Duty loss on import hurts economy
For five consecutive years, the federal government has lost half of its revenue accruing from duties paid on imported vehicles as 50 per cent of vehicles in Nigeria come...
For five consecutive years, the federal government has lost half of its revenue accruing from duties paid on imported vehicles as 50 per cent of vehicles in Nigeria come in illegally through the borders and seaports without payment of duties to the government treasury, investigation has revealed.
The economic sabotage, which gained traction in the first quarter of 2016, when the land borders were closed by President Mohammadu Buhari regime is perpetrated by either influential people/dealers who hand out signed documents to the Customs or bribe their way to clear the vehicles without due process.
In connivance with unscrupulous government officials, some dealers are treated as sacred cows and they are quick to get away with anything at the ports. The illegal business does not stop at sea ports alone; similar dealings have been reported in major land borders across the country, including: Kpobe (Ogun State), Ijowu (Ogun State), Seme (Lagos State), Idiroko (Ogun State), Shaki (Oyo State), Daura (Katsina State), Baga (Borno State) etc.
It would be recalled that the Nigeria Customs Service (NCS) had in September 2019 raided some top car marts in Lagos when the comptroller-general’s Strike Force and officers attached to the Federal Operations Unit (FOU), Zone ‘A,’ Ikeja stormed Berger along Apapa-Oshodi Express Road and other premises across the state.
Many of them were closed on the orders of the comptroller-general of NCS, Hameed Ali (rtd), a retired colonel for allegedly retailing smuggled vehicles in the shops.
Major car dealers including Affordable Cars Limited, Carlink Limited, Ineh Mic Autos, Globe Motors, Coscharis, Skymit Motors, Arrowhead Motors, Wonder Wheels Motors, Auto Point Motors, among others were raided. Showrooms in other states, including, Sokoto, Katsina were equally affected.
The second hand vehicles dealers were not spared as most of their showrooms were equally closed too due to reasons that have to do with documentation.
Commenting, Remi Olaofe, executive secretary, Nigeria Automotive Manufacturers Association, (NAMA) said “you can’t say there is no smuggling in Nigeria; our borders are porous and we have done everything we needed to do to improve it, by shutting down the borders, but they are still porous.
Olaofe said it is a fallacy to say for every vehicle coming into the country, appropriate duties are being paid. Stating that NAMA has proffered solution to the menace, Olaofe said that with their portal and that of the National Automotive Design and Development Council (NADDC, it will be 100 per cent impossible for anybody to import a vehicle and not properly register it in Nigeria because the portal will indicate that the appropriate amount of money is not paid.
“It is just as simple as that, but for the reason best known to the operators and the players in that market, they have refused to allow that portal to work”, he said.
Advising that vehicles must be registered for them to be driven on the road, Olaofe added, “You can’t be driving a vehicle that is not registered. To know this, they should go to the licensing office because the licensing office cannot license a vehicle without first clarifying from the portal that clears the vehicle. If that is not there, we have what is called the BIN number that will throw up a red flag”.
Explaining further, Olaofe said, “I don’t represent the (FBU) FullyBuilt Vehicle, mine is advocacy to shut our doors against the FBUs. Assembling of vehicles in Nigeria is what I represent”.
Confirming that the duty waiver for vehicles have been adjusted, but there is no difference in the rate of vehicles, the NAMA executive secretary said “We are saying that it is not duty that is affecting the rate we are paying as transportation fare, but the factors are the cost of fuel, infrastructure, security on the road, wear and tear, replacement of these spare parts and the conditions of the vehicles. They bring a lot of junks into this country”.
“Africa Bilateral Free Trade Agreement has taken off, where is Nigeria in the scheme of things? Assembly plants are now moved to Ghana, what do we stand to benefit? Toyota, Hyundai and co are being assembled in Ghana, are those for Ghana economy? They are for Nigeria economy”, Olaofe added.
Also reacting to the situation, Kunle Jaiyesimi, deputy managing deirector, Massilia Motors, dealers of Mitsubishi brand of vehicles said most car dealers, including Masillia Motors are still selling their old stock and that his company had stocked up to December for the 2021 business.
According to him, the local car market has really shrunk and that dealers have not really made major decisions in 2021 in terms of vehicle imports.Jaiyesimi said “to the assemblers, they are not happy with the Finance Act; it’s making the locally assembled vehicles uncompetitive compared to the Fully Built Units. For instance, Fuso and Canter (Mitsubishi) that we are assembling, it is cheaper to bring them in as FBU than locally assembling them. And that has affected our production lines’’.
Jaiyesimi who is also the Chairman, Auto Group of the LCCI proffered solutions, saying that “the only way for us have some gain on the assembly line is for govt to remove the import duty or reduce it. If they cannot remove it, they can bring it down to five per cent”.
He said that, for now, they are charging 40 per cent (35 per cent import duty and five per cent for levy) on passenger cars for FBU; 10 per cent on (Semi Knocked Down (SKD) and 10 per cent on FBU buses.
He argued that whatever duty reduction the government has put in place for them to enjoy is being wiped off by the exchange rate fluctuations, stressing that the CBN is not supporting vehicle importers at SKD or FBU level.
Rather, he informed that stakeholders rely on the black market to pay their suppliers. “Once you are getting your FX from the black market, whatever gain that is coming from the import duty reduction is lost in the over 25 per cent increase in the FX rate”, Jaiyesimi added.
Further investigations by the Nigeria Auto Journalists Association (NAJA) however, show that both new vehicle dealers and second hand vehicles merchants are deeply involved in this business of short-changing the government.
A key member of the United Bergers Motor Dealer Association (UBMDA), Chike Ejogu said that dealers evade Apapa ports because of the high duties paid to clear the vehicles there. He said, that is the major reason why dealers resort to smuggle in vehicles at cheap rates, in order to make big gains.
Ejiogu said, “The whole thing worsened in early 2016 when the land borders were closed. Before the closure we used to pay N74,000 and N96,000 for small cars while we were paying about N170, 000” for big vehicles like SUVs”. He said that about 5,000 vehicles are smuggled through the Idiroko land border every month.
Chairman, Allen B Motors Nigeria Limited, Lawal Azeez lamented that car smuggling has caused the government a fortune. According to the auto dealer, reduction of duties paid to the government will help to discourage smugglers from their illegal operation.
Meanwhile, efforts made by the NAJA, the umbrella body of all journalists covering the automotive industry to get statistics of imported vehicles from various auto companies proved abortive from either NAMA or the local auto dealers.
However, for the first quarter of 2021, despite the challenges associated with Covid-19, MercedesBenz Cars sold 590,999 passenger cars across the world driven by China and United States retail sales as well as strong demand for plug-in hybrids and all-electric vehicles
One of the implications of vehicle smuggling or duty evasion being observed is that, the vehicles of these illegal auto dealers are sold easily at cheap prices because they never pay the right duty to get them into the country. Consequently, the genuine dealers are left to suffer the outcome, as they cannot sell vehicles lower than the actual cost of bringing them to the showrooms.