The absence of ministers of finance and trade and industry is stalling the implementation of the 70 per cent tariff regime on imported fairly-used vehicles. The National Automotive Council has for the fourth time postponed the enforcement of the proposed tariff regime largely because the agency lacks the powers to do so.
Director-General of NAC, Mr. Aminu Jalal, penultimate week announced an indefinite postponement of the new tax earlier scheduled to commence on July 1. Jalal told Sunday Telegraph on the phone that the agency is suspending the take-off of the very important leg of the auto policy till the appointment of the ministers.
“We have to wait for the ministers to come in. When the new finance minister comes in, we have to brief the person on what we are doing, explain the policy and why we are doing it. The minister will then take up the issue. He has to give the order before it is implemented,” he said. The policy was introduced by ex-President Goodluck Jonathan through NAC in September 2013.
It is against this backdrop that a close aide of the director general, who spoke on condition of anonymity, said since the administration that initiated the programme is not the one in place now, the agency cannot go ahead to implement the tax regime. He assured that every other plan is in place and running according to schedule. He stressed that the survival of the auto policy depends on the tariff regime which according to him will protect the local assembling firms.
He noted that the tariff structure would enjoy protection from the ECOWAS Common External Tariff scheme which took off last month. The implementation was first shifted from July 2014 to January 2015. It was subsequently changed from April to July 2015.
This is the fourth time the policy will be shifted. Government imposed the 70 per cent of the cost of all fully built vehicles (both old and new) as tariff, being part of the automotive policy in order to discourage the importation of vehicles.
It also announced a zero per cent tariff on Completely Knocked Down units (CKD) and five per cent to 10 per cent on Semi Knocked Down units to encourage the establishment of local vehicle assembly plants. Jalal explained that when the scheme was postponed in April 30 to July 1 that the reason was due to the delay in the establishment of a proposed vehicle finance scheme.
He said, “The arrangements for the establishment of the affordable vehicle finance scheme suffered a delay of about four months due to the Ebola Virus Disease. “The automotive policy has five elements, one of which is market development. Under market development, tariffs are increased on fully built unit vehicle imports. These tariffs are to be reduced gradually over the years, as the vehicle assembly and local content operations gain momentum.”
According to him, the nation’s vehicle market is about 400,000 units annually, with about 300,000 being imported as second-hand. He said government plans to introduce the measures to balance the supply of vehicles and make them affordable, with the production by the local assembly plants. “The assembly plants will import two FBUs at concessionary duty for every one CKD/SKD they assemble in 2014/15. It will be one to one in 2016/17,” Jalal said.
The NAC DG also said new investors would be able to import fully built vehicles at concessionary duty to fill the gap between the supply by the assembly plants and demand. Since the policy was introduced, it has been generating mixed reactions.
While some feel the policy is ill-timed, others believe the prevailing economic situation in the country, among other constraints, would naturally suffocate the policy. Secretary-General of Association of Nigerian Licensed Custom Agents, Mr. Kayode Farinto, at a recent town hall meeting in Lagos argued that the policy was initiated at the wrong time, given the poor power supply in the country.
Though the Federal Government said some vehicle manufacturers had started assembly plants in the country, while many had stated their intention to do so soon, irregular power supply is seen as a serious constraint to the operations, Farinto said. Like every other business entity, to scale the hurdle, manufacturing companies will have to seek alternative power supply.
Apart from the fact that it consequently increases the cost of doing business, the burden is transferred to end users who will then pay a higher price for the vehicles. If this is the case, it has defeated the purpose for producing vehicles in the country at affordable prices. According to him, another constraint is the fact that there are few car manufactures in the country.
How will they meet the needs of about 160 million Nigerians or the total demands for cars in the country, he queried. Legal Adviser of National Association of Government Approved Freight Forwarders, Mr. Fred Akokia, who had cautioned NAC to put its house in order first before jumping into the enforcement of the 70 per cent tariff, described the inadequacy of raw materials as a major setback for a successful takeoff of local vehicle manufacture. He noted that the most local companies manufacturing steel, an important component for vehicles, had gone moribund.
This means that the manufacturers will be compelled to import spare parts in order to meet the huge demand for vehicles in the country, he added. Also, the Chairman of Port Consultative Forum, Otunba Kunle Folarin, said that the fact that Nigerians havee yet to see Nigerian-made vehicles two years after the policy was initiated also makes mockery of the policy.
The Federal Government has received knocks for being quick to embrace the policy without adequate local provision and the right environment to cushion the effect on end users. But a former Customs comptroller, now senator representing Bauchi South Senatorial District in the 8th National Assembly, Mallam Ali Wakili, faulted the auto policy.
He said in an interview that it would lead to an upsurge of smuggling of vehicles as there is no indication that Nigeria has the capacity to produce the number of vehicles Nigeria needs.
Most licensed customs agents on Tuesday told Sunday Telegraph that they depend on Wakili to save them from the policy. They said if allowed to succeed, the policy will will send them to the unemployment market.
Wakili said that apart from the hiccups listed by stakeholders, the policy will deny the country of needed revenue. He also warned that the policy would emasculate the middle class. “The relativity on items often affects their implementation. Nobody wants to pay high taxes, because the higher the tax, the higher the potential of smugglers to indulge in smuggling.
As a former Area Contoller, Seme Border of Nigerian Customs Service, I have argued that the hiking of tariff on items does not help us. It takes our attention away from anti-smuggling activities. We dissipate energy on running after one or two smugglers with the attendant risk to the lives of our personnel,” the senator said. He added, “Government should know that the average citizen cannot afford to buy a new car, whether it is being produced by only PAN or other manufacturers.
Rather, they would want to buy used cars. If they must buy second-hand cars, then we ought to encourage them to take the normal routes, charge them medium rates that they can afford to pay. Then, no one would want to take the tortuous smuggling routes.
“If you are coming from the developed countries where you don’t need to have a car, where you can jump into the next train or pick a bus that is efficient and timely, you can afford to do without a car of your own,” he said. The first-time senator insisted that as long as the public transportation system is faulty, and people cannot afford to buy new cars, they would rely on used cars. “It will cost you many manhours because you cannot control them. There are so many porous borders.
Once you try to block one, many others are created the next day. Due to the porous nature of our borders, from the bights of Badagry up to Bayelsa, you can always have a place to enter this country.”
The senator advocated a review of existing laws guiding Customs operations in the country. He said most of them are out of tune with reality. “In Nigeria, there have been efforts to reform the Customs law. I am not sure if the National Assembly has been able to pass it or if the government has been able to assent to it.
But what I know is that in trying to reform the Customs, we have to factor in the current challenges facing us globally,” he affirmed. An auto dealer at Berger auto market in Lagos, Kanu Chiemerie, supported Waki on his call for a review of the policy. “You can’t solve a problem by dealing with its symptoms; you have to deal with its causes. We have one solution to most of our problems in Nigeria… the refineries!
Once we have functional refineries, we have gas supply for generating electricity, bitumen for our roads, petrol, diesel and other by products, the Nigerian situation will change. But before then, lets not punish the average Nigerian, it’s not their fault,” he said.
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