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Anxiety as government reviews auto policy

By Benjamin Alade
27 September 2019   |   4:17 am
Following the recent announcement by the Federal Government to review the National Automotive Industry Development Plan (NAIDP), stakeholders have expressed worry on what will be the new provisions of the bill.

Used cars

• Stakeholders worried about new provision
Following the recent announcement by the Federal Government to review the National Automotive Industry Development Plan (NAIDP), stakeholders have expressed worry on what will be the new provisions of the bill.

The NAIDP bill popularly known as Auto Policy, is central to the development of the automotive industry which is said to be currently under-performing.

The Minister of Industry, Trade and Investment, Adeniyi Adebayo, had recently announced a fresh start for the auto policy at the Lagos Chamber of Commerce and Industry (LCCI) 2019 Presidential Policy Dialogue.

According to the minister, the bill prepared by the former administration was not received at the National Assembly; hence the plan to engage all stakeholders in the industry to get it right this time around.

The Comptroller-General of Customs, Col. Hameed Ali (rtd.), had earlier this year urged the Federal Government to revisit the auto policy, especially the duty charged on used vehicles.

Findings by The Guardian showed that the sale of brand new cars had dwindled drastically with all auto dealerships selling less than 10,000 units of vehicles from 50,000 being sold four years ago.

Year in, year out, the purchasing power of Nigerians for brand new cars has reduced even as prices of new vehicles have skyrocketed.

However, stakeholders said the current dismal performance of the industry was traceable to the absence of a legal framework in form of a policy to attract Original Equipment Manufacturers (OEMs) into the country.

According to them, the resounding echoes on the need to review the policy to satisfy short-term aspirations will ultimately lead to policy summersault and erode the investments in the industry if proper attention is not given.

To ensure a backward integration through the auto industry, they noted it was important that the industry is dependent on the domestication of car manufacturing in the country.

Besides, they said the policy formulation was well thought of and in line with the stakeholders yearning for the development of the industry through industrialisation.

Some of the industry players, who spoke to The Guardian, said the auto policy has literally addressed the shortfall of the new tariff regime and expressly stated that for the policy to materialize, the importation of cars through land borders should be banned.

Deputy Managing Director of Massilia Motors, Kunle Jaiyesimi, said if there is sincerity of purpose, definitely things will work in Nigeria. In the old era, the way the policy was fashioned; it will continue to fail because industries players were not contacted.

Jaiyesimi said the policy was put together by civil servants and they were not the main drivers of the sector. “They don’t have the technical know-how of how the policy will operate, which brought about government’s decision to revisit the bill. For now, we have huge opportunity to correct all the wrongs. we believe the minister will face more to the side of the industry players and operators.”

Dean, School of Transport, Lagos State University (LASU), Prof Samuel Odewumi, said the first issue is the “consistent inconsistency” in our policy.

Odewumi said it demonstrates lack of deep thinking, fickleness of mind and lack of ability to think things through before we decide.

“We are very myopic and disjointed in our orientation and values. We always settle for the easy options. Hence the smallest turbulence along the way to implement our plan we drop the plan and succumb to the least line of resistance.”

According to him, the risks are in the dislocation of whatever assumptions that the local investors have made. Their strategic plans will come to grief. Serious investors will just be looking for the opportunity to safely bailout to save their losses. Other would be investors will be voting with their feet.

He said genuine investors require stable policy environment to plan and implement. Once there is a spate of policy summersaults, they suffer greatly, cut their loss and not only quickly exit but warn other would be investors from learning from their own travails.

Odewumi said there is no perfect model. There will always be tradeoffs. Any model will have within it elements of the good the bad and the ugly. But once we stick with it for long enough, the investors will do their calculations to accommodate the negatives and accentuate the positives.

Marketing Manager Kia Motors Nigeria, Olawale Jimoh, said it will be a disservice to the country if one shy away from the sharp practices by some purported assemblers taking advantage of the incentives and exploiting the loopholes in the implementation of the policy. Regardless of how great the policy is, some economic usurpers will always exploit the loopholes in its implementation.

Jimoh said it behoves the law enforcement agencies and regulatory bodies to implement this policy and weed out serial abusers of the policy.

“We have got to make a choice; one with short term gain by incentivizing importers of FBUs at the expense of the local assemblers or a long-term gain that helps with the production of made-in-Nigeria vehicles by implementing the policy and further incentivizing the local assemblers to help them improve the country’s backward integration of the economy.

He mentioned that the need for vehicle acquisition scheme cannot be overemphasized; a provision of the scheme will widen cycle of vehicle ownership by making it more accessible and affordable. The auto industry as a consumer-facing business is as dependent on well-functioning and widely available financing as any other retail businesses across the globe.

“Car financing has over 85 per cent market share in car sales in the global market, non-availability of these schemes in Nigeria have continued to make the ownership of a new car a tall order rather than a go-to option for car owners. In the US, roughly $500 billion in new loans and leases are originated annually and 86 percent of new car purchases and 55 percent of used ones rely on borrowed money, with banks, captives, and fleet financiers all playing important roles.

“Collectively, the US auto finance industry held roughly $1 trillion in outstanding loans and leases in 2015, translating to nearly $111 billion in revenue. Premised on this, the government need to finalize the single digit vehicle acquisition scheme from financial partners to make the locally manufactured cars accessible to all in the market,” he added.

According to him with the provision of the finance scheme, there will be significant growth in the market volume which will, in turn, serve as a motivation to bring in component manufactures. When the car components are manufactured locally, it will drastically reduce the cost of production thereby reducing the prices of the cars ultimately, a value chain that is sustainable.

Jimoh posited that it will be too devastating to take a cue from neighboring countries by encouraging importation by auto dealers through incentives on imported cars both new and old at the expense of local investors that had setup multibillion Naira plants in the country.

On the contrary, he said rather than giving incentives to auto dealers for importing vehicles, a tariff cut should be extended exclusively to only local plants to make them competitive and provide affordable made-in-Nigeria cars. While we are not averse to the call for a review, the elements of the review must be directed towards industrializing the economy and keeping the local manufacturers competitive in the market.

“It has never been a roller coaster for the industry, stating that one of the bane of auto industry in the whole world is imported used cars.”

Jimoh said imported used cars are not still checked that much. People still bring in cars through grey areas and all of that which is also hampering the development of the policy should be checked.

“Another area that is also one of our concerns of the policy is government as an entity itself especially with the way the Nigerian government is structured, government is one of the major drivers of the economy and one of the major customers of the automobiles. The industry is capital intensive and there is still some kind of poor patronage,” he said.