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Land border ban fuels hike in cost of vehicles

By Sulaimon Salau and Kingsley Jeremiah   |   08 January 2017   |   4:02 am
Cars

Cars

. Operators Seek Reduction In Customs Duty At The Ports. Stakeholders Split Over Policy
. Policy Puts Cart Before Horse

Nigerians may need to brace up for high cost of vehicles this year going by the implications that may arise from the outright banning of vehicle importation through the land borders.

Stakeholders and auto dealers that spoke to The Guardian on the expectations from the new policy expressed concerns that cost of vehicles in the domestic market may soon take an upward swing, while smuggling activities will dominate the land borders.

Customs Public Relations Officer, Wale Adeniyi, had in a statement said the ban was sequel to a presidential directive restricting all vehicle imports to seaports only.

“Importers of vehicles through the land borders are requested to utilise the grace period up till 31st December 2016 to clear their vehicle imports landed in neighbouring ports,” he said.

Already, many of the dealers were on their toes to finalise arrangement on their orders before the take off of the new policy on January 1, 2017.

This, according to The Guardian sources has created tension in the market, as dealers prepare to go into the new regime.

Before now, the officers of the Nigerian Customs Service (NCS) have always had confrontation with smugglers at the porous border points, with many casualties recorded.

The Customs recently said it had lost 70 officers in 2016 alone to smuggling, saying the greatest challenge facing it remains activities of smugglers.

President of National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), Lucky Amiwero, said the decision by the Federal Government was tantamount to putting the cart before the horse, because their was need for it to first create a conducive environment at the ports before shutting the land borders against such importation.

“The problem is that they should have looked into matters that will make our ports operations more conducive. If you ban importation of vehicles just like that, it will lead to massive smuggling and government will lose a lot of money

“If we have not been able to reduce our ports’ cost, many importers will prefer to divert their cargoes to neighboring countries in order to reduce cost. President Obasanjo had reversed the earlier ban, because it was discovered that it was dangerous to the economy. If this government now decides that they want to ban it again, we will have to wait and see how successful it will be. You should make your ports user friendly. The borders are exit point and not illegal point, the only thing is that people are using it to cut cost, but if we can import through the ports it will be better, but doing that at this time, will increase cost of vehicles and increase smuggling. Our ports are not yet up to a state whereby importations can be facilitated,” he said.

The auto dealers have argued that more vehicles are being smuggled through the land borders than those that actually paid duty, hence the need for the ban.

Amiwero said a lot of smuggled vehicles still find their way into the country and Customs might not have the capacity to withstand the pressure, because the demand in the country is high and importing through the port is far expensive, so invariable government is going to lose a lot of revenue.

He said the ban may not not have much effect on the auto policy, as not many vehicles Assembly plant have sprang up after the policy because the provisions are not right. Stakeholders are currently calling for review of the policy.

However, The Guardian gathered that government has mandated all automobile dealers in Nigeria to publish ex-factory price of their vehicles with effect from 2017.

Ex-factory price is the exact amount a manufacturer charges for the products as they leave the production line. The ex-factory figure is determined solely by the manufacturer. The price does not include taxes, surcharges or shipping and handling fees.

A highly placed source accused auto dealers of allegedly depriving the Federal Government of revenue and frustrating ongoing fight against corruption in the sector.

The source said: “Majority of auto dealers in Nigeria don’t pay the required revenue and taxes. The government will crack down on them as from 2017.”

However, another section of the stakeholders believed that the policy is in the right direction.

Chairman, Nigeria Automotive Manufacturers Association (NAMA), who is also the Managing Director of Volkswagen Nigeria, Tokunbo Aromolaran, lauded the effort of the Federal Government, saying that it is a step in the right direction.

He said the ban is an indication that the current administration is committed, adding that the move would boost the confidence of the local assemblers, who had raised an alarm that the inflow of used vehicles into the country would jeopardise their investments.

