National automotive policy: Time to stop the abuse

It is a general consensus, with negligible dissenting voices, that the National Automotive policy of the Federal Government is long overdue for complete overhaul.

The policy, which was re-launched in 2013 to trigger industrial growth in the country, has ironically over the years been subjected to serial abuse by the beneficiaries.

As an improved version of similar programme in the 80s and 90s to develop local capacity in vehicle assembly plants, the Jonathan administration re-launched the project in 2013 to boost local production and assembly of vehicles in the country.

As a result, friendly regime of duties and levies were put in place to encourage local capacity while stringent measures in terms of higher tariff were slammed on vehicles imports to protect local production.

The policy makes provision for commercial vehicles to attract 35 per cent duty without a levy.

Cars are to attract 35 percent levy charged on the fully built units (FBU), in addition to the 35 percent import duty.

Also, the federal government gave incentives of zero percent, five per cent, and 10 per cent respectively to assembly plants who imported completely knocked down parts (CKD), semi knocked down parts I (SKDI) and semi-knocked down parts II(SKDII) to be used by local assembly plants.

Assembly plants importing FBU for cars pay 35 percent duty without a levy, whereas commercial vehicles attract 20 percent duty without a levy, in numbers equal to twice their imported CKD/SKD kits.

However, it has been discovered that these privileges given to the auto plants are being abused to the detriment of national revenue.

Less than 20 percent of vehicles were actually assembled or even coupled in Nigeria because 20 percent of the components of the automobiles are from Nigeria while 60 percent are from Europe, Asia and America but no account was made of the remaining 20 percent thus giving rise to the possibility of smuggling of the parts.

We at nigeriamaritime360.com want to lend our voice to the strident calls for the review of the policy in view of the flagrant abuse of the concessionary rates enjoyed by the auto assembly plants.

Evidently, the policy has failed in its objective of stimulating car assembly capacity in Nigeria.

Apart from the few among the 14 existing assembly plants which showed a lot of promise and genuine desire to leverage on the policy to stimulate local capacity, others, mostly the new entrants into the scheme who are foreign investors in the sector, are exploiting the friendly regime of duties and levies to maximise profits at the expense of the realisation of government objective.

It is disheartening to note that since the re-launch of the policy six year ago, we are yet to see cars assembled in Nigeria with greater percentage of local contents, as was espoused by the policy.

Rather, what the smart so called auto plants do is to bring in news cars under the guise of CKD with zero or low duties, which they string together under few hours with few hands.

They sell these cars at exorbitant prices without achieving the required level of local content capacity.

More worrisome is that fact government, in its genuine desire to protect these unpatriotic players in the automotive industry, placed higher tariff on new vehicles to discourage their importation.

As if that was not enough, vehicle imports are banned through the land borders while the only route allowed which are the ports, importers pay through their nose.

The new vehicles were slammed with 70 percent tariff made up of 35 percent duty and 35 percent levy.

This was against the former 35 percent duty without levy.

The second -hand vehicles popularly called Tokunbo were slammed with 35 percent duty up from 25 percent duty payable before.

The regime of higher tariff was meant to discourage vehicle imports of any kind but protect and stimulate local capacity in the automotive sector.

But six year down the line, the government has not only failed to achieve the objective of the policy but has lost and still losing huge revenue.

The reason is not far-fetched.

Since the so called made in Nigeria vehicles are not available and the few ones which could pass as such are way beyond the reach of most Nigerians, then smuggling becomes an attractive option.

This option, inadvertently foisted on Nigerians by the ill-implemented policy, is now costing the government huge revenue on annual basis.

The revenue risk being posed by this policy was so real that the Comptroller-General of Nigeria Customs Service, Col. Hameed Ali(Rtd) had to plead with the Federal Government to revisit the high tariff slammed on vehicles imports which he admitted is encouraging smuggling with its attendant revenue loss.

We are therefore not surprised when the Minister of Finance, Hajia Zinab Ahmed attested to the failure of the policy and promised that the federal government shall take a second look at the programme with a view to halting the serial abuse by assembly plants and ensure that the gains of the policy are actually felt by Nigerians.

We couldn’t agree less with both the Customs boss and his supervising minister that the policy has failed to meet the yearnings of Nigeria and Nigerians and needs to be overhauled to reflect the current economic realities.

The policy itself is a good drive towards economic recovery through the boost in local capacity in automotive industry.

However, we believe that government made some fundamental errors in its implementation.

Firstly, we believe that imposition of higher tariff on vehicles imports as well as its total ban through the border posts was ill- conceived.

In as much as we appreciate the genuine desire of government to protect the local production /assembly of vehicles, discouraging the importation of the item when Nigeria is yet to attain full capacity for local production to meet national demand is mis-advised.

Both local assembly/manufacture of vehicles and their importation should have been allowed to go side by side.

We believe that with necessary incentives and conducive operating environment, such as revival of our moribund steel industry and stabilising the epileptic power supply, local assembly plants will eventually roll out cheaper and better vehicles assembled in Nigeria with greater percentage of local contents.

We equally appeal to government to strictly monitor the activities of the auto assembly plants operators to determine the compliance level with the local content inputs in their operations.

This is because we have reasonable suspicion of possible collusion with the Nigeria Customs Service to subvert the spirit and objectives of the policy in their importation of CKD and semi-knocked down parts as the case may be.

Our suspicion of collusion with some unscrupulous officers in the Customs to perpetrate this abuse is predicated on our belief that any infraction in the guidelines on importation process by the auto assembly plant could not go unnoticed without the active connivance of the Customs.

We are sure that surveillance of the activities of the auto assembly plants as well as ensuring that Customs does not compromise its duty will eliminate the deep-seated abuse to which the policy has been subjected in the past six years.

Any review that does not factor in these observations will be a mere circus show that will not address the observed lapses.

We equally want to appeal to government to resist pressure and blackmail in its effort to review the policy as we know those who benefit from the abuse will likely kick.

Government should be guided by the general interests of Nigerians and the economic wellbeing of the country and shun the temptation to pander to the whims and caprices of few economic undertakers in the scheme.