PAN Nigeria Limited and other local automobile assemblers have called on the Federal Government to urgently reconsider the tariff regime on imported vehicles into the country in order to safe local assembly plants from collapsing.
The major local vehicle assembler made the appeal on Tuesday following the Federal Executive Council (FEC) approval of the new tariff regime on imported ‘tokunboh’ vehicles.
The Chairman of the automobile assembly company, Alhaji Ahmed Wadada Aliyu as well as the Chairman of Nigerian Automotive Manufacturers Association (NAMA), Mr. Tokunbo Aromolaran, and other stakeholders at a media briefing on their position on the revised tariff, accused the Comptroller-General of Nigeria Customs Service (NCS), Col. Hameed Ali (rtd) of misleading the government on the decision which, they claimed, was not in the best interest of local automobile assembly investors.
Specifically, the PAN chairman alleged the CG of the NCS gave wrong statistics about the automobile industry and subsequently got FEC’s approval for tariff review on importation of used vehicles, also known as tokunbo vehicles.
According to him, the CG is determined to kill Nigeria’s automobile industry, based on some of the reasons contained in the 2020 Finance Bill.
The automobile manufacturer described the tariff reduction as tantamount to a policy somersault based on recommendations made by the Automobile Standing Committee set up by the government, through the Bureau of Public Enterprises (BPE), to examine factors hindering the growth of the automotive industry.
Aliyu noted that many assembly plant operators were worried about the policy reversal given the fact that they were indebted by over N100 billion to local banks, stressing that the domino effect of the revised policy on the automotive industry is frightening and will be tragic, if not reversed immediately.
He cautioned that Nigeria would soon become a dumping ground for all kinds of vehicles and that with that, there will be massive lay-off of employees in the industry with the attendant negative implications for current efforts to pull the economy out of recession.
The PAN Chairman alleged: “The Comptroller General of Customs intends to flood Nigeria with Tokunbo used vehicles and ensure the closure of all assembly plants whereas the plants have out in place a car financing scheme for Nigerians to own brand new vehicles at affordable rates.
“The Comptroller General has misled the Honourable Minister of Finance with wrong statistics about the automotive industry and subsequently got the Federal Executive Council’s approval for tariff review on the importation of vehicles.
“The action of the Comptroller General is a clear flagrant abuse of the direct access that he has to Mr President.
“We are appealing to Mr President to reverse this review immediately because the effects include tokunbo importers will flood the country with all manner of old and obsolete vehicles; Nigeria will become a dumping ground for all manner of vehicles such as cars, buses, trucks, and others; Nigeria will not be able to compete in the AfCTA trade in the region; Imminent closure of 54 assembly plants in Nigeria with a total capacity of 417, 690 units per annum and loss of 6, 000 jobs; All the investments made over the years by these local assembly plants in excess of over $1 billion imminently goes to waste; All gains made by NAIDP in the past seven years will be rolled back; All local assembly plants will not be able to compete and eventual shut down; and there will be added pressure on scarce foreign exchange reserves”, Aliyu cautioned.
He explained that when Nigerian Automotive Manufacturers Association (NAMA), discovered that a tariff had been inserted in the 2020 Finance Bill, a meeting was called by the office of the Vice President in which NAMA was in attendance.
“It was agreed at that meeting that NAMA should put up a comprehensive presentation on the needs of the Automotive Manufacturers with regards to capacity for effective performance. We have been shocked to learn that the 2020 Finance Bill had been approved.
“The reasons adduced by the sponsors of this bill (Comptroller General of Customs) for this tariff review are listed as follows; Inadequate capacity of local automobile assemblers to meet demands of consumers, which is absolutely wrong because our combined capacity is over 500, 000 with over 4, 000 Number of employees in direct employment and about 2, 000 employed within the value chain in addition to a combined total investment of over $1 billion. As a matter of fact, the problem of the automotive sector is not of production capacity but of excess capacity.
“Diversion of vehicles to other countries instead of Nigerian market; The sponsors of this bill did not state that the logistics challenges that have always been witnessed at Nigerian ports has encouraged this diversion.
“High transportation costs; rather than reduce duty on vehicle importation to reduce transport costs, the government should seek ways of providing mass transit schemes across the 36 States so that each State will be encouraged and supported with incentives to set up such schemes; furthermore, the government should increase the demand for locally assembled mini and city buses by the launching of a low-cost vehicle asset acquisition fund under the control of the Nigeria Automotive Development Council, NADDC. With such a progressive move, haulage bus and truck owners will readily re-fleet to better serve the masses,; the government should seek ways of reducing bureaucracy, eliminate bottlenecks and extortion at the ports.
“We categorically state that this tariff review will become more detrimental to the long-term competitiveness that the automotive industry must achieve if it is to play any dominant role in Africa Continental Free Trade Area, AfCTA, and eventually lead to total collapse of the Nigerian Automotive industry, thereby positioning Ghana as the hub of automotive activities within the ECOWAS sub-region within a few years.
“The Nigerian Ports Authority, NPA, shipping data revealed that December 2020 that 13 vessels offloaded used vehicles at the terminals. In 2020 the country imported used vehicles and motorcycles valued at N1.28 trillion.
“It means in 2021 Nigeria is likely to go berserk and triple the amount to N3 trillion. 40 per cent of the budget on importation of all manner of used vehicles is direct consequences of the tariff reduction.
“We strongly believe that the Comptroller General succumbed to the bobby of ‘tokunboh’ dealers who are glorified car dealers with no matching investments in local vehicle assembly”, Aliyu stressed.
In what seems to be a way of allaying the fears of the local automobile manufacturers, the Minister of Finance, Zainab Ahmed, assured them that the Finance Act 2020 would not be a burden to them , since there are plans to bring relief to the industry in terms of fiscal support.