Business

Dealers Move To Beat New Auto Policy

AS THE FEDERAL GOVERNMENT PREPARES TO IMPLEMENT THE NEW AUTO POLICY, WHICH IS EXPECTED TO TAKE EFFECT FEBRUARY 28, 2014, THERE HAVE BEEN INCREASE IN THE IMPORTATION OF VEHICLES, ESPECIALLY USED VEHICLES INTO THE COUNTRY’S PORTS IN OTHER TO BEAT THE NEW POLICY. WITH THIS COME ANXIETY THAT PRICES OF VEHICLE WILL GO UP AND THE FEAR AMONG IMPORTERS ON THE FUTURE OF THEIR BUSINESS. AS ORDINARY NIGERIANS and STAKEHOLDERS GROAN UNDER THE PROPOSED POLICY, KASIE ABONE, WHO VISITED THE PORTS, WRITES
 
Avisit to the major sea ports in Lagos, Nigeria—Tin Can and Apapa Wharves will convince you that there have been massive importation of vehicles, especially used ones into the country in readiness to beat the new auto policy of the federal government. Some dealers, investigations showed are shipping these vehicles into the country to beat the deadline government set to implement the 70 per cent duty on such vehicles
 
Ironically, these vehicles are sold exorbitantly in the local auto markets in what looks like and effort to bring in the these vehicles and make as much profit as possible before the new auto policy regime comes into effect. While some dealers are selling them off immediately, other importers are filling their warehouses in anticipation of the increased tariff and to sell at cut-throat prices when the new regime takes effect. How all these will impact on the coming man in both long and short term remains to be seen.
 
Despite the huge positive reactions trailing the federal government proposed policy on the auto industry, some stakeholders are of the view that despite the claim by government that it would generate employment if implemented that there is the tendency it would worsen the already bad condition of the middle class and common man.
 
While some people think the policy would be detrimental to the economic situation of some critical economic stakeholders others especially the auto manufacturers believe it is the best policy to happen to nation’s economy in recent years.
 
For  C.Y Udochukwu, a graduate of Marketing from Lagos State University who decided early to engage himself in self employment rather than go for paid employment, he opted for a career in clearing and forwarding business, the new auto policy is like a death sentence. “I work from Monday to Saturday trying to earn a living. But this new policy will take away my business and his very source of livelihood”  This is sure not for Udochukwu who is married with four children, just like other clearing agents like him, who are faced with the possibility of losing their business.  He looked downcast and gloomy about his future as laments his fate.
 
He expressed outrage over the new policy when asked how it will affect his job. He  described government’s auto policy over the years as inconsistent stating that the present policy would further transfer the Nigerian economy into the hands of foreigners who will have a field and without control.  â€œThe economy is nothing to write home about, so if government must discourage importation of vehicles, it should be a gradual process. They are talking about job creation, what about these people—clearing agents.
 
But is Udochukwu against the creation of employment for the teeming Nigerian youths who work the streets daily in search of non-existing jobs? His response was instructive. “I am a graduate. Most of us doing this job are graduates. What happens to us? Look at the sea of heads here, what happens to them when they loose their jobs? Are they not Nigerians too? Are they not part of the people the government is  supposed to be creating the jobs for? You can’t destroy peoples’ means of livelihood  in the name of creating jobs for others. While I am not against federal government efforts at creating employment for the youths, my position is that it will be a gradual process.”
 
Udochukwu further said that presently, Nigeria Customs tariff on imported goods was the highest in the whole of Africa. He decried a situation where Nigerian customs give valuation in foreign currency adding that the practice demonstrates a lack of confidence in Nigeria by our leaders themselves. He suggested that rather than increase already high tariff, that the federal government should instead adopt Ghana system of vehicle evaluation where the older the vehicle the higher the duty to discourage dumping of junk in the country.
 
Festus Udemba sells cars at the popular Berger auto market. He is of the opinion that no matter how well intentioned government policies are, they are subject to abuse by even the formulators of the policies. According to him, the customs and other regulatory bodies lack the capacity to implement the policy at the end of the day and government would have only succeeded in throwing them out of business, while creating “a channel for criminals to feed fat on.”
 
Also speaking in similar tone Wale Okoya,  who sees no way such policy would benefit the market woman, self employed Nigerians who will find it difficult to plug in into the policy. According to him, bringing out millions of naira by such people to buy brand new cars would be an uphill task. Even when employers extend credit to their staff to buy new cars, it’s only the management staff that will benefit from it. “The way I know Nigerian government, they will begin to give jumbo loans to civil servants, which they will deduct from their salaries at the end of every month at the end leave them with nothing to take home.”
 
