NIGERIA’S balance of trade deficit looks set to get significantly worse this year as the country is poised to import used cars and motorcycles valued at a total of N3trn ($7.83bn) in 2021 which is certain to create serious foreign exchange problems.
Despite having a huge population of 200m people, Nigeria manufacturers very few finished products and does not produce most of the consumer goods used by its populace. There are currently about 12m automobiles in Nigeria but the nation only has one manufacturing plant in Innoson Motors and very few automobile companies have assembly plants in the country.
As a result, Nigeria is dependent in imported cars and motorcycles to survive and the second hand market is a key part of this process. According to Hon Ahmed Aliyu, the chairman of Peugeot Automobile Nigeria (Pan), one of the assembly plants in the country, said that it is unfortunate that the nation remains dependent on imports.
A former member of the Federal House of Representatives, Hon Aliyu also described the recent tariff reduction on imported automobiles as a policy somersault by the government. He added that the stance was contrary to the recommendations of the Automobile Standing Committee set up by the government through the Bureau of Public Enterprises (BPE) to examine factors hindering the growth of the automotive sector.
Hon Aliyu also accused the comptroller-general of the Nigeria Customs Service (NCS), Col Hameed Ali, of succumbing to the lobby of vehicle dealers with no matching investments in local vehicle assembly. In a swift response, however, the NCS dismissed the allegation, saying that Nigerians are happy with the new policy.
Expressing more long tern fears, Hon Aliyu expressed concern that the new policy will affect Pan Kaduna, which has already secured a financing of $150m over the next three years for its operations. He added that the tariff reduction would mean the imminent closure of Pan and other automobile assembly plants.
Hon Aliyu added: “The tariff portion of the Finance Bill was stepped down but to our dismay, it was smuggled again into the Finance Bill and subsequently approved. The Nigeria Ports Authority revealed in December 2020 that 13 vessels off-loaded used vehicles at the terminals.
In 2020, the country imported used vehicles and motor cycles valued at N1.28trn but this new law means that in 2021, Nigeria is likely to go berserk and triple the amount to N3trn. Some 40% of the budget on importation of all manners of used cars is a direct consequence of the tariff reduction.
“The comptroller-general intends to flood Nigeria with Tokunboh vehicles and ensure the closure of all assembly plants whereas the assembly plants have put in place a car financing scheme for Nigerians to own brand new vehicles at affordable rates. We strongly believe the comptroller-general succumbed to the lobby of Tokunboh dealers who are glorified car dealers with no matching investments in local vehicle assembly and without linkages and value chain components that can precipitate long term industrial growth of Nigerian economy.
“Pan Kaduna has just been acquired and has already secured a financing of $150m over the next three years and the implication of this review means the imminent closure of Pan and other auto assembly plants due to misguided recommendations by the comptroller-general. We categorically state that this tariff review will become more detrimental to the long term competitiveness that the automotive industry must achieve if it is to play any dominant role in Africa continental free trade area.”