Chairman of Innoson Vehicle Manufacturing Company Limited (IVM), Innocent Chukwuma, has warned that the Federal Government’s proposed reduction of import duties and levies on buses, tractors and other motor vehicles as contained in the recent 2020 Finance Bill will kill the local automotive industry.
The Federal Executive Council (FEC) had on Wednesday, November 18, approved a reduction in duties on tractors from 35% to 10%; reduction of duties on motor vehicles for the transportation of goods from 35% to 10%; reduction of levy on motor vehicles for the transportation of persons from 35% to 5%.
The downward review of duties and levies, as well as the introduction of tax incentives, were intended by the government to address the socio-economic problems arising from the COVID-19 pandemic and the recent hikes in the pump price of petrol and electricity tariff.
But, reacting to the development, Chukwuma argued that a reduction in duties on imported vehicles would lead to massive importation of fully built-up vehicles, resulting in an unfavourable competition that is likely to run the Nigerian automakers out of business.
He said the duty review is an embarrassing policy summersaults.
Chukwuma explained that the present charges on imported vehicles were prescribed by the Automotive Policy (the National Automotive Industry Development Plan, NAIDP) to discourage the influx of fully built-up products while helping to boost production by the local auto plants.
He feared that the reduction will erase gains so far made in the industry since the Auto Policy took effect in July 2014, with total duties on imported vehicles pegged at between 35% and 70%.
He warned of consequent unemployment crisis as adverse effects of the proposed tariff cuts would forced local auto companies to lay off workers in order to survive.
Chukwuma expressed his disapproval for a policy that favours importation, rather than encouraging those making impact on the local auto industry and the economy generally.
He further said the duty slash by the Federal Government will not only lead to a situation where fully built vehicles will flood the Nigerian market and result in the shut-down of local plants, but will also discourage local and foreign investors from investing their money in real production in Nigeria.