‘2020 Finance Act will adversely affect Nigeria’s automotive programme’
Luqman Mamudu is the managing partner Transtech Industrial Consulting and a former director of Policy and Planning at the National Automotive Design and Development Council. He spoke to BusinessDay’s HARRISON EDEH on how the new Finance Act could weaken the National Automotive Programme.
There has been serious concern on the Finance bill slashing down import duty on used vehicles; what is your take on this on the automotive policy?
The 2020 Finance act simply cancelled the Nigeria Automotive Programme (NAIDP) 6 years into its 10-year life span. The concern is genuine because the act simply opened up Nigeria for uncontrollable import of fully built up New and pre-owned automobiles from other economies including her brother African countries. It’s a strange decision. I am still struggling to come to terms with it. It’s difficult.
The Vice President pointed out that the policy was made on the back of paltry production of 14 000 vehicles by Nigeria’s auto plants; do you share in this assertion and what could the government have done differently if you may advice?
These are the lies that they fed the Vice President. The issue is that there are certain powerful interests bent on sustaining the age old inflow of built up automobiles into this country. They’ve always seen the NAIDP as an affront on their personal interests and we resisted them throughout our tenor. Unfortunately, when we left, those who took over from us weren’t that vigilant. Some of us tried to warn them but they see us busy bodies. The assembly sector of Nigeria including the six plants privatised by government, assembled less than 1,200 vehicles annually (mostly by PAN and Innoson) before 2013 when the policy was launched. As at today total output is about 15,000 units of automobiles, 3000 employed and over $billion USD additional investment has been made with footprint of global brands like HONDA, NISSAN, FORD, KIA. SINO-TRUCK, MAN DIESEL, YUTONG BUSES to mention but a few on ground with a combined capacity of 500,000 automobiles per annum. You tell me there is no impact? What impact do you need when all the hitherto moribund original six assembly plants privatised by government has been revitalised with the exception of Styr Bauchi. Automotive investment is capital intensive and long term-oriented. Six years is like early morning in the industry lifespan of an automotive programme. The VP was misinformed. I know he was with us on the policy when I was there. He is in government and must support its policy. I understand.
Some industry experts are of the view that the government should have offered loan facility for local manufacturing plants to expand their production instead of cutting down import duty; what is your take on this?
The banks are there to give loans. What government needed to do and which is part of the programme has been jettisoned. That is provision of vehicles Asset Acquisition cheap loans. We were ready to launch when suddenly someone cancelled it…the same powerful interests. The levy collected was meant to Finance this scheme. I wonder what will happen to monies collected now. This would have enabled Nigeria acquire vehicles built in Nigeria by the global OEMS here to drive demand. Nigeria problem is long term money to buy vehicles and pay gradually. Until you have this, you can reduce tariff to 0%, Nigerians still won’t be able to acquire new vehicles- individuals and haulage firms alike. It looks like we are doomed to rely on condemned second vehicles imports forever. There is even no age limit. Vehicle manufacturers worldwide are looking for where to dump vehicles that have come to end-of-life and we open up our land to them?
There are also concerns that Nigeria is not maximising the full potential of the auto sector in creating jobs in the value chain, do you share in this view, and what can we do differently?
To expand capacity utilisation in the Nigeria assembly plants, you first have to satisfy those against the policy. They are those who are angered by having to pay too much for the import of brand new choice cars because they all have become too expensive. Never mind that they are rich-they don’t like it. I know. In any case, we can’t make these vehicles here for now. They can be allowed to bring them in duty-free so they can let us be. They only deceived government that they are concerned about masses and recommend slashing commercial vehicles import to 5% from 35% but their target is to remove levy of 35% on import of new choice car imports. After all there is no levy on second hand vehicles imports and local assemblers can make new mid level cars easily. In fact they have unsold stock. Honda, Innoson, Coscharis all have huge inventory of unsold new automobiles. Innoson has over 4000 new cars selling for less than N5m unsold. Once government provides credit purchase funds, assembly utilisation capacity and demand in Nigeria will skyrocket. There have been intervention funds for every sector in Nigeria except automobiles. Did they offend government? Such a fund will be an ENABLER and will endear this government to Nigerians. If capacity grows, the present 3000 employed will also grow in number but as it is now, the new Finance bill will drive them out of employment.
If the government would reconsider rethinking the policy; what would you advise them to do differently now?
Government should simply carry out a transparent review of the policy implementation so far and chart a way forward. Cancellation is not and shouldn’t be an option. It’s totally unacceptable especially with AfCFTA in force. We cannot leave our boarders open for inflow of fully built new and old vehicles into Nigeria. We pose a threat to the rest of Africa more serious about pursuing the ideal of intra Africa trade. The review report will enable government restrategise on how to address the weaknesses in the implementation processes. NAIDP still have 4 years to go. Why vacate it so suddenly on the basis of dubious statistics. Who provided it? Certainly not NADDC. The programme doing so well. You don’t take figures out of context. I just left the launch of Geely vehicles in Nigeria. The minister of industry was there. I met him and he informally invited me to join his technical team on the policy review. I intend to take up the invitation.
Any suggestions on how to use the sector to grow and expand the economy especially now Nigeria has signed into the commitment of the AfCFTA?
Like I said, if we must take advantage of our membership of AfCFTA, we have to consolidate our position as an automotive hub in Africa. We have the market. The only way is to grow our local content. Unfortunately, the 2020 Finance Act is hostile to spare parts production locally- you can import them freely. By the rules of origin, we cannot export automotive products into the rest of Africa if we don’t achieve minimum 30% local content. How can you do that under this new act.? We have to work with government to quickly address this anomaly.