Gateway to big losses
• Bureaucratic Bottleneck, Auto Policy Aid Diversion Of Imports
• Cotonou Replaces Lagos As Fairly Used Vehicles market
Seeing that Nigerians have grown accustomed to buying fairly used vehicles, also known as Tokunbo, which has fueled the importation of about 700,000 units of cars yearly, government resolved to ‘domesticate’ the business of car production.
But since the introduction of the National Automotive Industry Development Plan (NAIDP), popularly known as the automotive policy, initiated in 2013 to discourage vehicle importation and encourage local production, stakeholders in the sector say government and Nigerians have lost billions of naira on diverted vessels and port-allied activities. They, therefore, call for a review of the policy in the light of its failings.
They argue that ports in neighbouring countries are swelling their ranks from increased activity resulting from Nigerian importers’ desire to seek better incentive elsewhere. They believe there is urgent need to make ports transactions more transparent and automated.
In a recent report titled Africa’s Next Automotive Hub, a consulting firm, PricewaterCoopers (PwC), said there are three growth scenarios for the industry till 2050, in which it proposed that growth of car manufacturing industry was dependent on the country’s GDP.
According to the firm, in one of the scenarios, if Nigeria maintains its growth rate and the auto policy is well implemented, especially with the protection of the borders and government support, Completely Knocked Down (CDK) production will begin in 2019, manufacturing would start in 2023, Tokunbo cars would be phased out by 2034 and Semi Knocked Down (SDK) would no longer exist by 2035.
Indigenous car manufacturers, who are benefitting from the policy, say they are at home with the policy, as its implementation is capable of positioning the country on the path of industrial revolution.
However, the same cannot be said of terminal operators, who have developed capacity over the years to support the importation of vehicles.
The Seaport Terminal Operators Association of Nigeria complained that last year vehicles imported through the Lagos ports reduced by more than 150 per cent in January 2016, compared to the same period of the previous year.
For General Manager, Ports and Terminal Multiservices Limited (PTML), Tunde Keshiro, the auto policy has denied Nigerians of earnings beyond import duties such as Nigerian Ports Authority (NPA), Nigeria Maritime Administration and Safety Agency (NIMASA) and other ancillary charges.
He argues that the policy is a disincentive to port operators and has pushed Nigerian businessmen to facilities in neighbouring countries.
Said he: “The policy’s impact on the economy is much more than Customs duty to the Nigerian government. The ships bringing in the cargo pay the Nigerian Ports Authority (NPA) dues and charges. That means NPA earnings is hampered. NIMASA collects three per cent for freights. The ships pay other charges to the Nigerian government aside these. That’s how bad this policy is. The clearing agents also make money from the activities of importers.
“Before the advent of the policy, we were handling 18,000 units of vehicles in a month. At the end of 2013, we handled close to 200,000 units. In 2014, we did 171,000 units.
“In a nutshell, before the advent of the policy in 2013, our understanding of vehicle import in Nigeria is that 700,000 to 720,000 units are brought in yearly. All these are not coming directly into Nigeria. From our estimation, the quantity we see being discharged in Nigeria is about 350,000 to 360,000 units, that is about half of the total number. The other half goes through Cotonou. As a port, Cotonou has been the major route for Nigeria-bound vehicles.
The traffic of cargoes to the ports was beneficial to Nigeria, as it had direct impact on all revenue generating government agencies. Clearing agents and all other business concerns involved in the trade also benefitted from the imports coming into Nigeria.
But the trend has since changed with the increasing import duties on vehicles. Cars are being diverted and the Nigerian government that is in dire financial straits has now lost another source of revenue.
Keshiro said the increase of duty at the ports has had a huge effect on terminal operations, even as there was different level of implementation by Customs commands in the different terminals in the early days of the policy. He bemoaned that ships are now diverted to neighbouring countries, adding that Nigeria is losing billions of Naira from the latest trend.
“This policy brought about a decline in the trade. Hence, in 2015, we saw a decrease to 220,000, from the 360,000. At the commencement of the policy, we thought the decline was just a mere reaction by importers to the new duty.
“We started seeing serious decline in cargo from mid-year of 2014. From an average 16,000 per month, we started doing an average of 10,000 units. When the implementation started, Customs commands within the Lagos zone, such as Tin Can, Apapa and PTML, were not on the same pedestal in enforcing the new rates. That saw a huge diversion of traffic among the ports, say from PTML to Tin Can.
