Dike Onwuamaeze writes that the reduction of the import tariffs on automobiles as contained in the Finance Act 2020 has triggered a war of attrition between automotive manufacturers and the federal government over the future and viability of the industry
None of these responses indicated wide-scale disapproval of the Finance Act or suggested that a raging storm is gathering around the act, especially on a section of the law that reduced import tariffs for automobiles from 70 per cent to 40 per cent. He told THISDAY that it was sad that this is coming up at a time Nigeria should be working hard to remove its name from the lists of import-dependent nations and migrate to export-driven countries.
“This is a shame that Rwanda will be shipping vehicles to Nigeria,” adding that the government is treating an ailment with a wrong medication because, “we have over the time confirmed that the correlation between duty paid on vehicles and the transportation fares is totally infinitesimal and almost not seen.”
Olaofe, stated that the NAIDP envisioned that operators of assembly plants would grow in phases from the importation of Semi-Knocked Down one components to the importation of SKD 2 and later to the Completely-Knocked Down components at which point the original equipment manufacturers would begin to operate in Nigeria to produce components for automotive manufacturing in Nigeria.
“So, the government came up with an executive order that said that government must patronise locally assembled vehicles. You can go around and check to see how many parastatals have locally assembled cars parked in front of their premises? People are expecting magic.”Another factor that is hindering effective implementation of the NAIDP apart from the absence of legislation to back it up, is the lack of standardised components for automotive manufacturing in the country.
“So, we say that government should come up with a standardised vehicle template for Nigeria. This will be backed by the auto finance scheme that will enable people to buy the vehicles and the volume will pick up. Then the original manufacturers will come in,” Olaofe said, adding that “we should create a road map and have milestones that must be achieved at a specified period.
“So, this section of the Finance Act is an affront on the NAIDP. It is not consistent with the earlier stated objectives of government in this sector that holds so much promise for Nigeria, especially in the West African region. The Minister of Industry, Trade and Investment, Mr. Niyi Adebayo, told THISDAY that the Finance Act 2020 is a significant milestone for Nigeria, as it marked a return to an era of active fiscal supervision geared towards making incremental adjustments to fiscal policy in order to stimulate the economy.
He also argued that the Federal Ministry of Industry, Trade and Investment has been the foremost champion and advocate for a robust automotive sector by robustly defending the tariff regime, pushing for access to credit for both producers and consumers and planning to build infrastructure such as automotive clusters.
Other proponents of this argument believed that the previous rate had adverse impact on the cost of doing business, welfare of the people, government revenue and the capacity of the economy to create jobs as it has caused massive trade diversion to neighboring countries. They further argued that the automotive policy, in its original form, is not in consonance with the NIRP, which is the main industrial policy document of the President Muhammadu Buhari’s administration that espoused the strategy of resource-based industrialisation.
According to the Director-General of NECA, Mr. Timothy Olawale, critics of the new tariff policy should first understand the policy direction of the government and what it intends to achieve with it, which is to embrace a long term policy for the automotive sector. He advised the local auto assemblers to be content with the 40 per cent tariff because there are sectors that survive under five, 10 and 15 per cent import tariffs.