ROTIMI ASHER
Apart from the lack of political will by the Buhari administration to pass the auto Industry Development Plan (NAIDP) bill into law, which according to the government required some review, patronage has contributed to stunted growth witnessed in the auto industry in the last five years.
The NAIDP was introduced in 2013 by President Goodluck Jonathan’s administration to promote domestic automobile manufacturing and reduce importation.
Prior to a draft of the policy, the country was spending over 6 billion dollars on the importation of over 700,000 vehicles annually, out of which only 50,000 were brand new. This implies that the demand for new vehicles was low compared to fairly-used, popularly known in Nigeria as ‘Tokunbo’.
To discourage the importation of fully Built-up vehicles (FBU) as contained in the policy, tariffs were increased to 70%. While that of Semi-knocked down (SKD) and Completely Knockdown (CKD) was pegged at 5% and 20% respectively. It also banned the importation of fairly used vehicles through land borders. This was also meant to reduce competition and costs for local assembly plants.
It was like the new dawn for the nation’s auto industry, as the number of licensed auto assembly plants soared from three to forty-nine out of which, thirty-nine commenced operations.
According to the Minister of Industry, Trade and Investment, Chief Adeniyi Adebayo, the licensed plants have installed a capacity of 423,790 units with the achievement of an assemblage of 10,343 units so far.
Of course, operations of the plants have been hampered by such challenges as epileptic power supply, incessant smuggling coupled with a cross-border security failure, limited accessibility to funds and lack of patronage.
While waiting for the NAIDP bill to become law, the auto industry was hit by the 2021 finance Act, which slashed customs and Excise tariff on imported vehicles from 35% to 10% on tractors and commercial vehicles as well as 5% on others, a move, which industry watchers believe, will hinder stability and discourage current and future investors into the sector.
Reacting to criticisms against the Finance bill passage, the federal government, through Minister of Finance, Budget and National Planning, Zainab Ahmed, argued that the tariff slash was not meant to hurt the local automotive industry, but aimed at cushioning food inflation across the country.
“It is designed,” she explained, “to enable us to adopt counter-cyclical policy measures to be able to adequately respond to the COVID-19 pandemic by providing financial relief to taxpayers. And some of these provisions in the bills are also designed to reform the existing financial incentive policies, prioritize job creation, accelerate economic recovery and foster greater collaboration between the monetary, fiscal and trade authorities.
‘’So when we were designing the bill, we adopted five thematic areas. One of these areas, in addition to counter-cyclical, is to provide fiscal assistance for mass transit. This is important because we have inflation running at double-digit and increasing on a month-to-month basis. And when you decouple the inflation, you find that one of the major components of inflation is food inflation.
“One of the major drivers of food inflation is transportation cost. So we were looking for how to reduce the cost of transportation for the benefit of Nigerians. This reduction in duties and tariffs will have an impact on reducing the cost of transportation. It will enable Nigerians to bring in more trucks for agricultural production, more mass transit vehicles, and also more trucks that move goods across the country. This will reduce the cost of transportation and will also reduce the cost of food and provide relief to the greater proportion of Nigerians.
‘’Of course, we realize it was going to have an impact on the auto industry. Our design of this policy is not to hurt the industry. If it had that consequence, the government has already started discussing it with the industry. We have had one meeting chaired by His Excellency, the vice president, in which the auto industry was engaged and we will continue engaging them to provide reliefs.”
Also responding to criticisms against the bill as it affects the auto industry, the Minister of Trade, Industry and Investment, Adeniyi Adebayo disagreed with those describing the Finance law as auto policy somersault.
He said: “It is important to distinguish between a policy somersault and what is essentially an absolutely critical review of an existing policy that requires adjustment.
“The ministry has been the foremost champion and advocate for the robust automotive sector by stoutly defending the tariff regime, pushing for access to credit for both producers and consumers and planning to build infrastructures such as an automotive cluster.’’
According to him, the Federal government commenced the review of the auto policy in order to address shortcomings in the plan and introduce measures to enable Nigeria to attain its expectations for the automotive industry.
Notwithstanding, in response to the major challenge thrown up by Finance Act, the government has promised series of reliefs, including a commitment to buy vehicles rolled out from the local assembly plants.
According to Mrs. Ahmed, the government has started discussing the commitment with the assembly plants operators.
She said: “The federal government, this year, must stand with that commitment and buy all the vehicles that these assembly plants in Nigeria produce and engage the state and the local governments to do the same.’’
It is heartwarming to know that some of the auto companies are also doing something to drive patronage by offering unique vehicle finance schemes to their customers.
Just recently, Coscharis Motors launched an auto finance scheme, which enables auto-drive home brand new vehicles after paying a deposit of 10% of the total price and spread the remaining balance for a period of about 12 to 36 months.
Speaking at the opening of the 15th edition of Lagos Motor Fair, the Director-General, National Automotive Design and Development Council(NADDC), Aliyu Jelani reaffirmed the Federal Government’s plan to mandate ministries, agencies, states and local governments to patronize made in Nigeria vehicles.
He said: ‘’The Federal government is aware of the challenges that the auto companies are going through after investing well over 500 billion with an installed capacity of over 400,000 in your factories, plants and operations. It is a huge commitment to the industry and the future of Nigeria.
‘’Although we are not there yet, we are working assiduously towards driving market demand. As you are aware, there have been two executive orders aimed at pushing for the patronage of made in Nigeria vehicles with a renewed commitment to ensure strict compliance.
“We are working hard to see that it is a policy not just the agencies of government but states and local government to patronize made in Nigeria vehicles. We believe that when that happens, there will be more demand. And we will also continue to encourage organizations and private citizens to patronize vehicles made in Nigeria.’’
It is hoped that, as promised recently by the NADDC boss, the NAIDP will not only be passed into law before the end of 2021, it would translate to a workable auto finance scheme aimed at encouraging patronage of locally assembled vehicles.
The foregoing would also translate to an increase in the badly needed volume, which will, in turn, encourage OEMs to set up local content manufacturing and generate local jobs, the ultimate goal of the industry. More than that, the safety menace caused by fairly used vehicles on Nigerian roads will be a thing of the past.
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