“In 2015, we started doing about 8,000 units. These days, we are even struggling with 5,000 and 6,000 units, especially since the beginning of 2016. That is our January and February records. In January, we did about 6, 400,” he said.
Noting that the new duty rate directly impacts the cost of imported vehicles, he said importers got better incentives for berthing their ships in Cotonou and bringing in cars via land borders.
“Between the period of 2014 and 2015 that we saw a decline in cargo, we observed a significant increase in the number of vehicles discharged at Cotonou. We are related to Grimaldi Shipping Line and when we monitor our network, we are able to see the ships with large numbers of units going to other ports. We noted that importers of vehicles that would hitherto have discharged in Lagos were now booking for them to go to Cotonou ports. Of course, the vehicles were not rotting away in Cotonou, they eventually came to Nigeria.”
This development had over time fueled a notorious brand of vehicle smuggling through Nigeria’s porous borders, a situation that has proved a hard nut to crack for Customs officials.
But Keshiro believes the auto policy has emboldened importers to take the legal route and pay charges at land borders after clearing their consignments at Cotonou, which is cheaper than going through the bureaucracies at Lagos ports and its attendant costs.
“Rather than the information we had overtime that they smuggle the vehicles into Nigeria, to our fair understanding, the people routing vehicles to Cotonou don’t do that. They don’t smuggle the vehicles in the realm of what we used to know. They don’t bring them through the bush and try to avoid Customs border posts. We observed that they go through the Customs land border posts. From the feedback we got, the incentive importers get is that the duty level that applies at the land border posts is not the same that applies at the seaports. They get discount on the duty and that is the actual incentive,” he said.
In his view, the problem with the auto policy is its implementation, which stems from a faulty perception because import duty increase is one element of the policy.
“With the kind of population and economy we have, it would be unprofessional to say Nigeria doesn’t deserve auto-assembling plants. But we need to have a broad perspective of vehicle assemblage. The questions we ought to ask are: What is the quantity of new vis-a-vis used vehicles purchased and used by Nigerians? What is the level of infrastructural development and what are the supporting industries for automotive production? With the earning per head in Nigeria, how many people can afford to pay for new vehicles in Nigeria?
“Also, Vehicle assembling is not a one-item line. It is very important to encourage Original Equipment Manufacturers (OEM) to set up factories in Nigeria. But there are other measures to adopt other than the increase in duty, because it is always difficult to implement. I am sure that if proper assessment were done on the collection statistics by Customs, glaring gaps would be spotted. What we expect to see is support in terms of grants, tax incentives and infrastructure,” he averred.
He said the challenges with forex was not affecting the importation of vehicles, because it is financed from the repatriation of Nigerians’ earnings abroad, which were not subject to the Nigerian economic challenges.
“Vehicle importation into the country is financed by the repatriation of Nigerians’ earnings overseas, which is why you see vehicles being sold in every corner. It is not because everyone selling cars trade in forex. It is because the best way for them to recoup their earnings is to buy some of these things and send them to Nigeria for their relatives to sell and make the naira. That is part of the trade going to Cotonou.
“The challenge of forex may be there, but it is not the major limiting factor for trading in vehicles. If the duty is competitive, we would have a huge trade returning to Nigeria.”
Advising that government should be open and transparent to facilitate reforms at the ports, he said, “Most importers in Nigeria don’t know how much they pay per vehicle. They only rely on their clearing agents to know what to pay at the end of the day.
This is counter productive, because from the point of purchase, they should know what they are to pay as duties, terminal charges and clearing agent fees, among others.”
However, President of the National Council of Managing Director of Licensed Customs Agent, Lucky Eyis Amiwero, said government must review the auto policy to correct most of its shortcomings and ensure a competitive duty is enforced to encourage trade.
“Vehicle importation has collapsed. There has been an 80 percent reduction in activities. A lot of ships are not coming to the country because of the high tariff. The vehicles are dropped in neighbouring countries and then find their way to Nigeria. It would definitely increase the incidence of smuggling, because there is no way Customs can curtail it. There is high demand for vehicles in the country,” he said.
Calling for a drastic action to get Nigeria out of the challenges of the auto policy, he said, “The auto policy must be revisited. The tariff rate is too high. We don’t have sufficient infrastructure in the country. And government must look into these. Ghana is also manufacturing cars, but the duty rate is low.
The duty on trailer heads in Nigeria is at 35 per cent, but in Ghana it is almost at zero percent. There is need for government to get experts to restructure the policy. We need people to check what is on ground. Nigeria has a population of almost 170 million people. The terminals have dropped their staff because of bad business.”
No Comments yet