The Federal Government has a long term view of the nation’s auto industry but there is a cog in the wheel, particularly from some government agencies.
The Managing Director of VON Automobile Nigeria, Mr. Tokunbo Aromolaran, stated this during a chat with journalists in Lagos, recently.
Aromolaran said, “The same government agencies in its finance system, largely the Ministry of Finance and Customs, don’t see this long term vision; they just see a short term revenue scope. They complain that the budget of Customs will not be achieved because government has given the assemblers lower tariff. “They’re not seeing what we expect to add to the GDP of this country by local production. They’re only seeing short term revenue, so they put everything possible in the way to hinder the growth of this industry.
“Our goods stay in the ports for two to three months and they wouldn’t let them out because they must check everything since they come in with special rate of duty as conferred by the Auto Policy. What we don’t pay in duty, we pay in demurrage, because at the end of the day, they don’t want to understand why your goods were delayed; they will still levy their charges. This is because one arm of government cannot understand the other, that all of this is towards the same end of moving this country forward in industrialisation.”
Aromolaran explained that the revenues of Customs and the Ports come short not only because of the dictates of the Auto Policy on special duty rates for assemblers of vehicles but also because other vehicles come into the country completely knocked down in boxes, not on four wheels, which is why they don’t attract the mandatory duty, since they cannot be counted as fully built vehicles. “The question is, are we going to keep the Japanese factories running for ever, when our people are looking for jobs?
“People give me their children’s CV for jobs and I tell them to talk to the government to make us produce and your children will find work here. If the government keeps having this myopic view that if we increase duty on second hand cars, then poor man will suffer. Poor man will continue to suffer the way they are going, because they are not putting in place things that are sustainable for the poor man. It is not the duty on second hand cars that will make the poor man to become liberated; it is putting in place a nice public transport system. A good mass transit system is what the poor man needs, not a second hand car.”
He said they need to produce cars in large numbers to reduce their prices to enable the poor man buy new cars.
Another problem in the auto sector, he said was that of competition. “We are not afraid to compete, but we want fair competition, and that has to do with smuggling. The same Customs that complains that the revenue is going down because of the Auto Policy incentive is the same Customs that allows smuggled cars into this country unashamedly. We stay on that Badagry expressway and we see them drive through, and they would have passed through five to 15 Customs check points. It is a shame.”
He said they made submission to government some time ago, “but we are not aware of any assembly plant in Benin Republic, or in Cameroon, or in Niger Republic- the countries that surround us. We do not see why vehicles should come into the country through our land borders; all vehicles should come through the sea ports where they can go through the various infrastructure that Customs has put in place,” adding that the government accepted but that cars still come in through the land borders.
“We are suffering because people are bringing in vehicles, don’t pay any duty, put them on the road and they put ridiculous prices on them and they say our products seem expensive. We cannot bring in our containers in the night, we pay all the dues and get stuck in the ports for months, and we pay all the demurrage, and they still want the cars to be cheap.
“We have told them that if we are able to double our production, we are in a position to produce cars that will compete with these second hand cars, but only if we are able to produce in large volumes.”
He said the economics, as far as production goes, was the same, explaining “whether we produce 10 cars or 1000 cars, our overhead will be the same; it wouldn’t go up very much. This is why we say they should shut the door on second hand cars and challenge the plants to increase their production and drop their prices.”
Nigeria’s automotive industry was redefined by the Auto Policy, Aromolaran said. “We have achieved partial success envisaged when the policy was being put together. Partial in the sense that not all the requirements of the policy have been implemented or is being implemented as they should. When we say it has not been fully implemented, it has to do with the fact that all the various tariff issues are not being applied as the policy envisages.”
He said what some institutions failed to realise that those steps were not taken for nothing, explaining “We gave the government instances of what every other nation that have developed the auto industry used to be able to develop its own and we indicated that there was need for some protection of the local industry. Stating reasons why the industry needed protection, he said, “Various auto producers in their home countries get protection, because their countries appreciate that they need it to be able to compete in the world market.”
He said India, for a long time, shut its doors to foreign cars and what that did was that all those subsidised cars from China could not come in and throw away their own local producers. “South Africa did the same thing but they did not put a ban, they said if you’re bringing in a fully built car from any other place, you pay 112% duty otherwise buy the ones that are produced here, which will be cheaper and for seven or eight years when they ran their first auto policy regime, they did not waiver from that policy and what was the result of it, all the notable OEMs (Original Equipment Manufacturers) went and established in South Africa. Today, all OEMs operate in South Africa. That country has a full auto industry, they can produce everything from a pin to the final car, including engine blocks. The cars you see on the road in South Africa are all produced there. South African blacks are on the factory floors producing these cars; nothing says Nigeria cannot do the same.”
Aromolaran said, “One of their advisers when we were doing this policy was a South African minister who was responsible for that policy when it was first brought out. He went with us to the Federal Executive Council to go and argue that policy out.”
He said the president Goodluck Jonathan administration listened to him and that all the ministers present contributed to the debate and “they agreed that we needed to project our industry somewhat. We had five or six booming auto plants in the ‘70s, but they all died because they couldn’t compete against the imports from China and South East Asia.
“We are bringing them back again; we’re putting investments in place. We still need that protection and that’s why the 70 per cent tariff is in place. You find that some aspects of government are getting very jittery about it, which is unfortunate and I will tell you what the problem is. The federal government has a long term view of developing this industry.”
He said the automotive industry is huge and the better part of it is still outside of Nigeria where they have most sophisticated production and they come up with state-of-the-art items. We as a nation must develop our own industry and to do so we must support the local assembly plants and local components manufacturers- these are two issues. Together, we add the local content to whatever it is that we are able to bring in from abroad. “Now, the industry cannot grow here if we do not support it.”
He said Nigerians ought to know that “there is a strong effort here to make the us an auto producing nation and not just a consuming nation of the products of other countries.
“I say this because we find that we have a big problem or there is a big communication gap between us and the general public. Most do not know that we assemble anything here,” adding that it gets embarrassing after six to seven years of assembly operation here. He said when vehicles’ manufacturing blossoms, the gains go to the industry and the savings in foreign exchange by not importing go to the government, and that at the end of the day, “even our own businesses too will, hopefully, feel the impact of what we are doing locally.”