Monday, 27 January 2014

Does President Jonathan understand?

Over the past one month, President Goodluck Jonathan has spoken three times in defense of the national automotive policy introduced by his administration late last year.
From the various comments by the President, he sounded convinced beyond reasonable doubts that the new policy is good for Nigeria and Nigerians. His very simple argument is that it will boost local production of automobiles, reduce importation of vehicles, conserve foreign exchange and create employment for Nigerians.
Yes the policy has the potential of doing so but I believe, as many other Nigerians, that implementation of the policy at this time is premature. It will have a counter effect and lead to revenue leakage for this country.
Truth is that many are not convinced by President Goodluck Jonathan’s assurance that Nigerians stand to benefit from immediate implementation of the policy approved last year by the Federal Executive Council (FEC) even as he stated that its aim was not to inflict pains on them.


He said the new policy will save the nation an average of over $4 billion spent in importing vehicles, adding that the money, when invested here, will create jobs.
The hike in import duty on vehicles is aimed at discouraging its importation.
Speaking at the World Economic Forum in Davos, Switzerland last week, the President sounded so upbeat about his policy he declared that Nigeria would soon become a net exporter of vehicles.
I believe the new automotive policy will be bedeviled by several problems.
For one, 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 60,000 units per annum while demand stands at 750,000 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 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 and President Jonathan’s argument in Davos that Nigeria would soon begin to export cars is a mere pipe dream. Who does he plan to sell the cars to and for how much? Under the current production environment in Nigeria, can any manufacturer churn out products that can compete with those made in China, Japan and Korea?
Even the world super powers like the United Kingdom, United States of America, France and the likes have bowed to superior manufacturing techniques of the Asians.
I bought a new American car – a Chevrolet – here in Nigeria some years back and Made in Taiwan was boldly written on it. So much for American cars!
Truth is whatever we manufacture here will be insufficient for the local market and cannot compete on price so the imported ones will still reign supreme in 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, and an ill-equipped and largely corrupt Customs structure; smuggling will boom. So the federal government is inadvertently promoting smuggling through its ill-conceived policy.
There is a precedence that has cost this nation well over N300 billion in 10 months – an amount that would have been sufficient to upgrade and fix the Lagos-Ibadan expressway.
The ugly consequences of Jonathan’s ill-conceived and hastily implemented policy on rice, introduced in the first quarter of 2013 still stares us in the face. It is similar to the new automotive policy.
Supposedly to support Nigerian rice producers and make their product competitive, the federal government in 2013 imposed a 100 per cent levy on polished rice in addition to a duty of 10 per cent.
This was meant to discourage rice production despite knowing that the local capacity was, and still is, insufficient for the overall Nigerian market.
Since there is a huge demand which cannot be satisfied by local production because of the capacity and price, a massive amount of rice is being smuggled into the country from Benin Republic on a daily basis. Experts estimated that over a million tons of rice was smuggled into the country between April and December last year. Nigerian ports lost all their rice shipments to Cotonou port and the eventually commodity found its way, under the nose of our Customs operatives, into our market illegally. 99 per cent of the rice consumed in this country during the past Christmas and New Year festivities was smuggled in.
The consequence has been a loss of huge revenue to terminal operators and the three tiers of government through customs duties, value added tax, corporate taxes and others.
Of course, the price of rice shot through the roof in the market while local production – which was to have benefitted from the policy – has not recorded any significant increase.
Since there is a huge demand of vehicles which cannot be met by local production because of the capacity and because of the price, the Nigerian buyer will have no chance but buy smuggled vehicles from Benin Republic just as we have seen with rice.
It may interest Mr. 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.


I heard there was a big feast in the Presidential Palace in Cotonou to celebrate the folly of the Nigerian government.

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