Enthusiasm, sceptism  trail proposed  import levy slash on automobiles

Chinazor Megbolu     |

Few days ago, the Federal Government of Nigeria proposed a slash on import levy on automobiles from 35 per cent to 5 per cent.

This proposal by the Federal Government to slash the levy to be paid on imported cars is in a new bill to be presented to the National Assembly by the Presidency.

The bill, according to the Presidency, is a welcome development to the citizenry who have been financially drained by the negative effects of Covid-19  pandemic, as contained in the draft bill of the 2020 Finance bill to be presented to the National Assembly.

Some analysts said that once the bill is passed by the Legislature and signed by President Muhammadu Buhari, it’ll automatically become law.

The bill also shows that the import duty of tractors and motor vehicles for the transportation of goods will be slashed from 35 per cent to 10 per cent while tax relief will be granted to companies that donated to the Covid-19 relief fund under the private sector-led Coalition Against Covid-19 (CACOVID).

Recall that about two weeks ago, after the Federal Executives Council (FEC) meeting, the Minister of Finance, Budget, and National Planning, Ms. Zainab Ahmed, while addressing journalists, noted that the reduction in import duties and levies is being done to reduce the cost of transportation.

According to her; “the reason for us is to reduce the cost of transportation which is a major driver of inflation, especially food production”.

Meanwhile, the media aide to the Vice President Yemi Osinbajo, Mr. Laolu Akande, in a tweet corroborated the federal government stand on the reduction of import duty.

“President Muhammadu Buhari’s administration is proposing more tax incentives in the 2020 Finance Bill including import duty reductions from 35 to 10 per cent and 0 per cent levies on tractors, transport vehicles and co, 50 per cent reduction of minimum tax, specific TETFUND exemption.

The National President, Association of Nigerian Licensed Customs Agents (ANLCA), Hon. Tony Iju Nwabunike in a chat in Lagos, said the reduction on levies on imported car is a good move from the government, which  he said clearly shows that the government has the welfare of the masses at heart.

Speaking on its effect on local manufacturers and assemblers, Nwabunike noted the country has not gotten enough capacity to manufacture cars that would sustain the over 200 million people in Nigeria.

Nwabunike also averred that even though, Innoson Motors is working hard to get it right, other local assemblers are not working presently, saying  it’s not a welcome development for the Nigeria.

“It is important that the move by the federal government is a good one to reducing the levies from 35 percent to 5 percent. The priority of the masses is the first choice of the government and the priority is to make sure that the commercial vehicles, which the commuters are using, would reduce their pricing because the common masses will benefit from there.

“Then again an average person who wants to buy car, but because of the high duty paid, the person cannot. The local manufacturers or assembler cannot meet the demands of the masses, they shouldn’t bother much about it,” Nwabunike said.

Meanwhile, the  Director-General, Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Yusuf, in his remarks, said the import duty levy slash was a step in the right direction as the 70 per cent tariff was outrageous, given the weak vehicle production capacity, sharp depreciation in the naira exchange rate and the high dependence on road transportation for logistics in the economy.

He added that the high tariff had  resulted in massive smuggling of vehicles and loss of revenue to government, adding that the compliant auto dealers have suffered greatly over the years because they could not compete with the smugglers.

Yusuf maintained that policy makers should be cautious in order not to jeopardise the existing manufacturing investments in the auto assembly sector.

 He stressed that if tariff concessions are given for importation of fully built vehicles, then  corresponding concession should be extended to the auto assembly firms.

Yusuf, however, noted that the Semi Knockdown (SKD) and Complete Knockdown (CKD) should attract zero duty and zero Value Added Tax (VAT), buttressing the move is necessary in order to make the auto assembly investments viable and sustainable.

Moreover, the National President, African Association of Professional Freight Forwarders and Logistics of Nigeria (APFFLON),  Otunba Frank Ogunojemite didn’t support the Federal Government’s initiative to reduce import duties and taxes for tractors, buses and commercial vehicles, while excluding special vehicles such as those in medical and fire service.

Ogunojemite said while the plan by the government is aimed at boosting the economy in the wake of Covid-19 and other economic challenges, slashing the 35 per cent customs duty or avail zero duties on ambulances and other essential medical equipments would boost health services in the country amid the COVID-I9 pandemic.

He frowned at the reality of the policy despite being in the 2020 Finance Bill.

According to him; “let’s see if this reduction would take place because I believe it won’t. Let  us face reality rather than fallacy, when will the policy take effect? It is impossible for government to waive duty on those vehicles. I do not see reality in this.”

Ogunojemite decried the policy, saying that it would harm the ailing local automobile industry, which would definitely yield more unemployment in the country’s labour market as a result of decrease in activities by automobile plants.

Moreover, he suggested that rather than enacting such policy that is injurious to the survival and development of the local automobile industry, the federal government should make provision towards encouraging the local manufacturers and the indigenous car dealers as well as provide work for everybody.

“The government should try to emphasise how to develop the general economy of the country, not just to wake up one day and make some laws.

“If government will want to reduce duties on some vehicles, they should take care of indigenous manufacturers and the motor dealers who have imported their goods into the country in an exorbitant cost, otherwise their business will crash,” he said.

Another stakeholder and the National Coordinator, Save Nigeria Freight Forwarders, Importers and Exporters Coalition (SNIFFIEC), Dr. Osita Patrick Chukwu lauded the initiative of the federal government, saying that people can now import good cars to reduce cost of transportation, which will also help the country overcome the current economic recession.

“The government has announced it, but let it come in papers and reality not ordinary announcement. After announcing, it will take Customs time to continue to rally around to say they have not gotten the white paper or documents.

“But if they enact it,  let it be transmitted immediately to the Customs for effectiveness and consolidation.

Chukwu also pointed out that locally made and assembled cars in Nigeria are expensive than the imported ones, making it more difficult for the common man to afford and also deter economic development.

He maintained that the indigenous automobile companies and manufacturers do not have enough production capacity to serve the population of the country.

“How many cars can our local automobile companies produce?  Nigeria is 200 million in population and let’s assume that 80 million are using cars, how many can our local companies produce for and how many of the people can afford those cars?

“The least car is sold about N5 million, who can buy that car? while some people are buying fairly used imported cars for N1.5 million. If the cars coming from outside are cheaper, then we use it.

“Can we say because our brother is producing cars at a high cost, that will make us buy it at that high cost thereby deterring our economy management?,” Chukwu asked.

He, however, posited that the government should  strengthen the local manufacturers in order to strive and consolidate the economy by reducing duty in all ramifications to local manufacturers and for all the production materials used to produce to local expectations.

“If we could do that to domesticate what exactly is in place, that means we can no longer contain the economic recession which we have already entered now,” Chukwu said.

With the foregoing, it remains to be seen if the national assembly will expedite action fast enough on the proposed bill.

Will the slash truly effect the masses’ means of livelihood positively?

Will it truly reduce the cost of vehicles?

Will it encourage local production and assemblage?

The hope of the masses hangs in the balance as they await the proposal to become a reality.