Thursday, October 2, 2014

The Tariff On Imported Vehicles

THE sudden implementation of the outrageous 70 per cent tariff on imported new vehicles after government had earlier suspended same is an assault on the sensibilities of weary Nigerians who already bear the heavy burden of a battered economy.

The development has justifiably drawn the ire of stakeholders, including clearing agents and freight forwarders.

Even though second-hand vehicles are excluded at the moment the vexatious tariff is not in tandem with a people-oriented auto policy. Indeed this surreptitious implementation of the tariff regime underscores the inconsistency or policy somersaults that are the hallmarks of governance in Nigeria.

The Customs authorities had earlier confirmed the suspension of the tariff till January 1, 2015 but later recanted and began collecting it without notice. They claimed that this action was based on a circular from the Federal Ministry of Finance to that effect, to the shock of all stakeholders. Since the Ministry of Finance has not owned up to the purported circular, there is enough reason to assume that the Customs Department is merely acting alone to meet its 2014 revenue target.

Expectedly, stakeholders have protested the new tariff. The National Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), described the policy as anti-people, adding that it has the potential of increasing the hardship faced by Nigerians.  Also, the association of clearing agents and freight forwarders withdrew their services at the ports and decried the hurried implementation of the tariff.

Under the new automotive policy, government had raised the duty and levy payable on imported new and used cars from 20 t0 70 per cent on the excuse that it was encouraging local production of automobiles. The amount is made up of 35 per cent duty and 35 per cent levy. This has made cars unaffordable to the average Nigerian.

Obviously, the development amounts to putting the cart before the horse. Such a protective tariff ought to be imposed after local auto plants had begun rolling out new vehicles in large numbers and at affordable prices. Then consumers would have the choice of patronizing local manufacturers or paying the heavy duties on imported ones.

Except something is done to redress this anomaly, the new automotive policy can be deemed to have fallen prey to greed and avarice. Implementing a crushing tariff without first rolling out locally manufactured Nigerian cars is absolutely in bad faith.  It puts into question what the Nigerian government’s intention really is. Is it to exploit Nigerians and rake in billions as being insinuated or have cars produced locally as promised?

A few units being rolled out notwithstanding, certainly a lot still needs to be done to make the dream of local car production a reality. 

The new tariff should therefore be put on hold until the necessary groundwork is done to save Nigerians the hardship that its implementation in this present form and circumstance will certainly inflict. Its continued implementation negates the principle of fairness and opens the Jonathan administration to accusations of poor judgment and character. The President had assured that the implementation of the policy would not inflict pains on Nigerians. With what is happening at the moment, what is the President’s word worth?

Sadly enough, government appears intent on not heeding expert advice. Various stakeholders have repeatedly warned of the dangers of implementing the policy without first putting the necessary infrastructure in place. Uninterrupted electricity and good road network have been identified as critical and both are grossly unavailable in Nigeria.  

At this juncture, it is important to tell the authorities not to feign ignorance of what the right thing is to do. They cannot be so insensitive to the plight of the citizenry as the tariff can only have a negative impact on the economy impose greater hardship.

The new cars are not readily available yet and the majority of Nigerians can’t afford the imported ones as a result of the astronomically high tariff. That places many individuals and businesses in jeopardy.

Government should review the tariff, especially in the face of the current lack of a viable alternative to imported cars. Local production of vehicles is a good plan but until then, citizens need not be over-burdened. The tariff implementation could be done in phases depending on the level of vehicle production.    

Full implementation could then be considered once local vehicle production reaches an appreciable level. And this depends on the provision of necessary infrastructure which is lacking at the moment.
The automotive policy is a lofty strategic development agenda but it should follow a logical sequence.

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