Chairman, Seaport Terminal Operators of Nigeria (STOAN), Princess Vicky Haastrup, urged government to take a step further by scrapping the high import duty regime imposed on vehicles by the past administration.

She also called for proper implementation of the policy, adding that if well implemented by the Nigeria Customs Service (NCS), the policy would reduce the smuggling of vehicles into Nigeria and revive the operations of Roll-On-Roll-Off (RORO) terminals in the country.

RORO terminals are specialised port terminals that handle all types of vehicles importation.

Haastrup, appealed to Customs officers at the border posts to support the Federal Government and the NCS leadership by ensuring that no smuggled vehicle finds its way into the country through the land borders from 1st January 2017, when the new policy is expected to take effect.

She said: “We are confident of the ability of President Muhammadu Buhari to turn the economy around. The earlier ban on importation of rice, and now of vehicles, through the land borders is a welcome development.

“We are happy that the President has listened to our appeal to reverse incongruous policies inherited by his government from the former administration and which had deprived Nigerian ports of cargoes to the advantage of the ports of neighbouring countries.

“In addition to this ban through the land borders, we appeal to the President to return the import duties on vehicles to 20per cent from the prohibitive 70per cent tariff imposed by the former administration.

“The reversal to the old tariff will serve as an incentive for Nigerians to import legitimately through the seaports and make appropriate payments to government. This will boost revenue collection by the Nigeria Customs Service. It will also lead to the return of lost jobs at the affected ports,” she said.

Haastrup said since 2014 when the 70 per cent hike in the tariff of imported vehicles came into effect, Nigeria had lost 80 per cent of its vehicle cargo traffic to the ports of neighbouring countries.

The Director-General, National Automotive Design and Development Council, Aminu Jalal, had said used cars constituted about three-quarters of the total automobile market in the country and would be difficult to ban.

Jalal was optimistic that the ban on vehicle import through the land border would not only create a level playing filed for all operators, but also would check smuggling and create competition in the sector.

“We requested all vehicles should come through the port. Through the land borders smugglers bribe Customs because they don’t have all the control they have in the ports. It is a step in the right director and will boost confidence in the local industry. We commend the government for it and we hope that it will ginger the local industry,” Aromolaran the NAMA chairman said.

Deputy Managing Director, Kewalram Chanrai Group, Victor Eburajolo said though there could be increase in the price of vehicle, particularly used vehicles, the ban would reduce level of smuggling and promote government’s policies in the automotive sector.

“Those who import vehicles through the land borders don’t pay duty. Even if they pay at all, it is just a fraction They just drive the vehicles in through push paths. In that way, we are loosing revenue as a country,” Eburajolo said.

He however, blamed smuggling activities on the lapses of the Customs authority.

Meanwhile, the House of Representatives has advised President Muhammadu Buhari to direct the Customs to suspend the policy banning the importation of vehicles through the nation’s land borders.

In its resolution before proceeding on Christmas break, the lawmakers explained that more security personnel should be deployed to the borders, adding that the policy expected to come into effect from January 1, 2017 should be reversed.

Part of the resolution read: “The House further urges the government to install border security and surveillance equipment for effective monitoring to address the recurring menace of smuggling and ensure a maximum revenue generation on all lawfully-imported goods.”

Speaking on the issue, an All Progressives Congress (APC) lawmaker from Sokoto State, Abdullahi Salame, argued that the policy could only worsen the “hunger and insecurity” in the land coupled with possible job losses.

He was of the opinion that corruption at the borders would increase “as Customs personnel would seize the opportunity to divert revenue into private pockets.”

He said: “The government will indeed lose revenue and Customs personnel will connive with smugglers to divert revenue. Car dealers will lose their business and this also implies that millions of Nigerians will lose their means of livelihood.”

Another member from Adamawa State, Mr. Sadiq Ibrahim, said: “Buhari should suspend the ban. There is no alternative. Why ban car importation through land borders when you have not provided other options for those in the business to survive?

“This policy will serve no useful purpose and there will be more problems than solutions to the hardship arising from our economic situation,” he said.




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