Association of African Automotive Manufacturers (AAAM), an umbrella body of automotive assemblers in Africa are increasingly becoming sceptical on further investments into Nigeria’s local automotive assembly due to the proposed 2020 finance bill by the federal government that seeks to lower the duty paid on new vehicles imported into the country.
In a response to an electronic mail sent by Businessday to the leadership located in South Africa on what impact the proposed bill could have on original equipment manufacturers with interests in supporting Nigeria’s automotive industry, Dave Coffey, chief executive officer of AAAM warns that the 2020 finance bill would be the end of the road for automotive investment in Nigeria.
Dave Coffey wondered why the Nigerian government should is seeking to reduce the tariff on newly imported vehicles into the country 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 said 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 & Development Council (NADDC) on the development of a fully fledged motor manufacturing industry, enabled by a comprehensive automotive framework which would assist in the industrialization of Nigeria.
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According to Coffey, ‘’The 2020 finance bill by the Nigerian government 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.
Coffey pointed 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 warned that, should an acceptable level of differentiation not be in place, the industrialisation and growth of the automotive sector will not transpire.
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 stated.
“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”. Dave Coffey concluded.
The Nigeria Automobile Manufacturers Association (NAMA) also said the umbrella body of local auto assemblers was rattled when the bill seeking the approval of the National Assembly to approve reduction of duties paid on imported vehicles into was released to the public.
Remi Olaofe, executive director, Nigeria Automobile Manufacturers Association said the proposed bill by the federal government has a lot of short, medium and long term negative implications that is a ticking bomb for the economy and auto assemblers in the country.
The NAMA boss lamented the treat of the proposed finance bill by the federal government will pose to the Nigeria’s Automotive Industrial Development Plan (NAIDP) and the new automotive policy.
Olaofe expressed 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 channeled 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 frowned 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 takeoff of the African Continental Free Trade Area Agreement (AfCFTA).
Remi Olaofe recalled that, the christening of the National Automotive Industry Development Plan ( 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 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 stage.
