Based on news reports, the House of Representatives recently decided to appoint an ad hoc committee to investigate the collapse of auto assembly plants across the country with a view to making insightful recommendations for the immediate resuscitation of moribund factories. . However, it is unclear what this committee plans to consider nearly a decade after the auto policy was launched.

The Nigeria Automobile Policy was introduced in November 2013 to resuscitate Nigeria’s moribund automobile industry. The policy allows local assembly plants to import fully knocked down vehicles at 0% duty and semi knocked down vehicles at 5% duty, while importers pay 70% duty on both new and old vehicles. About 54 licenses have been granted. In addition, a soft tariff of 35% was imposed on imported cars by companies that showed interest and reached investment milestones for local assembly.

The economic recession the country crashed into shortly after the introduction of the car policy did not bode well for the resuscitation of the industry. The weakening exchange rate has sent new car prices well above the reach of Nigeria’s shrunken middle class.

Car dealerships have seen a significant decline in sales volumes and even locally assembled vehicles, for which the policy was adopted, have seen significant price increases and are also beyond the reach of the average Nigerian. A report on the automobile industry at the time noted that the more than 40 existing automobile factories in the country with an installed capacity of 500,000 cars per year were using less than 3% of installed capacity due to low footfall.

The Nigeria Customs Service (NCS) has banned the importation of vehicles through land borders effective January 1, 2017, following calls from automotive industry stakeholders for strict regulations on the importation of vehicles, as the influx of vehicles, especially used vehicles, was affecting sales. This move was apparently aimed at improving government revenue, discouraging vehicle imports while phasing out used cars (commonly known as Tokunbo cars), and ultimately increasing the patronage of locally assembled vehicles.

However, it was planned in 2019 to ease the ban on importing vehicles through the land border following the successful implementation of a new initiative by the Nigeria Customs Service and the Republic of Nigeria Customs Service. Benin to automate and network all electronic entry information. shipments across the
frontier.

There is a clause in the Nigerian Finance Bill which is expected to reduce import duty on foreign vehicles from 35% to 5%. This, according to the government, is to reduce the cost of transportation. Industry players and investors are warning that if the bill passes, it could mark the end of local manufacturing and significantly affect assemblers who have invested huge sums.

The Nigerian consumer has been through another recession since the first recession in 2016 and has been suffocated by high inflation and multiple devaluations implying the inability of a majority to afford new cars. Unless there is a thriving middle class, it will be correct to say that the auto industry cannot succeed as many Nigerians will continue to settle for Tokunbo cars.


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