The advert stood out in the This Week issue Vol 1, No 1 of July 21, 1986. Volkswagen of Nigeria Limited called it public information series Vol 1 5/86. It shared “The cost effect of only external factors on the Beetle (1980-1986 comparison).”
This is what it stated. “We have shown the effect of external factors in half a year on Beetle prices and that of a one cent drop in the value of the Naira. The illustration below using the 1986 cost + freight value in foreign exchange shows that from just these external factors alone a N4,012 cost burden has been placed on the Beetle.”
The table that Volkswagen displayed showed that the Naira exchanged for the dollar at N1 equalled $1.85 in 1980. In 1986, the Naira could only fetch $0.90. The cost and freight value of the Beetle remained at $3,193 in 1980 as in 1986. However, in Naira it changed from N1,726 in 1980 to N3,548 in 1986.
More significantly, the federal government added to this increment that manufacturers had to pass on to consumers by raising the customs duty from the 25 percent of 1980 to 35 percent in 1986. There was no import levy in 1980; in 1986, import levy was 30 percent, thus adding N1,064 additional costs to the valuation.
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Similarly, the company paid excise duty of 5 percent in 1986 from none in 1980. The Beetle then sold for an approved price of N6,636 in 1986 as against N3,425 in 1980.
Volkswagen then stated: “Using the formula prescribed by the appropriate government agencies, current Beetle prices should be the 1980 price of N3,425 plus the cost effect due to external factors during the period 1980 to 1986 =N4, 012 plus the effect of domestic inflation on overheads and assembly cost and dealer margin. The actual approved price of the Beetle (including excise duty) is only N6,636. The company suffers a loss of N3,600 per car.
“This should suffice to erase the impression that we have ever asked the price control board to do more than follow the formula laid down by the government.” The optimistic firm signed off the ad by claiming to be “Your partner for a better life.”
That claim sounds so ironic looking back. Volkswagen did not become the partner of Nigerians for a better life. Government policies on the exchange rate, tariffs and taxes forced it out of the country. Better life? Mariam Babangida, the first to officially claim the title and office of the first lady, appropriated the name for her pet programme of better life for rural women given that the policies of her husband’s government had impoverished that demographic even more than others.
Nigeria will mark its 59th independence anniversary a few days hence. Routine will fill the day. There would be march pasts, muted celebrations as well as long speeches and promises of deliverance. What have those speeches delivered?
Working on a research report, I recently took a walk into the past by reviewing newspapers and magazines of 1986.
The year 1986 is significant for Nigeria. It was a year into the coming of the Ibrahim Babaginda regime that ended the tyranny of his predecessor Muhammadu Buhari. More importantly, it was the year of the beginning of Nigeria’s gyration with exchange rates and with the other two critical rates of inflation and interest.
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The French expression comes to mind as one read through the files. Plus ça change, plus ça la meme chose. The more things change, the more they remain the same.
The issues in those reports still feature today in various ways. South Africa was one of the foremost topics in July-August 1986. The matter was the fight by African countries for an end to apartheid, the meeting of the Commonwealth eminent persons group and the seeming willingness of Margaret Thatcher to throw the Commonwealth under the bus in favour of retaining apartheid. South Africa featured prominently in the last two months as they forgot the struggle of their brother Africans to end the obnoxious policy that held them down.
More importantly to citizens is the nexus between government policies and the value of the naira, inflation, interest rates, and how they affect his life. As the Volkswagen Beetle pricing matter showed, the federal government through its policies is always the agent provocateur. Advisers tell it to behave like Jeroboam who promised the people more pain through taxes and tariffs. It is unclear what the FG did then or does now with all the increment in rates. What is clear is the continued impoverishment of citizens arising from the policies.
Nigeria is currently raising all manner of tariffs and taxes, tightening borders and practices, while neighbouring Ghana is doing the exact opposite and attracting investments and investors.
Volkswagen of Nigeria was one of the first major firms to exit from the consequences of those policies. Many others followed. Since then, Nigeria has continued to play the same policy game. The result has been harsh on citizens.
There is plenty of institutional and human memory in the new Economic Advisory Council (EAC) of President Buhari with Ode Ojowu and others on the list, who have been part of economic advisory in the last thirty years. It will help if they take a retrospective before coming up with any advice. We need to see sustainable change.
CHIDO NWAKANMA
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