National Auto Policy: Of Economic Boost Or Decline?

National Auto Policy: Of Economic Boost Or Decline?

Patrick Aigbokhan
What seams to have become of the auto policy being implemented in Nigeria today may be best described as nothing else but a fatal accident searching for somewhere to occur, if speculated from the many threats and uncertainties it seams to present, according to its assessments by industry watchdogs.
But, be it as it may, the likely outcome of the initiative may turnout a goldmine, probably if well fine-tuned to meet the need for which it was initially targeted in the auto industry and the nation’s economy as a whole.
The nation’s automotive policy was introduced in September 2013 by the former administration of Dr. Goodluck Jonathan, with an aim to curtail the influx of used and fully assembled vehicles into the country.
Since inception of the policy, there had been mixed feelings and reactions from stakeholders over what it’s outcome holds in store for the auto industry. Most often, industry observers seam to be spelling doom on the outcome of the initiative, which had been creating daunting hopes for fear of ‘casting their seeds into a non-fertile land’.
In the reaction of Chief Michael Ade-Ojo, Chairman, Toyota Nigeria Limited, TNL, who condemned the policy, describing it as a move with a week foundation that cannot stand the test of time, he lamented that the policy, since it’s inception, has led to a huge loss of jobs in the country.
Adeojo cited as an instance that, his company, TNL, was forced to disengage quite a number of its workers between 2014 and this year as a result of the 70 per cent import tariff slammed on vehicles when the auto policy became effective.
He opined that unless the auto policy was given a holistic review and properly executed with the involvement of all stakeholders, the efforts could fail again and it would hurt the nation badly.
“I can say that the pretentious assembly plant project that is going on currently cannot take us anywhere because it was made to just help some people.
“An industry like the automobile is not one you just wake up and start. We cannot just wake up and say within three years we should start to assemble vehicles. It needs serious planning,” the TNL boss said.
Further research into the impact of the policy on the auto business and nation’s economy revealed that Nigeria is losing not less than N800 million annually as a result of high import duties on vehicles imported into the country.
Jonathan Nicol, President, Shippers’ Association, Lagos State, who confirmed this figure during fielding of this report, said the high import duty was part of the provisions of the National Auto Policy, aimed at encouraging local production of vehicles.
According to Nicol, rather than helping the country, the policy is impacting negatively on the maritime industry in particular and the economy as a whole.
He stressed the need for the federal government to discontinue the implementation of the provisions of the policy until Nigeria is ripe enough to produce her own vehicles.
He noted that it was necessary for the auto policy to be reversed immediately to attract many of the cars being lost to ports of neighbouring countries.
“We should think of protecting local car manufacturers and assembly plants but this should be gradual.
“What we want is standards. If Nigerians decided to be helping their families by bringing fairly used cars why should the government not encourage these families?
“Government should look at other maritime laws, restrictions and prohibition and reverse them,” Nicol said.
Further findings have revealed that some of the terminals dedicated to handling of car importation are going under because of low patronage as a result of the policy.
During visits to some terminals, it was observed for instance, that Ports and Terminal Multi-Services Limited (PTML) known for vehicle imports no longer receives as many Roll-on-Roll-Off (RORO) vessels as it used to prior to the implementation of the policy.
It has also been observed that most importers no longer import vehicles into Nigeria, but they have resolved to using the port situated in the neighbouring countries, especially the Cotonou port.
This however, has resulted to an ‘almost empty’ state of the nation’s seaports.
A data recently issued by the National Automotive Council (NAC) and presented by the United Nations Conference on Trade and Development (UNCTAD) in Abuja, has shown that Nigerians have spent a whopping sum of $31.67 billion (about N6.3 trillion) in the importation of brand new as well as used vehicles (popularly known as tokunboh) and other allied automobile equipment between 2009 and 2013.
Giving a breakdown of the figure, the country spent $5.407billion in 2008; $4.012billion in 2009; $5.592billion in 2010; $4.082billion in 2011; $6.364billion in 2012 and $6.212billion in 2013 on the importation of these items.
It further shows that about 100,000 new and 300,000 used vehicles were imported into the country in 2012, excluding tractors, trailers and semi-trailers, civil engineering and contractors’ plant and equipment.
A recent report reveals that industry stakeholders have frowned at the trend, calling on the present government of President Muhammad Behar to jettison the policy due to the rise in vehicles smuggling at the country’s borders.
Amy Muoneke, Managing Director, Carmudi.com, an online cars sales platform, said that on the online auto sales transactions platform, Nigeria is rated the highest among countries in the world where used cars are being sold so far, recording about 40 percent of the total sales all over the world.
Muoneke, also disclosed that about 1,500 Nigerian auto dealers are listed on Carmudi’s auto dealers’ database.
She said, “Most of the used cars sold on Carmudi’s online auto sales platform so far are Nigeria used cars.
“Currently, about 40 percent of the total number of used cars sold on Carmudi’ online auto sales platform all over the world were sold in Nigeria.
“Also on our auto dealers list, we have 1,500 Nigerian dealers operating on the Carmudi auto online sales platform.”
In her response to questions bothering on job losses in the country resulting from implementation of the Auto policy, the Carmudi.com boss stated that restructuring is inevitable, noting that the companies that are laying off their workers are only trying to align with the system of e-commerce.
Meanwhile, in a development that seams like a move to douse the frightening trend, there are indications that the Federal Government may review the auto policy, following the awareness of low patronage as one of the challenges confronting the domestic automobile industry in the country.
Vice-President Yemi Osinbajo, who gave the indication during opening of the 17th edition of the Abuja International Motor Fair recently, where he was represented at the event by the Acting Permanent Secretary, Ministry of Industry, Trade and Investment, Mohammed Badamasuyi, disclosed that plans were already in place by the Federal Government to reconsider the controversial policy.
As a result, top functionaries of the Federal Government may be compelled to buy made-in-Nigeria vehicles as official cars and other uses as a part of measures to boost local production of automobiles.
To achieve the goal of reviewing the policy, Osinbajo said the present administration will lead the campaign of buying made-in-Nigeria vehicles through public procurement to stimulate the industry.
According to him, the government will collaborate with the local automobile industries and banks to provide interested individuals with soft loans to enable the masses to purchase locally-made cars at discounted prices and pay over a period of time.
The Vice President lamented the high cost of importing vehicles into the country and its impact on the economy, adding that the government was seeking ways to improve the auto policy to address the problem.
“Government will seek new ways of improving the Automotive Industry Development Policy in order to protect the industry. The high cost of importing fully built vehicles and used cars into the country is having serious impact on the economy. This trend would be reversed as quickly as possible,” he said.
Worried that the nation is currently importing about 400,000 vehicles annually with a total bill of about N1.2 trillion, which made the sector the second largest consumer of foreign exchange, Osinbajo however, noted that Nigeria remains a large market for the auto industry with a population of over 170 million people and a viable middle class.
“It is on record that about 10 million cars currently exist on Nigerian roads, creating a large market for spare parts,” he said.
As part of measures to improve the situation, he said the government would continue to use fiscal and non-fiscal measures to reduce the influx of the nation’s market with used cars and encourage vehicle manufacturers to establish auto assembly plants in Nigeria.
The VP stated that in addition, the government will ensure that existing incentives in the auto sector are implemented and new ones initiated to encourage automobile and spare parts manufacturers.
“The Federal Government would lead the purchase of made-in-Nigeria vehicles through public procurement”, Osinbajo added.