Why FG’s Ban on Land Border-Importation of Vehicles Makes NO Sense – Adeeko Ademola

Published:7 Dec, 2016

BusinessDay search shows that before the implementation of the new auto policy, which raised duty paid on imported vehicles from 20 to 70 percent to encourage the upcoming assembling plants in the country, about 30,000 new cars and trucks used to arrive Nigeria every month across all the Roll-on Roll-off (RORO) terminals, but the volume has now dropped to about 10,000 monthly. 

 

Most times, I can’t help but chuckle at the sheer incompetence and shallow reasoning employed in drafting government policies in Nigeria. These attributes are evident in almost every decision the Nigerian government has taken over time. Such of these ill-advised policies is the latest ban on land border imported vehicles into the country.

 

Yesterday night, I got a message circulated via WhatsApp. As I read through the message which was laden with the intention to sway public opinion about the government’s decision to place a ban on land border-imported vehicles.

 

After reading the ridiculous reasons the government gave for the ban, I was compelled to address what seems to me like a damning decision by a government that has done little to nothing to alleviate the suffering of it’s own citizens especially in a period of economic recession. Therefore, I will share with you the points circulated by the FG as reasons for the ban before addressing them:

 

Why FG’s ban of vehicle imports through land borders makes sense

 

1. Ensures the proper documentation and duty collection on vehicles that comes into the country. Many vehicles brought in through land borders find ways and means to avoid payment of duties thereby shortchanging Nigeria.

2. Reduction in smuggling of vehicles older than 15 years into the country. Many of these vehicles have a lot of harmful exhaust which could be responsible for increasing cases of lung cancers seen in younger people in Nigeria. The government cannot control the vehicles imported through land borders with some as old as 20 years!

3. Reduction of corruption and bribery of customs by smugglers through land borders and of course the attendant security challenges whereby arms and other dangerous products can be smuggled in along with those vehicles.

4. Avoidance of double payment of duties on imported vehicles. Most Nigerians who buy used vehicles brought in through land borders still have to pay as much as extra 300,000 Naira as duties to customs within Nigeria, with many vehicles impounded along with the pains to the affected individuals.

5. Reduction in 419, armed robbery and several other losses to Nigerian buyers who travel all the way through land to buy used vehicles in neighboring countries.

6. Helps to protect the local auto industry and makes government more responsible.

 

Laughable, isn’t it? I have read the reasons over and over again and nothing in it suggests that a total ban will eradicate or in any way reduce the vices listed in those reasons. As a matter of fact, whoever came up with those reasons, either has a low reasoning capacity or just lacks critical thinking abilities and I will tell you why.

 

In order to solve a problem perpetually or let me say; put an everlasting solution to a problem, you should be ready to go as far as the root causes of the problem. Once it is evident that you’re not ready to tackle the causative factors of a particular problem, then you have no business holding any leadership position. Nigeria, as it is now, does not need cosmetical or short term solutions. We need thoroughly thought out solutions to be able to solve our systemic problems.

 

If you remember, some years ago, Ex-President Jonathan increased sea port importation tariff by 70% in a bid to discourage importation of automobiles and to encourage a ‘non-existent’ local automobile industry or let’s just say; “Innoson Motors”. The increment in importation tariff resulted to spike in the price of imported automobiles as Nigerians continued to demand for imported automobiles. At a point, the tariff was unbearable and due to the natural demand for foreign brands of automobiles, importers, willing to meet the demand and also sell at affordable rates resorted to land border importation otherwise known as smuggling. What they do basically, is; ship their merchandise to a neighboring country where the importation tariff is relatively low and then they bring the cars into Nigeria via porous borders, hereby cutting off the costs of paying government the necessary monetary dues which also means government has continued to lose revenue in Billions of Naira to smuggling over time.

 

Going back up to the reasons listed by the FG for the ban, you’ll realize that the ban will have very little effect on the listed reasons except for number 1 which clearly states that; “the ban will ensure the proper documentation and duty collection on vehicles that comes into the country. Many vehicles brought in through land borders find ways and means to avoid payment of duties thereby shortchanging Nigeria.” Truth is the Nigerian government cannot really be bothered about the type or the age of cars brought into the country. The government cannot be bothered about the respiratory problems that come with driving very old cars. The government cannot be bothered about the rate of armed robbery and 419 schemes people may go through traveling all the way to neighboring countries to purchase automobiles. The only thing the government is interested in is the loss of funds involved in the land border importation venture. Simple!

 

Moving on, why does the government need to place a ban on land border importation when it encouraged the venture some years ago by increasing tariff at the seaports? Why is it so hard for the government to reduce the throat-cutting tariff at the seaports to encourage importers abandon the land border importation? After all, seaports are safer and closer to the importers’ customers. Importers who make use of the seaports readily know that seaports are way better than using land borders especially when you put into consideration, the treacherous journey from the borders to the inner cities coupled with bad roads and security risks. The question we should ask ourselves is; why do importers risk everything to use land borders over seaports? The answer is simple; cut-throat tariff at the seaports.

