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Job losses loom in local assembly plants as new vehicle tariff to begin

Families and other dependants on persons working in some of Nigeria’s automobile assembly plants may be in for an uncertain future as their breadwinners face imminent job losses.

This follows the take-off of the 2020 Fiscal Policy under which the Federal Government reduced tariff on vehicles and tractors from 35 to 10 percent.

BusinessDay checks revealed that some local assemblers with massive investment are planning to shut down their factories and return to the importation of fully build units (FBUs) as their margins can no longer sustain auto assembly overhead costs and other sundry expenses.

Frank Nneji, chairman and chief executive of Transit Support Services Limited (TSSL), told BusinsssDay that assemblers of the Shacman range of trucks in Nigeria may be forced to return to full importation since local assembly can no longer guarantee the truck assembler the projected returns on investment.

In 2014, TSSL signed a memorandum of understanding with the owners of Anambra Motor Manufacturing Company (ANAMMCO) to use its assembly line to assemble Shacman trucks under a contract assembly agreement with the first roll-out of the first batch in 2015.

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According to Frank Nneji, ‘If you are assembling these vehicles locally and the government says there is a reduction in import tariff to 5 percent or 10 percent, then you ask yourself, what is the factory worker doing there.” For ANAMMCO that was opened 7 years ago, factory workers numbering over 200 that were recalled back to work at the Shacman assembly plant will go back home.

Aliyu Wadada, chairman of Peugeot Automobile Nigeria (PAN), also described as ‘shameful’ the level of growth of Nigeria’s automobile industry following the recent reduction in the import tariff of certain categories of vehicles.

Wadada, in an interview on Channels Television condemned the government’s policies, which he described as impeding the growth of the Nigerian automobile industry.

“The automobile sector in Nigeria should have gone way beyond where it is. It is shameful enough that we haven’t still gotten to manufacturing which is basically about the environment that we operate in,” Wadada said.

”The minister of finance said initially there was 35 percent tariff and 35 percent levy which now all together make 70 percent. With the reduction in the Finance Act 2020, it now comes to 40 percent and she said 40 percent is good enough for the local assembly plants to thrive or develop because it gives a differential of 30 percent.

“That 30 percent has always been there even before this policy but it never attracted investors because it is not good enough for investors to be attracted

“So that 40 percent differential is not good enough for local assembly plants to develop,” Wadada said.

Recall that Hameed Ali, the comptroller-general of the Nigeria Customs Service (NCS), last week in Abuja told journalists that the management of the service was expecting an official communication from the Federal Ministry of Finance on the implementation of the new tariff any moment from now.

He said the vehicle tariff reduction, as contained in the 2020 Finance Act, was initiated by the NCS to ease the cost of transportation in Nigeria.

He said: “We are the proponents of the new tariff. I have been torn apart by many people criticising it, saying I used my connection to get it done. But it is in the overall interest of Nigeria.

“Now, it has become a law. We are now waiting for the finance minister to give us a formal conveyance of that Act. Once we receive it, we commence implementation immediately and inform our commands.”

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