While describing the policy as ill thought-out, Okoya averred that at the moment most Nigerians cannot even afford buying new cars let alone when importation is highly taxed or prohibited. He argued that if government was serious about the implementation of such 70 per cent duty on imported vehicles, a lot should have been on ground like the factories, assembly plants, the equipment and every other thing necessary to ensure smooth take off of local manufacturing.
 
He doubts the ability of local manufacturers to satisfy local demands. Instead of clogging the whole system, Okoya said government should concern itself with establishing a functional mass transit that would reduce the cost of transportation as well as improve the quality of life of the common man; otherwise it will amount to propaganda by the federal government to achieve some selfish goals.
 
For Mr. Okechukwu Abone, a concerned Nigerian, government cannot just wake up and increase tariff without first implementing the policy of local production and see how it goes. “How will they better their products if there is no competition?” he queried. Justifying his position, he said in spite of having a thriving auto industry, Americans still allow foreign competition. “When they found out they couldn’t compete with their bogus designs, they brought in foreign engineers to assist them with designing their vehicles. That is why today American cars are similar in design to the ones from Japan and Europe. Before then American auto companies were laying off their staff because they could not compete. Americans were dumping their vehicles in preference for Japanese cars with more sophisticated designs and more gas economy. America did not shut their ports for imported vehicles because of that, “they had to stay in business by being competitive by inviting European and Japanese engineers to help them design their vehicles. Were it not for competition, they would not have improved. Today, Ford makes one of the best and fastest selling cars.” Abone argued that imposition of high tariff would not only create a kind of monopoly but will in addition give room for local manufacturers to feed Nigerian auto market that will be left with little or no option but to buy inferior products and exploit Nigerians.
 
“Nigerian government cannot deny their citizens freedom of choice, Japanese have British cars coming into their country, Nigeria is not the first country to start manufacturing cars. It is not only in the auto industry that foreign products are allowed to come in. In the beverage industry, the operators are not calling for foreign products to be killed rather they are seeking for a level playing field. I think that is fair enough.”
 
For  Tom Dickson, the auto policy rather than achieve its intended objective of job creation may in the long run pose greater problems for Nigeria’s low-income earners and the masses. “As it is before the new policy, it was even uneasy to purchase and service these imported vehicles by the owners, while commuters even paid through their noses for transportation from one place to the other. Though our policy makers are of the belief that it’s meant to develop our local and indigenous automobile industries, but would the government roll out a long term, consistently managed auto policy? I say no. I also believe that the government needs to put on ground partnership agreement with the auto manufacturers in areas of structures needed to actualise the plan. To me, this is not the right time to propose or actualise this policy which I believe, is not in the interest of the masses still groaning under very unfriendly environment.”
 
For Ikem Ohuku, “the new policy is a giant step that would move Nigerian economy forward. In his words “the new automobile policy is a giant move capable of moving Nigeria forward and creating a new middle class while boosting employment. I say this because the multiplier effect of this on the economy is going to be huge. What this means is that feeder industries are going to spring up to support the auto companies.
 
“You know that cars are not made entirely by one company. So company A can take up the job of making and supplying brake pads, another will make the dashboards, the other can specialise in the making of the hoses to carry fuel into the engine and so on. That way, many people would be adding value and employing people, while making money for themselves. If you also realise that these materials are being imported at the moment, you can then realise how much would be saved in terms of foreign exchange.
 
In terms of cost of acquisition, Nigerians would be paying less for cars since, as we know, the bulk of what we pay here for cars are in the form of duties and taxes. If you remove the cost of duties and freight, cars would cost at least 45 percent less,” he said.
 
Ohuku further argued that the policy will hugely impact on the economy in terms of employment generation, capital savings, technology transfer, among others. He argued that the policy would empower the middle class once more, which hitherto had been decimated by past government policies, by boosting employment and creating new values in an economy that has been monoproduct.
 
“If Nigeria begins to make its own cars, that is economic diversification. A lot of the bye products of crude oil that we export at very low prices can now be put to use here. This is because companies that would feed the auto companies would then spring up to make use of these products. This means employment generation. This means capacity building. This means getting more value from our crude oil. This also means stronger economic power for Nigeria in the African economic bloc because we would then have capacity to even export,” he added.
 
