Republic. Smugglers are also guaranteed good returns.

“Very soon, RORO ships will be coming to Nigeria half empty. Even specialized RORO terminals will suffer huge revenue losses and may need to rework their business models. Port workers will also suffer the consequences of this policy as their will be less jobs to do at the port,” he warned.

Meanwhile, Chairman of Abuja Car Dealers Association, Auwal Rilwan, has appealed to the Federal Government to suspend the new vehicle import tariff till local vehicle manufacturers begin full operations.

Rilwan made the appeal in an interview with newsmen on Thursday in Abuja.

He said that implementing the policy now would lead to shortage of affordable cars for low income earners and loss of job to many people.

According to him, government should first put the necessary infrastructure in place for local manufacturers to produce enough cars to meet demand before discouraging importation.

The new tariff, which the Nigeria Customs Service began to implement on May 1, involves 35 per cent import duty and another 35 per cent port levy.

It is a key component of the Nigeria Automotive Industry Development Plan which is aimed at limiting importation of used vehicles to encourage local manufacturing of new and affordable ones.

Before the new tariff policy, imported vehicles attracted 20 per cent duty and two per cent levy.

Rilwan said that the new tariff had doubled the clearing cost of imported cars and was impacting negatively on the country’s automobile market.

“I have some cars waiting to be cleared at the Lagos ports but Customs is telling me to pay 35 per cent duty and another 35 per cent levy on them.

“Before now it cost about N250, 000 to clear one car but with this policy, we will be paying at least N400, 000.

“If you add the cost of ancillary services like transportation, loading and off-loading, among others, very soon Nigerians will stop buying ‘tokumbo’ cars due to their high price.

“Government should wait for the investors that are coming to start producing affordable vehicles to meet local demands before limiting importation,’’ he said.