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Automotive manufacturers fault reduction of vehicle import duties

By Benjamin Alade
19 March 2021   |   4:16 am
The Nigerian Automotive Manufacturers Association (NAMA) has advised the Federal Government to retrace its steps and reverse the Finance Act 2020 as it relates to the reduction in automotive tariffs.

An assembling plant

•Law will drain country’s foreign exchange
The Nigerian Automotive Manufacturers Association (NAMA) has advised the Federal Government to retrace its steps and reverse the Finance Act 2020 as it relates to the reduction in automotive tariffs.

NAMA described the reduction as an embarrassment to the present government, stating that a government cannot promulgate appropriate policies if it lacks an understanding of how an industry works.

In an advertorial published in national dailies; signed by the Chairman, NAMA Tokunbo Aromolaran, titled, ‘2020 Finance Bill and the automotive opportunity for Nigeria – what Nigeria stands to lose’, the manufacturers said Nigeria will experience plant closures, massive job losses in its fragile industrial segment and huge outflow of foreign exchange, at a time when the oil market is drying up and Nigeria groaning under huge stocks of foreign debt.

According to them, lack of political will to take tough decisions and the foresight to imagine how it would transform the economy in the medium-term made the government hesitate and eventually renege on the promises made by local entrepreneurs, who despite a difficult investment terrain and the reluctance of global OEMs, pumped hard-earned funds into the industry.

NAMA said this is tantamount to a mortgage of the future economy just to please the leadership of the Nigerian Customs Services (NCS) and to put more money in the pockets of low-value-adding vehicle retailers and border control officials.

The auto manufacturer said the NCS is prepared to mortgage the medium-term growth of the Nigerian economy for a paltry increase in duties collectible from the import of luxury vehicles and make more money for the boys.

“The laughable rationalization of this retrogressive policy change is that it is to reduce the cost of transportation of food products from the farm-gate to the market, as transportation cost is determined to be one of the components of the ultimate market price.

“We make bold to say that this is an inconsequential component and that the major factors that affect product pricing are operational costs incurred in getting the goods to the market, not importation costs of vehicles.

“It is intellectually lazy for government economists to ascribe the rise in the cost of transporting food items to the cost of vehicles when these costs constitute a negligible percentage of total overall cost, the manufacturers disclosed.

NAMA noted that the duty payable for importing regular and luxury vehicles that could be assembled in the country is reduced by 30 per cent, duties for transportation of 10 or more passengers by 30 per cent, duty for commercial vehicles by 25 per cent and duties for importation of agricultural tractors by 20 per cent on average.

The problem according to the manufacturers is not in the fact of reduction, but in the quantum of reduction of duties on goods manufactured elsewhere that are being produced here, thereby removing the incentive promoting local production utilizing local resources and labour.

The manufacturers revealed that information available to the association confirms the amendments were at the instance of the CG of Customs, which is clearly outside his area of jurisdiction.

According to NAMA, only the Tariff Review Board is saddled with the responsibility of review of duty rates and changes under the chairmanship of the Federal Minister of Finance, acting on behalf of Mr. President.

“This body represented by the Tariff Technical Review denies making any such submission, and indeed describes the amendments, forced through by the CG of Customs, as “embarrassing, counterproductive and unnecessary.’ They concluded that the inclusion of the Tariff changes in the Finance Bill was therefore an error, an anomaly that must be retracted to avoid further embarrassment to the administration. They further observed, “for the CG of Customs to send an input directly to the National Assembly on tariff matters that have been covered by an existing Act is the effect of personality cult the country has been suffering from over the years.”

NAMA however, stated that the tariff, as proposed in the 2020 Finance bill, makes little allowance for the differential in duty between local manufacturers and importers of fully built vehicles.

“The differential does not justify the engagement in local production with the attendant high production cost; local assembly plants are poised to close down and join the ranks of importers of fully built vehicles. This will lead to a massive loss of jobs in the industry, eventual closure of assembly plants and a rollback of the gains made since the inception of the Nigerian Automotive Industry Development Plan (NAIDP),” the manufacturers stated.