Vice President Yemi Osinbajo on Monday defended a new policy in the draft 2020 Finance Bill which seeks to slash duties and levies on imported vehicles. Osinbajo said the government plan is to cut down on the present high transportation costs with attendant effect on the entire economy.
Osinbajo’s quick intervention in Abuja at the ongoing 26th Nigerian Economic Summit (NES#26) while reading President Buhari’s opening speech followed concerns raised at one of the panel discussions on how government policy summersault is fast stifling the already struggling businesses in the country.
Recall that the past administration had, among other things imposed some 35% duty on vehicle imports to encourage the implementation of its auto policy which basically aimed at booting local production.
But Buhari’s administration has proposed to slash those levies, including import duties on tractors, transport vehicles, and others, with claims is to help further cushion current socio-economic conditions in the country.
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As contained in the draft 2020 Finance Bill, the Federal Government is proposing reduction in duties on tractors from 35 to 10 per cent and a cut in duties on motor vehicles for the transportation of goods from 35 to 10 percent.
Government also wants to cut levy on motor vehicles for the transportation of persons (cars) from 35 per cent to 5 per cent, and also exempt small companies from paying education tax under the Tertiary Education Trust fund (TETFUND)- including companies with less than N25m turnover are eligible
The bill also seeks a tax relief for contributors to the COVID-19 Relief Fund, while retirees’ compensation exemption threshold is to be raised from N10,000 to N10million & software acquisition would now qualify as capital expenditure allowing for tax recovery of same.
“The point of reducing duties and levies on motor vehicles is to reduce the cost of transportation by reducing the cost of vehicles.
But the subsequent removal of fuel subsidies and increase in fuel price have had pass through effect on food prices, transportation costs and so on,” the VP said in response at the summit held both virtually and physically for the very first time.
“Now the automobile policy is directed at localized production of vehicles, so the logic then was that if you increase duties and levies on imported cars and imported vehicles, local production becomes more competitive and this is a compelling argument, however the annual demand for vehicles is about 720,000 vehicles per year, but actual total production today by the Assembly plants that we have is 14,000 vehicles a year.
“So the problem is that at current rate of production we will not meet the serious national needs and this will just mean higher prices of vehicles and greater strain on other sectors of the economy that depend on transportation. But we are not giving up on the auto industry,” he explained further.
He said the new import policy will not “necessarily” ruin what government is trying to do in auto sector but will also energize other sectors of the economy that constitute threats, especially on high inflation.
“But we are not giving up on the auto industry. Two important things to note the first is that we still have relatively high duty 35% so there is still a disincentive for importation. second is that we are promoting policy that government must buy only locally manufactured cars.”
He added that two important things to note is that first, “we still have relatively high duty 35% so there is still a disincentive for importation, second is that we are promoting policy that government must buy only locally manufactured cars.”