Ohuku differed from those who argue that the timing for such policy was not right. According to him, there was no real time for any policy; whenever you start something is good time provided you start it with a sense of purpose.” Despite his endorsement of the policy, Okuhu identifies a snag: “The only snag is that we are yet to develop the steel industry here to the level that would make it effectively support the auto industry. If we had our steel industries well developed, a lot more would be achieved. But be that as it may, when the auto companies begin a strong demand for steel, when you measure the cost of importing this critical component vis-a-vis sourcing locally, the push of this demand would essentially force the development of the steel industry here.”
 
But the Local auto manufacturers who are the direct beneficiaries of the policy are applauding the government of President Goodluck Jonathan for his timely intervention in the auto sector of the economy. Speaking with Mr. Arthur Madueke, Executive Director of Nigeria Automotive Manufacturer Association (NAMA), he told THISDAY that those who are kicking against the new policy should realise that the common man will ultimately suffer. He accused the dealers, the major opposition to the policy as feeding fat on the ignorance of Nigerians, saying they (the dealers) have nothing to lose. The major dealers include Coscharis, Globe Motors, Elizade, Leventis, among others. Throwing more light into how the policy will be implemented, Madueke explained that the fear of having a shortfall in supply is unfounded, as the local manufacturers will be given concession to import the shortfall to meet local demand. “Presently some factories are not producing at optimum capacity before the policy came into place. The policy provides that you produce what you can locally and double what you produce. This measure will have the impact of meeting local demand. As capacity utilisation increases, he said the shortfall being imported by the plants would decrease.
 
He said while importation is still going on, the new policy will give concession to those serious dealers who indicate interest in setting up a plant in the country. He described as scare tactics the hues and cry by those who don’t want the policy in place. He reiterated that the development would create jobs when it comes into effect.  He added that it’s the children of the common man that would suffer when there is no job.
 
Madueke explains that those who may not have ready cash for down payment to purchase cars, have the opportunity of obtaining loans from banks, questioning the rationale behind buying used cars when one can buy new ones at affordable prices.
 
Madueke cleared the air on the speculation of how much the new tariff regime would be. According to him, the new tariff provides that imported vehicles would attract 35 percent duty and another 35 percent levy bringing both to 70 per cent.
 
Managing Director, Innoson Vehicles Manufacturing, Nnewi was quoted in an interview as commending the federal government for coming up with such policy. “I think it was about time someone opened the eyes of the nation to the huge losses the country have been incurring in importing motor vehicles into the country. I think it was time the country got energised to move forward and recover the several years of opportunities that have been lost by following the easy way out of making everything available to Nigerians but denying real value to the economy. Now having said this, I must commend the present government under President Goodluck Jonathan for the bold step that have been taken towards not just ensuring the reduction of the importation of fairly used vehicles, but also encouraging local manufacturing as serious government policy.
 
“The government captures that amount of money the country would save when local capacity in vehicle manufacture is developed. But what they did not capture is the massive boost the economy would get in terms of employment generation and what in economics, is called localisation,” he emphasised
 
The new policy has not yet taken effect. The reason from some quarters is that government is looking at all the issues raised before the complete roll out in April. What is clear, according to the Minister of Trade, Mr. Olusegun Agagan, is that there is no going back on the policy. Would government take into cognizance how previous measures have negatively impacted the economy by pushing businesses out of Nigeria to neighboring countries of Benin Republic, Cotonoue and Ghana? Will the dire consequences of throwing millions of Nigerians who are into sale and importation of used cars and the clearing agents at various seaports into consideration? Would there be palliative measures to contain the expected challenges that may arise from the policy, only time will tell.
 
Though there will not be outright ban on used (tokunbo) vehicles, the new policy would no doubt have consequences on the Roll-on-Roll-Off (RORO) port, emerging deep seaports, small traders, customs agents, terminal operators and even the Nigeria Customs Service (NSC). For those desirous of owning a tokunbo car, if they are unable to buy it now, they may have to wait a longer time even as they are likely going to pay through their nose as the new tariff regime of 70 percent charges takes effect.
 
For the manufacturers of cars in Nigeria, they will enjoy tax holidays and 50 per cent duty rebate for five years, while some importers have filled their warehouses in anticipation of the increased tariff with imported vehicles, which they will sell at cut-throat prices when the new regime takes effect. How all these will impact on the coming man in both long and short term remains to be seen.

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