Vehicle Dealers, Economists Differ On FG’s Tariff-slashing Measures

BY YUSUF BABALOLA, OLUSHOLA BELLO AND KINGSLEY OKOH, Lagos

Economists and vehicle dealers have expressed divergent views on the federal government’s 2026 Fiscal Policy Measures (FPM), particularly the reduction of tariffs on imported vehicles, with dealers downplaying its impact on prices while economists highlight broader gains for industry and manufacturing.

Under the new policy, tariffs on imported used commercial vehicles and fully built passenger vehicles—including four-wheel drives and station wagons—were reduced from 70 per cent to 40 per cent, reversing the higher rates introduced under the 2015 fiscal regime. The Import Adjustment Tax (IAT) on selected products, such as crude palm oil, was also cut to an effective rate of 28.75 per cent as part of efforts to stimulate economic growth.

Despite these changes, vehicle dealers argue that the tariff reduction will have only a marginal effect on vehicle prices.

Speaking with LEADERSHIP, President of the Association of Motor Dealers of Nigeria (AMDON), Akinola Adedoyin, said the policy, though well-intentioned, does little to significantly ease the cost burden on consumers.

“Inasmuch as it will reduce prices, the impact will not be significant. The reduction is on tariff and not on import duty, which forms a larger component of the total cost,” he said.

Adedoyin explained that the scale of the tariff cut is too small relative to overall import costs to drive meaningful price reductions.

“For instance, if a vehicle costs about N5 million, and the tariff component is around N400,000, while duty is higher, the reduction in tariff may only result in a difference of about N150,000. That is not substantial enough to significantly affect the final price for buyers,” he added.

He stressed that a reduction in import duty—rather than tariffs alone—would have a more noticeable impact on affordability.

“Yes, if the government reduces import duty, the effect will be more significant because of its larger share in the total cost structure,” he said.

While advocating for further policy adjustments, Adedoyin also warned that lowering import duties could undermine the government’s push for local vehicle assembly.

“We are trying to promote made-in-Nigeria vehicles. If import duties are reduced, it may encourage more imports instead of supporting local manufacturing,” he noted.

He added that although Nigeria’s automotive capacity remains limited, efforts by the National Automotive Design and Development Council (NADDC) are beginning to yield results, with prices of some locally assembled vehicles gradually declining.

“Recently, we have seen improvements, with prices of some locally assembled vehicles coming down. That is encouraging,” he said.

Adedoyin further emphasised the need for improved after-sales services, including warranties and maintenance support, to boost consumer confidence in locally assembled vehicles.

“For local vehicles to gain wider acceptance, there must be strong after-sales service and reliable warranties that allow users to operate the vehicles for a reasonable period before encountering maintenance issues,” he added.

In contrast, economists view the fiscal measures as largely positive, particularly for domestic production and industrial growth.

Director/CEO of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, described the policy as strongly pro-manufacturing, noting that its design supports local industry through a mix of protective and concessionary measures.

He said, “The fiscal policy comprises three key components: the import adjustment tax, the national list, and the excise duty, alongside the import prohibition list. The importance of the national list cannot be overstated, as it provides crucial protection for the Nigerian manufacturing sector.

“The import adjustment tax specifically targets finished products that can be produced locally, establishing a protective framework for the industry. These taxes are designed to safeguard the manufacturing sector, with rates ranging from 5 per cent to 55 per cent. Such protective measures are essential for bolstering the capability of Nigerian manufacturers.”

Yusuf noted that the national list provides manufacturers with access to lower tariffs for raw materials and intermediate goods, easing production costs.

“The national list features a range of low tariffs, from zero to 100 per cent, making it easier for manufacturers to import the necessary raw materials and intermediate goods at concessionary rates. For instance, essential items like food ingredients might attract tariffs of 10 per cent or 15 per cent, facilitating smoother production processes for local manufacturers.

“The import prohibition list also reflects a strategic approach, as it restricts items that can be produced locally. This is particularly beneficial for the pharmaceutical sector, ensuring that local capacity is fully utilised and reducing dependence on imports.”

On excise duties, he said the policy maintains moderate rates for beverages while imposing higher charges on products with health implications.

“Regarding excise duties, the measures maintain a relatively low level for carbonated drinks, non-alcoholic beverages, and alcoholic beverages, saying this is consistent with a uniform charge of N10 per litre, though higher rates apply to tobacco and spirits in recognition of their health impacts.

“While the overall reception of the fiscal policy is positive, there are some concerns, particularly regarding the newly introduced green tax of approximately two per cent on vehicles. However, the zero tax on electric vehicles is a commendable move to encourage environmentally friendly practices in the automobile sector.

“Additionally, the reduction of import duties on new vehicles, from a previous high of 70 per cent to around 40 per cent or 45 per cent, is a significant step towards enhancing accessibility and affordability for consumers,” he stated.

Yusuf added that the measures strike a balance between protecting domestic industries and promoting sustainable growth, positioning Nigeria’s manufacturing sector for long-term expansion while encouraging environmentally responsible practices.

Also speaking on the impact of the tariff cuts on small and medium enterprises (SMEs), the National President of the Association of Small Business Owners of Nigeria (ASBON), Dr. Femi Egbesola, said one of the major challenges confronting SMEs is the high cost of importation.

He noted that the government’s decision to reduce tariffs would help ease cost pressures on SMEs and improve their profit margins.

Egbesola explained that persistently high import costs had discouraged many businesses from engaging in import activities, adding that the new wave of tariff reductions is expected to restore confidence in the sector and strengthen the overall impact of the fiscal policy measures.

He further stated that SMEs have been grappling with rising operational costs, which have eroded profitability and weakened business confidence. According to him, the tariff cuts across key sectors would help restore resilience within the SME space.

Egbesola added that the reduction in tariffs would improve business margins, while the recently introduced Import Adjustment Tax would provide manufacturers, SMEs, and industrialists with a level of protection, enabling them to better integrate and scale their operations.

He expressed optimism that the tariff reforms would encourage SMEs to drive growth in critical sectors of the economy, enhance their competitiveness, and position them to become more resilient and assertive in the business environment.