After earlier shifting the implementation of the auto policy from February to July, the Federal Government last week surprised industry stakeholders with a 35 per cent tariff hike on vehicles imported into the country, a development that in turn triggered industrial action by freight forwarders, reports Francis Ugwoke
After months of silence, the Federal Government last week started the implementation of the auto policy in Lagos ports. The new policy aims at promoting local production of cars and other vehicles in the country. But the contention is that it also aims at discouraging importation of cars and other vehicles in the country, either directly or indirectly.
Although, the Minister of Trade and Investment, Dr. Olusegun Aganga, including the Coordinating Minister of the Economy and Finance Minister, Dr. Ngozi Okonjo Iweala, had explained that government had no plans to ban importation of vehicles into the country, importers and freight forwarders, among other stakeholders, are apprehensive that government may not sincere on this issue. And this position may not be unconnected with the events of the past when such policy was enforced not necessarily through trade prohibition but by imposing high tariff on the products in question.
This was what happened in the case of rice when government moved to discourage importation of the staple food in the country. Government had in 2012 raised the duty on rice to 100 per cent. Although this was not a ban, it affected many importers who were into the business. The result was that the price of the product was high to such an extent that many decided to go into rice smuggling.
Many who were into the business decided to use the neighbouring ports of Cotonou to smuggle the products into the country. It was a big business for the smugglers and government agencies who lobbied to remain at the border routes. The losers in this case were the few who kept using the Nigerian ports and government agencies as well. This explains why the Nigeria Customs Service (NCS) lost billions of naira revenue to the neighbouring ports. However, what happened in the case of rice is about to be repeated in the case of auto policy. This was with the decision to begin the implementation of the new tariff on vehicles import last week.
Implication of the New Auto Policy
The new auto policy when fully implemented will no doubt boost local production of cars and other vehicles. It will increase the demand for locally made vehicles, but there is doubt if the companies involved will be able to satisfy this demand. The effect is indeed clear. It will lead to high cost of the local cars. And what this means is that very few Nigerians will be able to afford such cars or vehicles. It will go back to what has become of the rice product. Before the 100 per cent duty was announced on rice, a bag of rice was selling for N6,500.00.
Today, a bag of rice sells between N11,000 and N12,000, depending on the market. This trend has heightened smuggling of the products into the country, a problem that the security agencies have demonstrated they do not have the capacity to control because of the many routes being used by the smugglers. Like rice, the new auto policy which duty as at last week was raised by 35 per cent will lead to massive smuggling of imported cars into the country.
Already, the neighbouring port of Cotonou has repositioned itself to take care of the traffic that the new measure in Nigeria will bring by building a deep seaport. Besides, the neighbouring port has always made its cargo delivery system conducive that many Nigerians have become used to the area. Sources told THISDAY that about 40 per cent of the cars sold in the country come from the neighbouring ports. If this has been the case all these years, analysts fear that the situation is certainly going to be worse if government insists on raising the tariff as it did last week.
Protest by Importers, Agents
Following the implementation of the new tariff on vehicles at the Port and Terminal Multi Services Limited (PTML) by the Nigeria Customs Service (NCS), freight forwarders embarked on strike which started on Tuesday. The Customs Command had explained that it was acting on instruction to implement the new policy. But the agents drawn from the Association of Nigerian Licensed Customs Agents (ANLCA) and National Association of Government Approved Freight Forwarders (NAGAFF) ignored all the explanations by the Customs Comptroller, Tunji Aremu, and insisted that they would not return to work until government reverses the policy.
The grouse of the agents was that government had in February decided to shift the implementation to July, apparently because of the earlier outcry. This explains why the agents were shocked about the implementation.
Effect on RORO Ports
If the new policy is implemented, it may have some adverse effect on RORO ports which specialises in vehicles imports handling. This is even moreso since some of the big operators have a lease agreement spanning over 25 years with the federal government. The new policy may affect the traffic in most of the terminals as the rise in tariff will force many importers to use the neighbouring ports. It would be recalled that soon after the new policy was made public last year to take effect in February this year, some importers had asked their agents to prepare to use Cotonou ports. What it means is that the importers may be planning to smuggle the cars into the country to evade payment of correct duties.
Traffic and Revenue
Although, the tariff on importation of new cars has been increased by 35 per cent, the Customs Service may still suffer low revenue yield from vehicles import this year. This is because the new policy is likely to reduce importation of vehicles into the country and instead lead to increase in smuggling of these vehicles. Those who will benefit from the new policy are definitely some unscrupulous customs officers and security agents at the border stations.
The implementation of the auto policy will affect many low income earners who would want to either buy a car for the first time or change car for another one. This is because both the vehicles that came through Nigerian ports and others that were smuggled would be too expensive. The worrisome aspect is that those who will buy smuggled cars without knowing may suffer the usual harassment from the Customs Service. Many had lost their cars if the original importer did not pay duties. What most of the car dealers who smuggle cars into the country do is to simply arrange fake documents for their customers.
Views from Stakeholders
Importers and customs agents who spoke to THISDAY advised the federal government to consider the suspension of the new policy because of the adverse effect. A foremost freight forwarder, Chief Austin Obe, advised government to suspend the 35 per cent tariff hike that was introduced last week. “The tariff hike will have adverse effect in the sense that some people will prefer to use Cotonou port where we all know they will smuggle it into the country. Besides, the new auto manufacturers do not have the capacity to produce enough cars that will be affordable by many Nigerians, especially the low income group.” He advised that government should wait to see in reality the efforts of the new auto companies in meeting demands, in terms of their capacity to produce enough cars that will be affordable before embarking on measures to protect them. Obe also argued that government should also consider that the auto trade remains a big employer of labour, adding that the hike in tariff was capable of leading to closure of many businesses and in turn increasing unemployment in the country.