Land Border Ban: Buyers Shun Auto Markets Due To Price Hike

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The various policies of the federal government aimed at boosting economic activities at the nation’s ports and by extension, earn higher revenue for the government are clearly having negative impacts on the businesses of auto dealers.  Findings by LEADERSHIP Sunday indicates that potential buyers are deserting car markets due to the hike in prices occassioned by the ban.Some auto dealers, according to checks by our correspondents, have started delving into alternative ways of surviving the adverse times occasioned on their business by harsh government policies on vehicle importation and port charges.

The federal government had on December 5, 2016, announced a blanket ban on importation of used and new vehicles through land borders with effect from January 1, 2017.

Before the federal government’s pronouncement on ban of importation of used and new vehicles through land borders, it had introduced a hike in import duty on vehicles in 2014 from 10 per cent to 35 per cent with an additional surcharge of 35 per cent, bringing the total tariff to 70 per cent. The policy rendered Nigerian ports near desolate as importers of vehicles abandoned Nigerian ports for those of Benin Republic, Ghana and Togo, where import duties are more affordable.

The hike in tariffs for imported vehicles did not just make the cost of vehicles shoot through the roof in the country, it resulted in low demand for vehicles by Nigerians-a situation that was worsened by the relentless economic recession.

To make ends meet, an auto dealer who simply identified himself as Henry told LEADERSHIP Sunday that he has partially left the import part of the business in the past six months due to low demand. “I have left the business temporarily because the amount paid on duties and taxes at the ports are just too much for me to handle at the moment,” he said.

Also, some major importers of fairly used cars told our correspondent that most of the people buying cars now are those living abroad. According to a car dealer, John Nwabueze, his clients at the moment are those who wish to visit and stay in Nigeria for some time. He said they make orders and the vehicle brands are shipped prior to their arrival. He added that Nigeria who can afford to buy vehicles are holding on and watching to see if the cost of vehicles would come down and if the economy would improve.

Findings revealed that the price of a Toyota Corolla 2003 Model, which sold at N1.3 million before is now is sold at N1.9 million, while its 2009 version which went for N2.5 million now goes for N3.5 million due to the high exchange rate and increase on duties.

The Association of Motor Dealers of Nigeria, AMDON, has in the face of the prohibitive cost of vehicles in the country, called on the federal government to ease the cost of doing business at the nation’s ports.

National President of the association, Ajibola Adedoyin, said the association sought urgent review of the tariff regime on imported vehicles so that average Nigerians who cannot afford Nigeria-assembled cars can afford imported secondhand ones.

Some other car dealers, especially in Lagos, have urged the federal government to rescind the ban on importation of vehicles through land borders to aid inclusive economic growth and crime reduction. The car dealers see the ban as ill-timed considering the fact that an average Nigerian is feeling the bite of economic recession. The discontinuation of the policy they say is even made more compelling given the high foreign exchange rate and increasing unemployment in the country.

Prince Kingsley Godswill, the managing director, Attitude Auto Mart, said, “The car lots of many auto dealers that import massively into the country are almost empty. The exchange rate is killing the business and prices of automobiles are going beyond the reach of an average Nigerian. The land border ban will further worsen the situation, especially for upcoming car dealers that prefer the land borders because of affordability”.

Mr Olaseni Obafemi, the chief executive of Emmoba Motors in Lagos, said a downward review of duties on imported automobiles would boost economic activities, while generating more revenue for government. “The current price of one vehicle could purchase three vehicles before now due to the fluctuations in the foreign exchange rate. Due to the decline in the value of the naira, unemployment rate and increasing cost of living, the attraction for automobiles has reduced drastically.

“If duties paid to customs are reviewed, vehicles will be affordable for the citizens and life would be easier for all.”

Mr Felix Agbaje, the general manager, Exotic Autos, warned that the ban would worsen unemployment, poverty and encourage smuggling. “This policy is not thoughtful. It holds a lot of implications for the economic development of the country.”

It would be recalled that the Senate on Wednesday, January 11, 2017, rejected the federal government’s ban on the importation of vehicles through the land borders in the country. The Senate also called on the Customs Service to immediately suspend further action on the policy, to be more creative, up to their duty and rather device a policy with human face for shoring up government revenues through the ports.

In the face of position of federal lawmakers, and Nigerian auto dealers, the comptroller-general of Customs, Col. Hameed Ali (retd), rather directed operatives of the Headquarters Compliance Team and Federal Operations Units of the customs to ensure strict implementation of the controversial policy.

A statement from the acting public relations officer of customs, Jospeh Attah, noted that smugglers take advantage of the “porous border or compromise some customs officers and that of other agencies to short change the nation,” adding “Despite Nigeria’s bigger and more equipped port facilities, statistics has shown that more than 90 per cent of vehicles imported into neighbouring countries are normally on transit to Nigeria.

Col Ali said apart from being a statutory function of Nigerian Customs Service, NCS, to implement government fiscal policies, the advantages and opportunities inherent in the policy were a motivation to ensure implementation.

While claiming that duty rates chargeable on vehicles at both land borders and seaports are the same, Col Ali said importers of vehicles rather choose to exploit the informality of land border trade. He said that since the goods were not usually manifested for Nigeria ports, some of them were either smuggled through the porous border or some customs officers and that of other agencies are compromised in a bid to short-change the nation.

The CGC charged customs anti-smuggling squad to ensure total blockage such that no vehicle importer gets his or her vehicle, smuggled through the land borders. Ali said that the channelization of vehicles through the sea ports will see to suppression of smuggling.

He also added that it would create business and job opportunities with the eventual emergence of bonded car parks for vehicles around the country. The bonded parks he said would lead to the emergence of bank branches and mechanic villages around the bonded car parks, all creating job opportunities for Nigerians. According to Ali, high volume of vehicle cargo for shippers will boost capacity and optimize use of facilities at our ports and car parks.

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