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Vehicle smuggling booms on back of punitive national auto-policy

AUGUST 11, 2017

As prices of motor cars skyrocket on the back of the punitive tariffs, the National Automotive Industry Development Plan (NAIDP) of 2013 and a weaker naira, the business of smuggling cars from Benin Republic is once more booming.

The NAIDP plan of 2013 was meant to grow the volume of locally assembled vehicles by raising tariffs on imported cars but this has so far failed to happen. Instead, the number of vehicles smuggled through the land borders has continued to grow, BusinesssDay has learnt. Demand for smuggled cars has gone up because it is cheaper than imported “Tokunbo” cars which come through Nigeria’s seaports.

Consequently, the volume of vehicles imported through the seaports has remained low, as importers prefer to buy cars from Cotonou because it is cheaper to clear imported vehicles at the land borders, compared to the sea ports.

Benin Republic, sensing the opportunity in Nigeria’s punitive imported auto tariffs, on July 1, reduced the sum charged on transit vehicles from the Cotonou port from CFA399, 920 (N257, 000) to CFA290, 000 (N186, 000).

The new charge, which applies to a unit of any imported vehicle, irrespective of the model or brand, makes importation through the land borders far cheaper than through Nigerian seaports where the Department of Customs charges 35 percent import duty and another 35 percent surcharge, a total of 70 percent of the market price of the vehicle.
The volume of cars imported through Nigeria’s seaports dimed in 2015, when the government commenced implementation of its new automotive policy which was designed by the Goodluck Jonathan administration, to protect licensed assembly plants, resulting in huge diversion of Nigeria-bound cars to other ports and a rise in the volume of smuggled cars.

On the contrary, the volume of cars imported through the Autonomous Port of Cotonou, in transit to Nigeria, has recorded significant growth since March 2017.

Statistics from the Autonomous Port of Cotonou, show that the volume of imported vehicles from Cotonou reached over 10,000 units in July, while the volume of cars imported through Nigeria’s seaport reached an all-time low of just 3,500 units in the first quarter year.

Kunle Ade-Ojo, managing director and CEO, Toyota Nigeria Limited, said in an interview with BusinessDay, that the volume of vehicles imported through the nation’s seaports has dropped significantly, as only 350 new vehicles were imported by auto dealers in the first quarter of this year.

This, according to Ade-Ojo, shows a drop of about 90 percent over 3,500-recorded same period in 2016. Ade-Ojo blamed the development on the high duty paid on imported cars, high cost of foreign exchange and the impact of the economic recession.

“The drop in import volume occurred in 2016 such that the total number of vehicles imported into the country in 2016 dropped to 7,000 from 18,000 in 2015, but available statistics has shown that this year would be worse.

“Under the same period, retail sales of new vehicles for the first quarter of 2017 stood at 2,000 units, compared to 5,500 units sold last year. Total retail market plunged by about 42 percent from 32,000 units in 2015 to 18,000 in 2016,” he added.

Nigeria’s middle class can no longer afford new cars. A basic model of brand new Toyota Corrolla, which used to cost about N8.5 million in 2015, is now sold for about N21 million. A “tokunbo” 2014 or 2015 version goes for above N7 million.

A Markudi-based car dealer, who buys vehicles from Cotonou regularly, told BusinessDay that officially, Customs has stopped allowing vehicles to pass through the border but that at the Seme border, corrupt Customs officers collect bribes from smugglers to issue otherwise genuine Customs documents, thereby legalising such import.

According to the source, though, “Customs intercept vehicles intermittently, it is only the vehicles of smugglers who refuse to pay bribes as requested by the officers that get impounded.
“There has been zero tolerance to vehicle importation through Seme border and we have been carrying out total implementation of the Federal Government’s fiscal policy on automotive imports.
“Evidence is on ground at our command to show that vehicles of smugglers who tried to outsmart Customs, were intercepted and kept in our custody,” said Selechang Taupyen, public relations officer of the Seme Customs command, in a telephone interview with BusinessDay.

Taupyen, who countered the report that smuggling of vehicles was on the rise at the Seme border, said ‘it was a mere allegation,’ but disclosed that the command recently intercepted vehicles being smuggled through the borders but had clearance documents from a seaport.

“When we have such irregularities, we intercept such vehicles to enable us carry out investigation as to why vehicles with such papers were coming from the other end,” he added.

On the performance of the National Auto Policy, Luqman Mamudu, director of Policy & Planning of National Automotive Design and Development Council (NADDC) said at a recent automobile stakeholders’ meeting in Lagos, that the Council has so far issued 53 licenses to local automobile assemblers, but that only 25 of them have so far been able to commence operations.

Reubdon Sunday, a Diaspora Nigerian in Canada, said that local automobile industry will find it difficult to grow, following the total reliance on importation and lack local manufacturing of vehicle components and spare parts to the licensed auto assemblers.

“Can you tell me of any country which does not manufacture any auto parts and yet has a viable assembly plants?” Sunday questioned.

Ibrahim Boyi, managing director/CEO, PAN Nigeria Limited, said during the official launch of the revamped Peugeot 301 saloon car, that the Nigerian auto market is in dire stress, due to the high cost of foreign exchange.

“The high cost of foreign exchange has affected the market prices of vehicles imported into the country, such that the prices doubled in a space of one year. This has made it difficult for many Nigerians to afford imported used or new cars, Boyi added’’.

Vicky Haastrup, chairman, Seaport Terminal Operators Association of Nigeria (STAON), applauded the government for the new policy of ban on vehicle importation through the borders, but said the government needs to consolidate the gains of such policy by reducing the 70 percent tariff on imported cars.

“Since the high tariff was introduced, importers have resorted to landing their vehicles at the ports of neighbouring countries and smuggling them into Nigeria without paying appropriate duties to government. This amounts to huge revenue loss to the Nigerian Customs.
“The policy also led to loss of more than 5,000 direct and indirect jobs at the affected ports.”

Haastrup said the Federal Government loses about N200 billion annually to diversion of automobile imports to the Port of Cotonou in the Republic of Benin. The amount represents the value of tariff that should have accrued into government’s coffers through the Customs, if the vehicles were imported through Nigerian ports, as Nigerians are yet to see the impact of the existing auto assembly plants.

 

MIKE OCHONMA & AMAKA ANAGOR-EWUZIE

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