30% levy cut on imported vehicles’ll spell doom, local assemblers warn

File: Assembled vehicles 

By Theodore Opara

Stakeholders in the Nigerian auto industry have warned that the billions of naira invested in the nation’s automotive industry might become a wasted venture if the Federal Government goes ahead with its plans to reduce the levy on imported vehicles from 35 per cent to five per cent without applying same on Completely Knocked Down and Semi Knocked Down, CKD and SKD, units.

About 35 auto assemblies plants have been licensed between 2014 to 2020.

This was the position of most of the industry stakeholders who spoke to Vanguard, following the Federal Government’s decision to reduce the levy as a way of forcing down prices of automobiles in the country.

It would be recalled that the Federal Government under the Goodluck Jonathan administration in 2014, launched an auto policy aimed at encouraging players in the industry to set up plants and create jobs for the nation’s teeming youths.

Unfortunately, six years after, the policy has not received any legal backing as the Presidency refused to assent to the bill which had been presented twice by the National Assembly.

The inability to give the policy a legal backing had discouraged major auto makers across the world from investing in Nigeria as they prefer to invest in countries such as Rwanda, Ghana, South Africa, among others.

At the moment, Toyota, Suzuki and Volkswagen have settled in Ghana and their targeted market is Nigeria which has a population well over 200 million.

 

Government betraying investors — Maduka

Reacting to the development, President of Coscharis Group, Dr. Cosmas Maduka, who represents over seven car brands in Nigeria, said the government has betrayed the trust of investors, noting that government’s new plan would destroy the heavy investment the local auto companies have made in the country.

Dr. Maduka said that so far, his company has invested more than $50 million and an additional N6 billion which it borrowed from the banks.

Wondering why the Federal Government has not been consistent with its policies, Maduka said: “They encouraged investors in the auto sector to invest since 2014 and we borrowed from the banks and today it is a different policy after investing heavily with borrowed funds with the anticipation of reaping in future.

“If they continue this way, there is no way investors, home or abroad would ever trust the government. If government believes that we don’t need the auto industry they should compensate us for the wasted investment they encouraged us to make in the sector.”

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He said he kicked against the policy when it was introduced but noted that  the government insisted it was the only way forward, adding that they all had to comply.

According to him, the government will continue to lose the people’s confidence by its policy changes, adding that this was what they did in the agricultural sector (rice).

“It is like the government wants to make an omelette without breaking the egg which is not possible. To build the assembly plants, we borrowed N6 billion from a first generation bank.

‘’Our projection was to sell 10,000 vehicles from the plants annually but we are not producing up to five per cent of the projection which is not a good development,” he said.

While stressing that no country can solve its problems without going through pains, Maduka cited India, China as some examples.

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He added: “It is rather unfortunate that instead of encouraging the local plants they asked us to set up the government prefers to buy used vehicles from abroad and by so doing they are killing our business. Imagine what will happen if we fail to pay the banks. They will send the Economic and Financial Crimes Commission, EFCC, after us and the rest is better not imagined.”

He said that the implication of the new government’s plan will be that “these plants which we borrowed money to set up shall soon close down and some will be turned to workshops. We can’t fight the government but we are asking them to be consistent with their policies.

The lesson, however, is that we will not get into any project again with the government and will not encourage international partners to come and do business in Nigeria.”

Let government be sincere — CFAO DMD

In his submission, Mr. Kunle Jaiyesimi, Deputy Managing Director, CFAO Group, appealed to the Federal Government to show sincerity on the auto policy. He said: “We agreed on something and based on that we made investments. It was agreed that the 35 per cent levy will enable the consumer finance for people to borrow at single digit to purchase cars from local assemblers and to also borrow to expand their businesses, but none can access the fund. The money is there. The investors can’t borrow at single digit. When CFAO wanted to expand, we approached the Bank of Industry for this and were not granted.”

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He estimated that over N300 billion had accrued from the levy but could not be accessed by investors struggling to survive.

Jaiyesimi advised that by reducing the duty by 30 per cent, government should also reduce duty on CKD and SKD by zero per cent to ensure survival of the local auto assembly plants.

So far, he said that the company has invested about US$20 million on their local assembly plants, the Fuso Canter, and Kinglong buses and cargo vehicles as well as installations, machinery and technology.

While explaining that investors are not even benefiting from the saving from the levy, Jaiyesimi said:”They turn us about. Where are they hiding the funds? The National Automotive Development and Design Council, NADDC, said that the money is with the Bank of Industry and the bank is saying that the money is not with them. They should tell us who has benefited from it.

“The industry is going through very difficult times even in the hands of the Nigerian Customs. For every product you bring in the Customs would revalue it. Even, when the manufacturers have given the price from the plant, the Customs would come up with its own price.

“For all these reasons, major auto manufacturers are going to Ghana, Rwanda, South Africa and very soon vehicles will be coming to Nigeria from Ghana at zero duty. How do we compete with vehicles from Ghana?”

Jaiyesimi, however, frowned at a situation where used cars enjoyed 35 per cent duty as against 70 per cent by new vehicles.

On how auto manufacturers see the Nigerian market, Mr. Jaiyesimi said: “If you have integrity, people will respect you including the international manufacturers. It is unfortunate that six years after the launch of auto policy in Nigeria, there is no law to drive it.

“As for competing, we don’t have any option than to just find a way to survive. But the ideal thing is for the government to consider that if they have to reduce the levy for imported vehicles they should give local assemblers zero per cent duty on SKD and CKD.”

Auto sector’ll be stifled — Nord boss

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Chairman/Chief Operating of Nord Automobiles Ltd, Mr. Oluwatobi Ajayi, said the decision would stiffle the sector, given that most local auto companies had invested billions of naira in their plants.

He said: “What happens to those that have invested billions of naira to build plants in the country?”

Arguing that the reduction does not serve the interest of the nation’s auto industry, he said that many jobs will be lost and the plants will become wasted.

According to him, Nigeria spends so much creating jobs for foreigners with its addiction to tokunbo vehicles. He disclosed that in 2019, Nigeria spent N1.8 trillion (US$3.1 billion) on imported vehicles, while this year alone a total of N1.28 trillion  ($3.17bn) has been spent on imported vehicles which add no value to the auto industry.

“We can only imagine the amount of jobs and supporting industry this huge amount would have created, if the money was put into the economy. We are in a country where we need to create jobs, so the government should create incentives for manufacturing, especially auto manufacturing and assembly plant which is catalyst for development.

Whatever decision the government is taking, Mr. Ajayi said the government should encourage the assembly of vehicles in Nigeria, adding that the country cannot continue to import vehicles and expect jobs to be created locally.

While noting that many manufacturers were against the policy initially because they feared that the government would come up with this kind of decision which is what has happened now, he said it took three years before most of them started to invest in local assembly of vehicles. He also appealed to the government to be consistent with policy.

Organiser of the Lagos and Abuja Motor Shows, and Managing Director of BKG Exhibitions, Mr. Ifeanyi Agwu, said: “I am not against the reduction but what plans do they have for those who invested billions of naira in local assembly plants, bearing in mind that the aim of the auto policy was to create jobs for the people?

“The investors have invested so much in setting up plants and what concession is the government giving to them? With this development, investors will not trust the government when next it calls upon them.”

Vanguard News Nigeria

The post 30% levy cut on imported vehicles’ll spell doom, local assemblers warn appeared first on Vanguard News.

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