Reduction Of Duties On Imported Vehicles Will Destroy Nigeria’s Auto Industry-Reps Member

A Member of Nigeria’s House of Representatives, Oghene Egoh, has accused the Federal Government of being the biggest threat to Nigeria’s underdeveloped automobile industry with the reduction of duties on imported vehicle to five per cent.

Egboh said this on Thursday during a Channels TV programme “Sunrise Daily.”

With the introduction of the Finance Act 2020, duties on imported vehicles was reduced to five per cent from 35 per cent, a policy said to be threat to the 17 local manufacturing and assembly firms.

The Vice President, Yemi Osinbajo, had cited lack of local manufacturers capacity to meet annual demand for vehicles in the country currently at about 720,000 against actual local production by the available manufacturing and assembly plants at about 14,000.

Osinbajo had said that the shortfall would result to higher prices of cars and further pressure those sectors that depend on the sector.

Nigeria spends about $8bn to import cars annually, according to the Minister of Industry, Trade and Investment, Otumba Niyi Adebayo.

Egoh said, “All these plants are going to close up, with thousands of workers that they have employed will be laid off. Why because government has now removed the incentive for them to manufacture locally and the incentive was 35 per cent duty on imported vehicles which made locally manufactured vehicles much morecheaper. So as a result, the plants were making money and they were improving gradually.”

Africa’s largest economy has seen huge investment in local automobile manufacturing from local investors like Innoson Vehicle Manufacturing, Peugeot and Hyundai and Choscharis.

Lagos based car assembling company, Globe Motors, had invested over $200,000,000 to set up a multi-auto assembly plant to roll out Hyundai cars.

Peugeot new owner, Nesbitt Investment, in October 2020 said it would invest additional $150m in its Kaduna plant, while Coscharis- Renault invested N1.7bn in building its automobile assembly plant in Lagos.

Egoh said, “Now that the (duties) has been removed, what happens? the plants will close down, over N364bn was borrowed by these vehicle plants which they ploughed into local manufacturing. So when they close up they will not be able to repay their loans and if they are not able to pay their loans, the banks are in trouble.”

Local automobile firms had attracted $1bn investment in 2019 due to a “Made in Nigeria” campaign that induced strong sales to the police and some government ministries.

But the law maker lamented that the new waiver would put thousands of jobs at risk amidst the worst unemployment levels in the country’s history which is at 27.1 per cent.

Egoh said, “The Central Bank gave low interest rate loans to them amounting to several billions of naira to support them, that is taxpayers’ money and all that will potentially go.”

He said only government policies can help the underdeveloped automobile industry to scale up production to meet the 776,000 deficits currently witnessed in the country.

“Countries all over the world have faced this problem and what they have done is to over pamper the local industry,” Egoh added.