News Column

Car Prices Will Not Go Up, FG, Auto Makers Pledge

July 4, 2014

Steve Omanufeme

The federal government and National Association of Automobile Manufacturers (NAMA) yesterday cleared the air on the effects of the ongoing implementation of the Nigeria Automotive Industrial Plan (NADIP), saying that there will be no increase in the prices of cars.

The Minister of Industry, Trade and Investment, Mr. Olusegun Aganga, who said this at a press briefing in Lagos, also disclosed that a new vehicle credit finance scheme to make new cars affordable would be in place in four months.

With the new financing scheme, Nigerians will be able to buy new cars assembled in Nigeria at an interest rate of not more than 10 per cent repayable over a period of four years.

The minister said: "The rumour that the federal government has increased the tariff on imported cars by 70 per cent is incorrect and misleading. The Nigerian automotive manufacturers have already assured the government and all Nigerians that there is adequate stock of imported vehicles and that its members have not and will not increase the price of imported vehicles.

"Nigeria is the only country in the world where used vehicles were not banned following the introduction of the new automobile policy. This is because President Goodluck Jonathan, before announcing the new policy, had taken into consideration the current socio-economic conditions of the average Nigerian and would not want to come up with any policy that will inflict more hardship on them."

He stressed that the tariff regime for the NAIDP had been structured to achieve a maximum positive impact on the citizens in particular, and the nation's economy as a whole.

Aganga said: "The new automobile policy has been structured to encourage Original Equipment Manufacturers (OEMs) to invest in Nigeria to create jobs and develop our economy because we realised that for every car that we import into Nigeria, we are creating jobs for other countries.

"After consultations with all the stakeholders in the automobile industry, the government came up with different tariffs, which include zero per cent for Completely Knocked Down vehicles (CKDs); five per cent for Semi-Knocked Down 1 (SKD1) vehicles; and ten per cent for Semi-Knocked Down 2 (SKD2)."

He added: "We knew that because we were just starting with the implementation of the policy, there would be a gap between local production and demand. Therefore the policy allows those companies who have keyed into the policy by investing in the establishment of assembly plants in Nigeria to help us create jobs to import the difference of what they cannot produce at 35 per cent duty.

"However, for those companies that want to continue to support the economy of other countries and help them to create jobs at the expense of Nigerians and the Nigerian economy, they can import cars at 70 per cent."

Aganga explained that the overall objective of the federal government's new automobile policy was to fast-track inclusive economic growth.

He said: "The automobile industry is very strategic due to its economic benefits and overall impact on industrialisation, skills and technology development, job creation and foreign exchange stability, among other things.

"Among the 10 most populous countries of the world, Nigeria and Bangladesh are the only two countries without a successful automobile programme.

"As a country, we made a good attempt at developing our automobile sector during the administration of General Yakubu Gowon in 1972, but it collapsed due to the lack of policy consistency. In order to ensure that there is no policy somersault, the federal government has already taken steps to ensure that it is backed by legislation.

"Already, the new automobile policy has passed the first reading in the National Assembly and we are working with stakeholders to fast-track the passage of the bill into law."

Speaking during the event, the Executive Director, NAMA, Mr. Arthur Madueke, said members of the association had enough stock of vehicles, adding that nothing would warrant an increase in price.

He said: "We have no plans to increase the prices of cars. Our members have agreed after consultations that they will not increase the prices of cars in Nigeria because currently, we have enough stock to meet the country's demand.

"Those that have increased or are planning to increase the prices of cars want to take undue advantage of the new automobile policy to exploit Nigerians and we will not be part of that exploitation."

Madueke explained that in 2012, the total number of new cars imported into the country stood at 50,000 units; between January and December 2013, about 52,000 new vehicles were imported, while by May this year, 37,000 cars have been imported.

"All the vehicles were imported before June this year at the 20 per cent duty. So why do they now want to make things difficult for the ordinary Nigerians through needless exploitation," he wondered.

Also, in a statement yesterday reacting to published reports early in the week about a hike in the price of cars, NAMA said that going by the new automotive policy, it is cars assembled overseas and brought into Nigeria that will cost more, not those that are assembled locally.

In the statement signed by Madueke, he gave a strong assurance to Nigerians that the prices of locally produced vehicles will gradually come down, citing the nation's experience with the aviation and telecommunications sectors as examples.

Madueke said: "We pledge our support to the Nigerian people that there would be no increase in the prices of vehicles as being heralded by harbingers of doom, who wish themselves well at the detriment of the growth of Nigeria for the benefit of all."

He added that no member of NAMA was contemplating a price increase and that there would be none.

NAMA accused opponents of the automotive policy of using scare tactics against a progressive policy designed to make cars cheaper in Nigeria, domesticate production, create jobs and bring about transfer of technology.

"It was clear that the country needed to gravitate in a new direction, away from the import mind-set, if it was going to embark on sustainable industrial development. Only a select group of traders benefitted from a high end auto market with a massive resource drain in the form of foreign exchange outflow and littering of the landscape with a scrap heap in the name of fairly used cars," he stated.

NAMA said it is against this backdrop that the federal government launched a reformist and revolutionary programme to reposition the economy on an industrial platform.

"This necessitated a structural change, one that entailed the reshuffling of resource allocation away from finished goods importation and distribution. It was clear non-value adding businesses in the auto sector had to give way to more productive linkages.

"To achieve this policy shift, it became necessary to ensure the buy-in of all stakeholders. The federal government embarked on a massive consultation to explain the industrial development vision, sensitise affected groups and educate them on changes required to re-integrate into the new paradigm," the association said.

Madueke acknowledged that people naturally resist change, adding that rather than study the new value chain arising from local vehicle assembly operations, and determine where to position given the new platform, most in spite of acknowledging the immense benefits of the new policy set out to undermine it to preserve the status quo.

He accused car importers of embarking on the false propaganda that the new policy will lead to price escalation, stressing, "Such critics did not consider the fact that the tariff has only been used as a tool to redirect incentives to the value-adding segment the government has decided was germane to the success of its industrial revolution agenda."


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Source: AllAfrica


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