No doubt, Nigeria, like many African nations, is a vehicle importation-dependent economy; a business that is divisible into two broad categories, namely: new and fairly used vehicles.
Without mincing words, importation of used (Tokunboh) vehicles has been a lucrative business in Nigeria; both for Nigerians and for their relations abroad who ship those vehicles into the country.
No doubt, Nigeria, like many African nations, is a vehicle importation-dependent economy; a business that is divisible into two broad categories, namely: new and fairly used vehicles.
Without mincing words, importation of used (Tokunboh) vehicles has been a lucrative business in Nigeria; both for Nigerians and for their relations abroad who ship those vehicles into the country.
Recently, the National Automotive Council said that importers have spent as much as $31.67 billion (approximately N6.3 trillion) on the importation of vehicles and motorised equipment in five years.
In Nigeria, there is long chain of players, including the importer, the shipping lines, the clearing agents, the Nigerian Port Authourity, the terminal operators, the Customs, etc all of whom are directly connected (one way or the other) to the vehicle importation business.
At the peak of vehicle importation business, it is not unusual to see that, on daily basis, ships bring in new and used vehicles into the country through the nation’s seaports; in fact some ships and some terminals are already synonymous with that category of imports.
From available records, the business of vehicle importation wasn’t very pronounced in Nigeria until the late 1970s when Nigerians started developing tastes for exotic cars.
But, between 2000 and 2009, there was an upsurge in the purchase of new cars as banks opened their doors to the middle class who desired new cars; a development which threatened importers of fairly- used vehicles, but it appears that the fear no longer exists as both still enjoy a sizeable chunk of the market.
The Nigerian new automobile market is dominated by most of the global brands like: Toyota, GM, Nissan, Honda, BMW, Audi, Mercedes, Hyundai, Kia, Volkswagen, Skoda and a host of others.
In the new cars segment, the market leaders are Stallion Group (owned by the international billionaire businessmen; the Vaswani Brothers that holds the exclusive sole representations for prime European, Japanese and Korean brands. But, in the used vehicle genre, brands like, Toyota and Honda are hot favourites.
Determined to discourage unchecked importation of vehicles and safe the nation’s assembly plants, the Federal Government had introduced National Automotive Policy.
The policy came into effect in July 2013 with specific objective of localising the manufacturing of vehicles. It also targets that assembly plants will roll out an aggregate of 300,000 vehicle units within two years. 23,000 vehicle units of various brands of automobiles were to be produced by the plants between June and December 2014.
The policy was expected not only to reduce the pressure on foreign reserves by discouraging importation but also increase job creation and enhance the development of the economy.
Even though not yet in full force, some directives associated with the policy give room for concern. The most apparent of these directives is that which concerns collection of revenue on imported used vehicles. Its implementation has pitched stakeholders against both the NAC and the Nigeria Customs Service, which at first was bent on collecting 70 per cent tariff and levy. With the full implementation of the auto policy, tariffs jumped from 20 per cent duty on passenger cars (PC) and 10 per cent on commercial vehicles (CV) to 70 per cent and 35 per cent, respectively.
We are convinced that the decision to collect 70 per cent revenue on used imported vehicles is very very unpopular among most Nigerians.
The take-off has been delayed due to a combination of factors. The full implementation date has had to be shifted to January 2015, and probably it took some unseen circumstances for the current extension to April, 2015. Sadly, even as we approach the end of 2015, nothing is being said about the policy, beyond the assurances of it’s been work in progress by the DG of NAC; Alhaji Aminu Jalal.
But again, some have argued that, there are indeed no alternatives to used vehicles. We disagree and maintain that here are, as evidenced by the vehicles that are now being assembled by a few of the auto assembly plants.
However, our major concern is the immediate effect of the policy, especially when the collection of 70% tariff starts.
Certainly, importation will drop, and it has started dropping already going by what stakeholders have said.
Even though not yet fully implemented, the effect is already being felt by stakeholders. For instances, Managing Director of Nigeria's biggest vehicle importation handling terminal, the Port and Terminal Multiservices Limited (PTML); Mr Ascanio Russo confirmed recently that the policy has affected the importation of vehicles into Nigeria by as much as 50%.
More worrisome is that he confirmed that many of the vehicles that should ordinarily pass through the terminal are now coming into Nigeria through Cotonou port and that Grimaldi in Cotonou is making money while its counterpart in Nigeria is losing money.
Certainly, the auto policy is already causing revenue losses to both the Nigerian Ports Authourity and the Nigeria Customs Service; it will lead to job losses in the Nigerian port system.
We agree that a fully functional automotive policy will no doubt lead to gainful employment for many Nigerians. This is more so since the government is planning to create automotive clusters in Ogun and Lagos States, Kano and Kaduna States, Enugu and Anambra States.
While we agree that creating automobile clusters in different parts of the country will reduce cost of manufacturing and also create employment, we still see the rush to hike tariff as akin to putting the cart before the horse.
However, the greatest problem in the implementation is the silence on the part of the government; the policy appears not to be a priority of the present administration of President Muhammadu Buhari. Otherwise, how can one explain the fact that there has been no mention of it since May when the present administration came in? Of course, we understand that there has been no definite pronouncement on the government’s economic policy , of which the auto policy is part.
Rather than subject Nigerians to the whims and caprices of government officials at the port, the authorities should come out with a definite pronouncement and abort the negative effects of the half-baked policy.
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