 

Innoson

 

That period Innoson started it’s operations in Nigeria, the FG under Goodluck Jonathan, in a bid to support the locally manufactured cars by Innoson, decided to hike the importation tariff at the seaport to discourage importation and encourage the growth of the local automobile sector. It would have been a very good move if Innoson had taken the opportunity to widen it’s business scope. First off, Innoson is yet to be a trusted brand and it’s market penetration has barely left the surface even years after inception. Instead of Innoson, in what is expected of it to penetrate the market targeting the low/middle income earners in it’s production, was busy competing prices of automobiles with world renowned brands like KIA and Hyundai and Toyota. If Innoson is not a trusted brand yet in terms of quality and it’s cheapest car is at same price with say; Hyundai. Honestly, I don’t think there is any Nigerian who will buy an Innoson over a Hyundai, all on the altar of supporting locally made cars. In general, I doubt any Nigerian will buy a car because it’s a local brand as opposed to quality. At least, not at this time. As a matter of fact, an average Nigerian will buy a product for it’s longevity/durability (at a reasonable price) over luxury, even at same price.

 

This why I have always opined that Innoson needs to follow the market penetration model of a company like Tecno. Target low/medium income earners, who are the majority first, then rise through the ranks to compete with other brands over time especially with advance in research on latest technology. With the untested nature of Innoson vehicles, no one is willing to risk hard-earned money to buy vehicles they’re not certain about the availability of it’s body parts and durability.

 

Given the current state of the economy, how many Nigerians can actually afford brand new cars from Innoson now that we have placed a ban on cheap land border-imported cars? How many Nigerians can even afford Tokunbo cars with the high tariff demanded by the seaport? To go back to the root of the problem, why in the first place did importers choose land border importation? Simply because the tariff at seaports is too high. If a car merchant buys a car worth 500, 000 Naira and ends up spending almost 300k to clear it, how much do you think he’ll put up the car for, after adding his profit? Who is willing to buy such car at that imagined price especially with the recession in the country?

 

If the government is really serious about growing the local automobile industry, then it should look inwards to ensure the cost of production is relatively low so that companies like Innoson can drop their prices to create an edge over imported brands or better still, make the country business-friendly enough to invite automobile companies to set up manufacturing plants here in Nigeria which is also a good avenue to boos employment.

 

Solution

 

The only move that is appropriate right about now, is for the government to embark on a downward review of the seaport importation tariff before ever considering a ban on land border importation. The government has enough to gain by reducing the tariff and the reason I propose this is quite straightforward;

 

1. A reduction in importation tariff will encourage car importers to rescind on their decision to smuggle. It will encourage them to make use of the seaports in as much as they don’t have to break the bank to clear their imported merchandise from the ports.

2. The ripple effects of a tariff reduction will be felt immediately as government’s revenue generation from seaports will soar as a result of the increase in the importers who will patronize the ports over smuggling.

3. Their will be a reduced friction between smugglers and men of the Customs service. The less smugglers we have to deal with, the more effective the Customs service will be.

4. There will be a huge reduction in the corrupt practices of Custom officials basically because patronage will definitely fall to the barest minimum and this also grants the agency a clearer opportunity to rid itself of corrupt officials.

5. Fewer Nigerians will patronize smugglers when they know they can purchase vehicles at a reasonable price without the unnecessary risks of traveling long distance to neighboring countries and also they can get proper documentation for their vehicles without the risk of being caught and asked to pay double for import duties.

6. The Nigerian government can keep tabs on the necessary info it needs about every imported vehicle.

 

However, if the FG strongly believes the ban on land-border importation despite maintaining a high tariff  at seaports will deter smugglers, then it has really got jokes because a country like Nigeria with absolutely porous borders will only see a shift in entry point for smugglers not a reduction. In brevity, we will only succeed in overstretching our already overstretched Customs service.

 

Those who advised the presidency to place a ban on land imported cars while maintaining a high importation tariff at the seaports didn’t take their time to think it through properly. I sincerely hope that they get time to read this piece and make appropriate adjustments.

 

However, I won’t leave you without this piece of information to corroborate my stand on this issue. These are words from Asconio Russo, managing director/CEO, Ports and Terminal Multi-Services Limited (PTML), operators of Nigeria’s biggest RoRo terminal. And I quote:

Our business is down by about 60 percent, which is a significant drop and this has to do with the auto policy, which increased duty on imported cars and buses from 20 to 70 percent since July 2014. As a result, there was huge diversion of traffic to Benin Republic such that Benin Republic that used to be one of the major reason why Nigeria has been losing revenue from imported vehicle, became the most important port for Nigerian vehicles,” he said.

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