Customs Loses Multi-billion Naira Duty to Auto Policy in 8 Years

The federal government is losing several billions of naira to the National Automotive Industry Development Plan (NAIDP), popularly known as auto policy, enacted by the federal government in 2014, a LEADERSHIP investigation has shown.

The losses are due to the smuggling of foreign used vehicles into the country through the land borders and loss of Customs revenue to the importation of Semi Knock Down (SKD) and Completely Knock Down (CKD) by local manufacturing companies.

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Though, the Nigeria Customs Service (NCS),  generated the sum of N2.24 trillion in 2021, stakeholders said they are supposed to collect more, but for the revenue leakage through smuggling fueled by the auto policy.

Customs, importers and clearing agents have, however, called for the cancellation of the policy, saying, it hasn’t added any value to the government but, economic and revenue losses to the service

A senior Customs officer, who craved anonymity, told LEADERSHIP that the auto policy has failed as it has led to revenue loss for the government and increased smuggling of used vehicles.

The officer said high import duty on a used vehicle is fueling the smuggling of cars into the country.

He said: “Because when you check what is happening around, it’s those high values, high rate of duty that allows smuggling through our land borders. Why will new vehicles pay 35 per cent and old vehicles also pay 35 per cent when after giving backwards integration incentives to most of those assembling plants, we still don’t have plants that can really satisfy the demands of the transport sector. We need to make smuggling unattractive, smuggling shouldn’t be lucrative again.”

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The managing director, PTML Terminal, Tin-Can Island Port, Lagos, Ascanio Russo, had said, the introduction of auto-policy, was to encourage investment in local assembly plants, but it has failed.

He added: “after the policy was introduced, what we have seen rather is that used vehicles are still coming to Nigeria through the border, one way or another, and the sad thing is that the good quality vehicles are coming through Cotonou. This is because the rate of duties is much lower (in Cotonou) and so they can afford them to be discharged there while the old vehicles; the accident ones are coming to Nigeria.”

Russo, whose firm owns the biggest terminal for vehicle importation in West Africa, said as a result Nigeria is losing more than half of its cargo to the port of neighbouring countries due to unfavourable trade policies thereby causing huge revenue loss to the government.

According to him, the policy is not adding any value to the nation’s economy but has given rise to the smuggling of Nigeria- bound vehicles discharged at the Port of Cotonou through the nation’s porous land borders.

However, the auto policy, when it was enacted was to develop the automotive industry, which they said was underperforming as at the time of enacting the policy was to encourage local manufacture of vehicles while phasing out the importation of used vehicles.

Before the introduction of the policy by the Dr Goodluck Jonathan administration in 2014, import duty on imported used vehicles was 10 per cent with an additional 10 surcharge effectively making it 20 per cent.

Also, the then administration raised the import duty to 35 per cent duty and 35 per cent surcharge to effectively make it 70 per cent, thus, making vehicle importation into Nigerian ports expensive among its contemporaries in West and Central Africa.

The administration, however, said the automotive policy will lead to employment creation by contributing up to 10 per cent of job creation; Gross Domestic Product (GDP) contribution by another 10 per cent; the beneficiation of raw materials and local industrialisation through the value chain which spans a range of activities and development in automotive parts, components and services.

But, since the enactment of the policy, the local production of vehicles cannot meet Nigerians demand as statistics showed that Nigeria’s annual vehicle demands is 720,000 and local production stands at a paltry 14,000, thereby, merely meeting the citizens’ need.

For instance, according to the National Bureau of Statistics (NBS), Nigerians imported used vehicles worth N770.13 billion in 2021. According to the NBS, the used vehicle popularly referred to as Tokunbo is stated as Used Vehicles, with diesel or semidiesel engines, of cylinder capacity, 2500cc.

This means that while this list is not exhaustive, there are other forms of used vehicles, Nigerians spent money to import in 2021.

In 2019, Nigerians imported an estimated 1.3 million vehicles, 56 per cent more than 734,000 in 2017 and because of the high rate of smuggling, it is difficult to get the exact figures for vehicle imports in Nigeria.

According to the NBS, Nigerians spent a whopping N1.08 trillion ($2.7 billion) to import used cars and motorcycles between October 2018 and September 2019.

However, Deloitte, in 2016 said just 2 per cent of Nigeria’s population could afford new vehicles and despite the glaring failure, the administration of the NESG, vice president Osinbajo opined that the idea behind the previous policy was that if duties and levies are increased on imported vehicles, local production will kick into high gear.

Speaking, the acting president, of the Association of Nigeria Licensed Customs Agents (ANLCA), Kayode Farinto, said the government is losing several billions of naira through Customs duty to an auto policy, asking it to be reviewed.

According to him, local assemblers haven’t been able to meet local demand despite government intervention.

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“I have said it repeatedly that the auto policy is a failure. The auto policy was actually formulated to fail because we are not producing any vehicle spare parts and the policy has been on for a long time with a lot of billions of Naira waived for local vehicle assemblers.

“Indigenous assemblers haven’t been able to meet local demand despite government intervention. What we have is Semi Fully Built (SFB), where they import spare parts into the country and put them together to say they are produced in Nigeria. We don’t have local producers that will meet our demands, rather what we have is people benefiting and enriching themselves from the policy.

Speaking on the NAC Levy, he said, NAC was a policy formulated to protect our local assemblers thinking by now we will be able to produce Nigeria made vehicles and it was supposed to be two per cent of the Cost Insurance and Freight (CIF), on new vehicles or new spare parts for vehicles but, implementing or imposing NAC on used vehicles is an aberration and we will follow, fight and get to Abuja but, govt policy is not easy to oppose, but it’s something we will go to Finance ministry to sort out.”

Also speaking, the managing director, of Mickey Excellence Nigeria Limited, Alhaji Abdul-Azeez Babatunde, said the auto policy should be reviewed because local assembly plants haven’t been able to produce locally made vehicles.

According to him, motor dealers hide under the auto policy to undermine Custom’s duty. The policy has not worked and has to be reviewed for greater efficiency.

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“Nigeria is fond of policy summersault, that is, putting the cart before the horse. The auto policy is not working and it has never worked. For instance, no single part of the vehicle is being manufactured in Nigeria, the vehicle assemblers are just benefiting from the policy.

“Auto-policy has failed and I think the government should review the policy to become better. Auto policy is a fraud because it ought to have produced several local assemblers but, where are they? we have not been able to bring Peugeot, Hyundai or other giants to assemble vehicles in Nigeria and yet some motor dealers hide under this policy to undermine Customs duty. The policy has not worked and should be reviewed for greater efficiency.”

Effort to get the response of the director-general, NAC, Aliyu Jalaili, on the state of the automotive policy and to know what is stalling local assembly plants from meeting local demands proved abortive as calls placed to his phones were not answered while text messages weren’t replied.