LCCI Faults Automotive Policy

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Jonathan Eze
Five years after its launch, the federal government automotive policy has failed to achieve the desired outcomes.
Owing to this, the Lagos Chamber of Commerce and Industry (LCCI) has said that the policy in its present form is most inappropriate for an economy that is heavily dependent on road transportation and called for its review.

In a statement, the Director General, LCCI, Muda Yusuf, lauded the decision of the government to review the policy which was conceived by the Goodluck Jonathan administration in 2013.
The statement added: “The cost of vehicles had risen beyond the reach of most citizens and corporate bodies. The impact has been largely negative with far reaching consequences.

“The automobile sector was hit by the double shock of over 100 percent currency depreciation over the last five years and an import levy of 50 per cent on new cars and 25 per cent on used vehicles and commercial vehicles. This is in addition to the import duty of 20 per cent on new cars and 10 per cent on used vehicles and commercial vehicles.”

“The auto policy was an import substitution industrialisation strategy to reduce importation of vehicles and incentivise domestic vehicle assembly.
“However, import substitution strategy thrives in the context of high domestic value addition. It is within such a framework that the economy could benefit from the inherent values of import substitution which includes backward integration, multiplier effects, conservation of foreign exchange, job creation and reduction of import bills,” the statement added.

The LCCI further stated that the automotive policy, in its current form is not sustainable and that it is also not in consonance with the Nigeria Industrial Revolution Plan (NIRP) which is the main industrial policy document of the current administration.
“The truth is that, the high cost of vehicles has taken a toll on the economy, from a logistics point of view. Practically all aspects of our economic and social lives had been negatively impacted by the situation.
“This is because over 90 per cent of the country’s freight and human movements are done by road, which implies heavy dependence on cars, commercial buses and trucks.

“Manufacturers and other real sector investors suffer from high cost of delivery vehicles, sharp increases in haulage cost because of the high cost of trucks; school buses have become unaffordable by many institutions; many hospitals cannot afford ambulances; many corporate organisations have drastically cut down on their fleet etc.
“Car ownership is now completely beyond most of the middle class. These unintended consequences and collateral harmful effects on the economy and welfare of citizens are incalculable.

“We have witnessed an increase in the price of vehicles by between 200 to 400 per cent over the last five years Not many investors and the citizens have the capacity to pay these outrageous prices. Even prosperous corporate organisations are now buying used vehicles for official use,” it added.
The LCCI noted that the implication of the scenario for operational costs of organisations have become worrisome.

Other implications of the auto policy for the economy as listed by LCCI included: high transportation cost resulting from the prohibitive cost of vehicles largely because of the high import tariff and levy, increase in smuggling resulting from the high import duty and levy as well as the huge duty differential with neighbouring countries, huge loss of customs revenue as vehicle imports from official channels drop and smuggling increases, huge loss of revenue by the Nigeria Ports Authority, considerable loss of maritime sector business to neighbouring countries as more vehicle imports are diverted to neighbouring countries, severe adverse effect on automobile dealers in Nigeria as high cost of vehicles creates affordability problems, low sales and massive erosion of profit margins among others.
It, however, recommended that import levy of 50 per cent on new vehicles should be reduced to 15 per cent. This, would be in addition to the 20 per cent import duty.

“Import levy of 25 per cent on commercial vehicles should be reviewed downward to 15 per cent in addition to the 10 per cent import duty, import levy on used cars should be reviewed from current 25 per cent to 15 per cent and for government to give further tax concessions and waivers to the assembly plants in the spirit of the auto policy,” it added.