The proposed 2020 Finance Bill by the Federal Government that seeks to lower the duty paid on new vehicles imported into the country has got knocks from the Association of African Automotive Manufacturers (AAAM), the umbrella body of automotive assemblers in Africa, who are increasingly becoming sceptical on further investment into Nigeria’s local automotive assembly.
In a response to an e-mail sent by BusinessDay to the leadership in South Africa on what impact the proposed bill could have on original equipment manufacturers (OEMs) with interest in supporting Nigeria’s automotive industry, Dave Coffey, CEO of AAAM, warns that the 2020 Finance Bill would be the end of the road for automotive investment in Nigeria.
Coffey wonders why the Nigerian government should be seeking to reduce the tariff on newly imported vehicles against the country’s earlier position of increasing tariff under the 10-year (2013-2023) National Automotive Industrial Development Plan (NAIDP) to encourage local auto assembly.
The AAAM boss says in the past few years, the AAAM has been working with the Nigerian Federal Ministry of Industry Trade and Investment through the National Automotive Design and Development Council (NADDC) on the development of a fully-fledged motor manufacturing industry, enabled by a comprehensive automotive framework that would assist in the industrialisation of Nigeria.
According to Coffey, ‘’The National Automotive Policy would be scuppered by the 2020 Finance Bill, which sees the Nigeria Customs Service (NCS) proposing to reduce levies on motor vehicles for the transportation of persons from 35 percent to 5 percent, and the reduction of duties for the transportation of goods from 35 percent to 10 percent.”
He points out that, a critical element of an automotive policy that will drive industrialisation is to sufficiently differentiate tariffs for locally assembled vehicles from tariffs for imported vehicles. He warns that, should an acceptable level of differentiation not be in place, the industrialisation and growth of the automotive sector will not transpire.
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“The proposed automotive policy framework requires that the levies/duties be retained at their existing levels with some refinements. The proposed reduction in levies/duties will thus remove any possibility for Nigeria to industrialise and develop the automotive sector,” the CEO of AAAM states.
“It is in the industrialisation interest of Nigeria to halt the proposed reduction in motor vehicle levies/duties and to effectively implement the proposed automotive policy. The AAAM offers their full support to the Government of Nigeria in the development and implementation of the automotive policy and ecosystem,” he says.
In response to inquiries, Mike Whitefield, current president of AAAM, says government must see the automotive sector as the best avenue to industrialise and diversify the nation’s economy.
He states that, while players lamented that the sector is currently suffering a somewhat standstill, Nigeria’s government must build a legislative framework that allows stability and gives certainty to distance over a long period of time to move the industry forward.
The Nigeria Automobile Manufacturers Association (NAMA), the umbrella body of Nigeria auto assemblers, says it was rattled when the bill seeking the approval of the National Assembly to approve reduction of duties paid on imported vehicles was released to the public.
Remi Olaofe, executive director, NAMA, states that the proposed bill by the has a lot of short-, medium- and long-term negative implications that is a time bomb for the economy and auto assemblers in the country.
The NAMA boss laments the threat the proposed finance bill will pose to the Nigeria’s Automotive Industrial Development Plan (NAIDP) and the new automotive policy.
Olaofe expresses fears over the negative perception that the government move would generate in terms of policy inconsistency, which may result in reversal of ongoing foreign investments being channelled into the country’s economy.
Another area of concern is the envisaged pressure on the already scarce foreign exchange with its attendant pressure on the trade balance of the country.
The NAMA boss also frowns at the avoidable gross failure of ancillary industries that largely depend on the automotive assemblers.
Added to fears expressed by Olaofe is the likelihood of worsened unemployment from layoffs and business failures, with Nigeria returning to vehicles dump ground as well as the envisaged take-off of the African Continental Free Trade Area (AfCFTA).
He recalled that, the christening of the NAIDP in 2013 and the subsequent increase in the import tariffs on fully built vehicles (FBUs) attracted the interest of leading auto assemblers, all of which he cautioned should not be made to regret the massive investment they made in setting up the assembly plants, with most of the newly established assembly plants still at their teething stages.
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