Why We Slashed Vehicles Import Duties To 5%-FG

The Minister of Finance Budget and National Planning, Zainab Ahmed, has said that the reduction of duties on imported vehicles from 35 per cent to five per cent was as a result of the failure of the National Automotive Plan to drive the industry to meet the needs that would cut down transport cost in the country.

The finance minister said this on Friday during a Channels TV programme “Sunrise Daily,” monitored by THE WHISTLER.

The minister said transportation cost was a major driver of inflation which rose to 15.75 per cent in December 2020.

Ahmed admitted that the cut would affect the country’s underdeveloped automobile industry, but said the proposed National Automotive Plan 2020 which repeals the 2014 National Automotive Plan was in the final stage.

Ahmed made the disclosure while reacting to the allegations that the review of duties on imported vehicles from 35 per cent to five per cent in the Finance Act 2020, would destroy the local automotive industry.

THE WHISTLER had reported that Oghene Egoh, a House of Representative member said, “All these plants are going to close up, with thousands of workers that they have employed will be laid off. Why? Because the 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 cheaper. So as a result, the plants were making money and they were improving gradually.”

But Ahmed said the government realised that the cut was going to have an impact on the auto industry because of the penalties that it had imposed and the high duties to encourage the investment in the automotive sector.

She said, “Our design of this policy (five per cent duties) is not to help the auto industry, if it has that consequence the government has already started discussing with the industry. We have had one meeting chaired by the Vice President.”

The National Automotive Plan which was introduced in 2014 was designed to employ Nigerians in their millions by the automotive sector through different value chains.

It was also projected to contribute up to ten per cent of the Gross Domestic Product.

She said, “This is a policy that has been running for seven years, today we have 14 automotive plants in the country, their combined production is under 50,000, the needs in Nigeria is 750,000 vehicles.

“We have a global crisis, we have to take measures that are difficult or tough but necessary to be able to have the desired relief to the greater population.”

The minister admitted that the policy introduced in the 2020 Finance Act would affect some of the intended outcomes of the automotive policy.

Ahmed argued that the reduction of duties was a time bound relief provision made to provide immediate relief to Nigerians in the time of crisis.

The finance minister insisted that the Automotive industry was not growing at the rate it was supposed to grow due to the poor legislation drafted for the industry.

She said, “The plan (Automotive policy) has not produced the result that was desired and maybe it has to do with the design of the plan itself.

“This policy makes a provision that allows you to bring in SKD (Semi Knock Down and Completely Knock Down) at reduced import duties rates and that when you assemble one vehicle you can import two.

“But the policy didn’t define which type of vehicle you will import when you assemble that one vehicle. So it had the effect of not having the industry grow at the rate at which it is growing.

“We were hoping that by now we will have all kinds of value chain addition companies building glasses for the cars, building components, knot and bolts, we don’t have them. All that is being done is assembly. Assembly, in some cases a very simple and basic level.

“Yes there are staff that are employed but they could have done more and then the industry could have grown more now and that is not to say that this policy is going to be jettisoned.

“This policy has been reviewed by the Federal Ministry of Industry Trade and Investment and all dedicated authorities, I understand that the review has been submitted, there will be a report that will be submitted because we have to review this policy so that we get the impact that we need to get from that policy.”

She said the review process of the automotive policy was almost at the “final stage.”

Ahmed noted that it would be passed to the industry for a review with the authorities.

“We just want to get the best out of auto policy in Nigeria for the benefit of businesses and also for the benefit of Nigerians,” she added.

She said revising policy on duties was not made to hurt the industry, adding that efforts were made to “enable them continue to maintain their business, maintain staff and be able to employ more people.”