BY David Oputah
The new National Automotive Policy was approved by the federal executive council in October 2013, but it wasn’t until the federal government’s decision to begin implementation from July 2014 that curiosity about its intentions began to mount.
The policy was adopted after the government and major automobile importers/manufacturers met and agreed to have a collective 10-year action plan for the growth of the nation’s automobile industry, to be implemented by the National Automotive Council (NAC).
Below are six concerns about the policy, and the answers to them.
1. What is the new duty on used cars — 70% or 35%?
On the strength of the assertions of minister of industry, trade and investment, Mr. Olusegun Aganga, reports that duty on used cars has been increased to 70 per cent are untrue. Contrary to these claims, the duty on used cars remains 35 per cent – but that is until December 2014.
The minister explained that all those assembling cars in the country would be allowed to import at 35 per cent duty to bridge the gap that might arise between demand and supply. However, the 70 per cent duty would be applicable to those who are not ready to assemble cars locally, but prefer to trade by bringing in vehicles from abroad.
2. What is the rationale behind the new policy?
The automotive industry development plan is implemented to transform the nation’s automotive industry and attract investments into the sector.
It is aimed at protecting those assembling cars locally, and making importation unprofitable and totally unattractive.
Data from the Nigerian Automotive Manufacturers Association (NAMA), the Nigerian Bureau of Statistics (NBS) and the United Nations Conference on Trade and Development show that a total of 400,000 vehicles (300,000 used and 100,000 new) valued at N550 billion (US$3.451 billion ) were imported in 2012 alone!
Furthermore, the policy seeks to encourage local assembly and job creation, and stop to unnecessary pressure on foreign reserves. Talk about power for local content!
3 What is responsible for the disparity in fees?
According to Aganga, those importers willing to subscribe to the auto policy programme have their fees unchanged so that they are able to import cars to fill demand gap rising from the production capacity and the demand for cars in the country.
Other applicable fees include 10 per cent tariff for Semi Knocked Down kits 2 that are imported at the easiest level of assembly, five per cent tariff for Semi Knocked Down kits 1 imported at a slightly higher level of assembly and the Completely Knock Down kits that will attract zero per cent duty because there will be a measure of local input.
4 Will prices of buying cars increase?
Yes and NO.
No — because all the manufacturers and assemblers of cars, including some of the major distributors and importers, have given an undertaking they will not increase their prices at all.
The federal government intends to continue monitoring the prices of cars every week, because the new policy should not lead to any price increase if the operators were to be fair to the consumers with an assurance that the local vehicle manufacturers and assemblers had enough capacity to meet the expected upsurge in demand for new cars and would not increase the prices of their products.
Yes – likely, because investigations show that not all importers are ready to abide by the undertaking, as they are cashing on the ignorance of panic buyers and selling their stocked-up cars in preparation for the implementation of the new policy at higher rate.
Also, importers who are not assembling cars in the country have accepted their fate to pay the 70 per cent. So when you buy from them, you have to pay more. Most of them have stocked up their garages already!
5 Is it just about car importation alone?
No, it is more about local production and jobs!
At full capacity, the Nigerian Automotive industry has the potential to create 70,000 skilled and semi-skilled jobs along with 210,000 indirect jobs in SMEs that will supply the assembly plants. Some 490,000 other jobs would also be created in the raw material supply industries.
To this end, the federal government intends to work with the Nigeria Universities Commission (NUC) to have Automotive Engineering in the curricula of universities, such as the University of Ibadan, Tafawa Balewa University in Bauchi, and Elezade University, who are already offering the programme to produce automotive engineers to support the industry in readiness for local production. There have been assurances that international standards would be maintained in the production process to ensure global competitiveness, as the Standards Organisation of Nigeria (SON) is already working on the standards required in the auto industry.
6 I want to buy a car, how does this affect me?
The government is discussing with local and international financial institutions on how to make the scheme achieve the aim of making made-in-Nigeria cars affordable through the new automotive credit purchase scheme.
With the arrangement, Nigerians will be able to purchase brand new cars assembled in the country without having to pay in full — from November 2014 — as payment spread over four to five years at single digit interest rate is anticipated.
Already, about 12 companies, including Nissan, Toyota, SCOA and Dana motors, have signified interest in participating in the scheme.
Let’s hope the Federal Government and its agencies will also subscribe to the Automotive Policy in their car purchases.