Following plans to review the Nigeria auto policy, the Organized Private Sectors (OPS), as well as stakeholders in the nation’s maritime industry, have urged the Federal Government to address the high cost of production of vehicles, stating that the cost of production is the major factor bedevilling the auto industry in Nigeria.
Recall that the Minister of Industry, Trade and Investment, Otunba Adeniyi Adebayo had last week said the ministry will soon submit a new auto policy for the approval of the Federal Executive Council (FEC) to increase local production of vehicles.
The minister said this when members of the Senior Executive Course 45 participants of the National Institute of Policy and Strategic Studies (NIPSS) visited him in Abuja.
However, reacting to the planned review of the auto policy, the Chief Executive Officer of the Center for Promotion of Private Enterprise (CPPE); Dr. Muda Yusuf in a chat with our correspondent stated that the auto policy may not work unless the government addresses the cost of production in the manufacturing sector as a whole.
He explained that the auto sector is part of the country’s manufacturing sector, and whatever affects the general manufacturing sector also affects the automobile sector.
He added that no matter the review, if the cost of production remains high and the product price remains very high, it will be difficult to make any progress in the auto industry.
Yusuf informed that close to 90% of the vehicle inputs are imported, while local content may not be up to 10%. Continuing, he said if the nation has that kind of production structure, it will lead to a very high foreign exchange exposure, which makes it very difficult to be competitive. He urged the government to address the fundamental issues that have to do with fiscal policies.
He said: “The auto sector is part of our manufacturing sector, and whatever affects the general manufacturing sector also affects the automobile sector.
“So, you must deal with the issue of industrialization, I think it’s best to deal with it holistically and by that, I mean that they should address the issue of the cost of production; no matter what you do if the cost of production remains high and the product price remains very high, it will be difficult to make any progress with the auto policy.
“Now if you look at the auto sector, close to 90% of their inputs are imported. I’m not sure local content is up to 10%.
“So, if we have that kind of production structure, that means there is very high foreign exchange exposure, and if you have that kind of product, it will be very difficult to be competitive, because the whole thing boils down to competitiveness and what people can afford.
“We can see many more people in the middle class are buying Tokunbo vehicles. How many people can afford to buy a new vehicle; whether it is imported or whether it is even made-locally? The idea, in the beginning, was that vehicles that are produced locally will be cheaper, but are they necessarily cheaper now? So, we should address the fundamental issues and the fundamental issues is what fiscal policy measures can we use to support them, to bring down their cost of production, so that the product can be more affordable”.
“Secondly there’s a deliberate policy, I think the government has this policy to patronize those vehicles; I’m talking of the government institutions now, because you can’t force any Nigerians to patronize them, because you will be infringing on the fundamental rights of the citizens, the best you can do is to support this industry to be able to increase their scale i.e through government patronage so that they can enjoy the benefit of the economy if their cost comes down.
“Also, if there is any fiscal policy concession that can be given to them to bring down their cost, because the bottom line is that you have to be competitive and be more affordable, right now they are not affordable, so these are fundamental issues and this is not peculiar only to auto, it’s the same problem many of the manufacturing company are facing.
“How do we increase the local content, the local content is extremely low and if your local content is low, that means your foreign exchange exposure will be very high and once it’s high that is a problem, your cost will be high and you will now be struggling on how to sell it.
“If they are saying they should ban Tokunbo and all of that, those things cannot fly,” he said.
On his part, the immediate past President of the Manufacturers Association of Nigeria (MAN) Engr. Monsour Ahmed also in a telephone chat with our correspondent, said the review of the auto policy should target areas that will help local production and as well help the industry to grow.
He noted that the issue of local production is not just dependent on one set of policies, explaining that the foreign exchange will have an effect on it, and as such the review should target areas that will help local production and as well help the industry to grow.
In his words; “The issue of local production is not just dependent on one set of policies, the foreign exchange will have effect on it, but also the auto policy itself is also critical, so the review of the auto policy should target areas that will help local production and as well help the industry to grow.
“It’s not just the auto industry itself, but the auto parts industry is critical to local production. I am sure you are aware that in other economies the motor vehicle is not just one-location product, the source of the various components that have to go into a vehicle can come from many different places.
“So, one of the ways to improve local production is that you don’t focus only on the final product, you also look at the sources of components that go into that product and that’s what the policy should aim at”.
“So, anything you do which increases the number of components that are locally produced will be helpful in increasing capacity. The policy should increase the number of different components that are produced locally” he said.
Speaking also, an importer and executive member of the Association of Nigerian Licensed Customs Agents (ANLCA) PTML chapter, Sulaimon Ayo, lamented that there has been no significant improvement in the auto industry in the country, despite the collection of the NAC levy.
He said the NAC levy that used to be 2% under President Olusegun Obasanjo’s tenure has increased to 10% under the present administration, with no significant improvement in the auto industry.
“From all indications, it is obvious that most of these policies will only be on paper, the real people that are supposed to be the beneficiaries will only hear it in the news; the implementation is where the problem lies.
“The issue of auto policy has been an issue for over years, where is the NAC levy going to, but they continue to collect the NAC levy there was a time we raised an objection over the NAC levy, but you know the government will still go ahead
“There was a time during President Olusegun Obasanjo, when he stopped the payment of NAC, then it was 2% because the purpose was already defeated, but this government may be in their own wisdom brought it back and believe that the percentage from duty that we are paying as it is now will make a difference, and we are yet to see that, and we are waiting to see it. If actually it will be channelled directly to the development of the auto industry, we are being sceptical, but we don’t want to be a pessimist, that’s just the truth”, he said.