Implementation of the hike in tariff of imported vehicles will place the cost of vehicles beyond the reach of about 90 percent of Nigerians, increase the cost of transportation by at least 50 percent and increase inflation before the end of this year. It is for these reasons that I join my voice to those of concerned patriots to call on the Federal Government to halt implementation of this obnoxious policy to save the masses from further hardship.
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.
There are a handful of assembled-in-Nigeria vehicles alright but how many Nigerians are able to buy such vehicles?
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. Infrastructural challenges will make it impossible to produce enough cars locally and cost-effectively
Imported second hand cars have an average price N750,000 million while the cheapest locally assembled car sells for N3.5 million. It is just too expensive to manufacture in Nigeria and President Jonathan's argument 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 Taiwna, China, Japan and Korea?
Truth is if government makes it too difficult to import cars 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.
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.
There is a precedence that has cost this nation well over N365 billion in a year – an amount that would have been sufficient to reconstruct and modernise the Lagos-Ibadan expressway and the Apapa-Oshodi expressway together. 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 commodity 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 benefited 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 be inadvertently left with no choice 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, over 600,000 vehicles will be smuggled from the ports of neighbouring countries mainly Benin Republic into Nigeria annually.
I heard there was a big feast in the Presidential Palace in Cotonou to celebrate the folly of the Nigerian government.