Nigeria: Vehicles' prices rise as 70% tariff begins July 1
FROM Monday, a new car
that was sold for N3 million before the Federal Government introduced
the new automotive policy may now cost N5.1 million. The full
implementation of the policy which begins today (July1) has put 70 per
cent tariff on vehicles.
Under the new automotive
scheme, the Federal Government in 2013 raised the duty and levy payable
on imported new and used cars from 20 per cent to 70 per cent, pointing
out that the initiative was aimed at encouraging local production of
But experts and various
stakeholders have repeatedly cautioned the Federal Government against
the danger of implementing the policy without first putting in place
necessary infrastructure such as uninterrupted electricity supply and good road networks.
They said that without adequate facilities, the cost of production may push the cost of locally assembled cars beyond the reach of most Nigerians.
The Public Relations Officer
of Tin Can Island Command of Nigeria Customs Service (NCS), Chris
Osunkwo, confirmed the implementation of the policy as from today.
The Guardian's enquiry Monday revealed that under the policy, the NCS would publish the prices of new vehicles yearly.
Information made available
by the National Automotive Council explained that Fully Built Units
(FBU) cars falling under H.S.Code 87.03 shall attract a duty of 35 per
cent and 35 per cent levy.
NAC said: "All FBU import (except used vehicles) with Bill of Lading
dated not later March 31, 2014 and arrival date not later than June
2014 will pay the old rate, irrespective of the dates of opening of form
'M' and the letter of credit.
"Used vehicles will be
imported at 35 per cent without levy till June 30th, 2014 (Now December
31, 2014) renewable as required by the Ministry/NAC, to manage market
"Fully Built Unit (FBU)
Commercial vehicles falling under H.S. Code 87.02, 87.04, 87.06, 87.16,
shall attract 35 per cent duty without levy.
"Fully built tractor under
H.S. Code 87.01 shall attract 0 per cent duty without levy, until local
capacity is ascertained by NAC."
On the other hand, Local
Assembly plants shall import their Completely Knock Down (CKD) at zero
per cent duty, Semi Knocked Down (SKDI) at five per cent duty and Semi
Knocked Down (SKD11) at 10 per cent import duty.
According to NAC, all machinery and equipment imported for the purpose of vehicle assembly shall attract zero per cent import duty and be free of Value Added Tax (VAT).
Already, the first phase of
the policy involving 35 per cent duty increase has come into effect
while the second phase of 35 per cent increase in levy for new cars is
expected to commence today.
The President, National
Council of Managing Directors of Licenced Customs Agent (NCMDLCA), Lucky
Amiwero, said recently that the policy was capable of encouraging
diversion of cargoes to neignbouring countries.
Also, a maritime economist
and Executive Director of ABN Consults, Harrison Agada, recently advised
the Federal Government to halt the implementation of the policy in the
interest of the economy.
Agada explained that contrary
to claims by senior government officials, the implementation of the new
import duty would place the cost of vehicles beyond the reach of about
90 per cent of Nigerians, increase the cost of transportation by at
least 50 per cent and increase inflation before the end of the year.
He said: "I believe the new
automotive policy will be bedeviled by several problems. First, there is
a huge gap between demand and local capacity. Local production capacity
of automobiles by all the assembly plants in the country today stands
at a pathetic 45, 000 units per annum while demand stands at 800,000
units per annum.
"Secondly, the price of
locally made vehicles is way out of the reach of average Nigerians and
this is mostly as a result of the collapse of public infrastructure
including power supply. Imported second hand cars
have an average price of N1.5 million while the cheapest locally
assembled car sells for N3.5 million - more than twice the price. It is
just too expensive to manufacture in Nigeria."
Agada said infrastructural
challenges including poor electricity supply and bad roads would make it
impossible to produce enough cars locally for the Nigerian market.
He also said that locally assembled cars could not compete with imported ones as regards prices.
He said: "The imported vehicles
will still dominate the market place. If government makes it too
difficult to bring them into the country legitimately, importers will do
so through unapproved means. And with over 1,400 illegal entry routes,
over 80 poorly manned borders, smuggling will boom.
"There is a precedent in the
obnoxious rice policy that has cost this nation well over N300 billion
in one year - an amount that would have been sufficient to upgrade and
fix some bad roads in the country or build more hospitals or more
"It may interest the
president to know that if his policy is implemented this year, over
600,000 vehicles will be smuggled from the ports of neighbouring
countries mainly Benin Republic. Smugglers are also guaranteed good
"Very soon, RORO ships will
be coming to Nigeria half-empty. Even specialised RORO terminals will
suffer huge revenue losses and may need to rework their business models. Port workers will also suffer the consequences of this policy as there will be less jobs to do at the port."
In a petition to President
Goodluck Jonathan and other agencies of government, Amiwero explained:
"The same policy was introduced by the Federal Government in the 1980's,
which resulted in a massive diversion of Nigeria-bound vessels to
Republic of Benin (Cotonou Ports) due to the requirement of Import Duty
Report (IDR) for all used vehicles and the restriction of age of all
vehicles to five years, which include all vehicles (buses, trailers,
trucks, vans and motor cars.)"
He added: "The policy
encouraged massive diversion of vessels to Benin Republic, which was an
economic advantage that assisted the government in the development of
their nation's shipping infrastructure and the movement of Nigeria-bound
cargoes to Cotonuo Port up till date."