Why we slashed 30% off import duty on cars – Osinbajo
NEWS DIGEST – The Vice President Yemi Osinbajo has said that the decision to slash duty on imported vehicles in the country is not an attempt by the Federal Government to kill the country’s automobile manufacturing industry.
The VP made the commendation in Abuja on Monday at the opening plenary session of the 26th Nigeria Economic Summit (NES#26) on the theme “Building Partnerships for Resilience.”
According to him, the plan is to reduce the cost of transportation on the people in the face of growing economic challenges.
He was reacting to views expressed by a panelist, Chidi Ajaere, who said the decision by the government to cut the duty imposed on imported vehicles from 35 per cent to five per cent was a disincentive to prospective and existing investors in the local manufacturing of vehicles.
Mr Ajaere, who is the Chief Executive of GIG Group, owners of the God Is Good Transport Company, said the sudden change in policy by the government allegedly without consultation had sent the wrong signal to prospective investors in the sector.
Mr Ajaere narrated a personal experience on the impact of the inconsistencies in government policies in the country.
Following the announcement of a policy to encourage the private sector to go into local manufacturing of automobiles, he said GIG Group decided to go into partnership with some foreign investors three years ago to invest in the building of a plant for the manufacturing of ‘made in Nigeria’ vehicles.
Pursuant to the initiative, he said the group spent over N5billion of private funds, without any loans from the banks, to build the vehicle assembly plant.
He said the government’s decision, without consultations, to cut the duty on imported vehicles from 35 per cent to five per cent appears to have put the project in disarray, as the partners do not know what purpose the sudden policy somersault was meant to serve.
“We have invested all that money. What is going to happen to us (the investors in that vehicle assembly plant) now with the policy summersault?
“Will the Federal Government come to our aid with incentives for the monies sunk already into the investment?” he lamented.
“What is going to happen now is that if the government tells people in another three to five years to come to Nigeria to build automobile assembly plants, or any other plant, they are going to become very skeptical, because they have seen that in Nigeria there is usually policy summersault,” he added.
Rather than attract investors into the local manufacturing of vehicles, Mr Ajaere said the decision to reduce the import duty on imported vehicles would encourage importers of new vehicles into the country to thrive, with adverse consequences on the country’s foreign exchange.
But, in his reaction, the VP, who represented President Muhammadu Buhari at the occasion, said the decision to slash the duty on import vehicles was not to serve as a disincentive to the prospective investors in the car manufacturing industry.
He said following the decision of the government to remove fuel subsidy from the pricing template of petroleum products last March, the direct fallout was increased transportation cost across the country.
The decision to reduce the duty on imported vehicles was to make more means of transportation available in the country to help move the people and not a negation of the automobile industry policy directed at localizing the production of local vehicles.
The VP said the logic in the policy has always been that if duties and levies are increased on imported cars/vehicles, local production will become more competitive.
He said with the annual demand for vehicles in the country currently at about 720,000 against actual local production by the available assembly plants at about 14,000, the country would not realise the national need.
This, the VP said, would mean higher prices of vehicles and greater stress on other sectors of the economy that depend on transportation at a time of national economic emergency, especially with rising food prices and transportation cost.
“We are not giving up on the auto industry. There is still a 40 per cent duty on all imported cars, apart from a policy that allows the government to buy only locally manufactured cars,” he said.