by Abraham Ogbodo
It is so difficult understanding the
thinking and working of government in Nigeria. Here, the institution of
government appears to run on its own most of the time without the
people. Last week, there was apprehension in the air following media
report that the federal government had begun the implementation of a
policy that would attract 70 per cent tariff and duty payment on all
imported vehicles and auto parts.
The media reports highlighted the
underlying danger in the policy, which was that it would cause the
prices of vehicles to hit the rooftop and completely out of the reach of
many Nigerians. This sounded alarming, forcing the Minister of
Industry, Trade and Investment, Dr. Olusegun Aganga to do some
explaining after the mid-week meeting of the Federal Executive Council
(FEC) to put the issues in perspective.
But in the end, the minister spent good
time creating semantics that explained little or nothing. His handling
has made the issue even more complicated. Aganga is saying yes and no at
the same time to the operation of the 70 per cent tariff regime. In one
breath, he denied the raising of tariff on imported vehicles from 20 to
70 per cent and admitted in another breath that the tariff would apply
only to those he described as engaging in outright trade in vehicles and
who would not want to key into the new automotive policy of government.
I don’t exactly understand the category
of auto dealers that constitutes free traders. I guess the minister is
talking about businessmen and women who go to manufacturers abroad and
ship in road-ready vehicles for sale in Nigeria. These are the bad guys
who must pay through their nose to ply their trade. The good guys, who
shall enjoy a tariff holiday, according to Aganga, are those who create
some measure of local value chain by bringing in Completely Knocked Down
(CKD) parts to be assembled into complete vehicles in Nigeria.
In other words, instead of showrooms,
Minister Aganga wants auto dealers to build assembly plants so that the
value between CKDs and the coupled vehicles could be channelled into the
domestic economy to further increase the GDP base. Aganga has promised
that the new approach will create jobs and encourage technology
transfer. It is an obvious point that does not require special emphasis.
But as if doubting the efficacy of his prescription in meeting domestic
demand, the minister added that in the event of shortfalls, the
assembly plant owners alone would be allowed to import road-ready
vehicles at 35 per cent tariff to bridge the gap. He is offering the
best of two worlds to the good guys.
But first, the enthusiasm with which Dr.
Aganga is pursuing this policy is exaggerated. In the context of the
national economy, he is not inventing anything and I expect him to know
this. He has come from Goldman Sachs to sound like an inventor of car
assembly plants, as if nothing like that had existed before now in
Nigeria. We have had Peugeot Automobile of Nigeria (PAN) in Kaduna,
Volkswagen of Nigeria (VON) in Lagos, Anambra Motor Manufacturing
Company (ANAMMACO) in Enugu, Nigeria Motor Industry in Kano, Steyr Motor
Company in Bauchi and Leyland Motor Company in Ibadan.
These are outside the ancillary
companies like manufactures of tyres, glass, batteries, belts,
upholstery etc.; that serviced these assembly plants. I do not know how
many years that Aganga had spent outside the country before he returned
home to serve his fatherland. But he cannot claim ignorance of the
existence of key industry players like Michelin, Dunlop, Exide
Batteries, Oluwa Glass, West Africa Glass and the many manufacturers of
belts, bolts and nuts in the Nnewi axis at some point in Nigeria. This
was the same time when a Peugeot car and any other locally assembled
vehicle had over 30 per cent local content.
Today, the once flourishing auto
industry is as dead as dodo. Most of the assembly plants have been sold
and their new owners have not seen the need, or more appropriately, have
not been encouraged by the hostile operating environment to sustain the
tempo. It was even more horrifying with the parts manufacturers, with
the likes of Michelin and Dunlop closing shops and leaving Nigeria under
the PDP controlled Federal Government. Also, auto batteries are no
longer produced in Nigeria at any meaningful scale, while other outfits
including the glassmakers have since remodelled their production lines
to keep out servicing of assembly plants.
As it is evident, attaining success is
not so much a problem in Nigeria. We can massively launch out and record
gains. The problem has been sustaining or building on gains already
attained. This is why the phrase ‘the old good days’ has remained
constant in the description of every department of the national life.
With the current automotive policy, Minister Aganga is only trying to
bring back the memories of the good old days. To think that Daewoo
Motors and Kia Motors in South Korea, which are today leading names in
global auto manufacturing were first established as assembly plants made
the Nigerian story even more pathetic.
Dr. Aganga who has come to revive the
dead dream is unfortunately not following due process. Maybe hungry to
associate himself with some policy landmark or big achievement in the
Jonathan government, the minister has skipped certain questions, which
must be asked and answered going forward. For instance, what has so
dramatically changed in today’s operating environment to warrant the
replacement of auto show rooms with assembly plants?
Industrialisation is a process that
builds steadily and it cannot be decreed into force like a piece of law
under military dictatorship. We allowed what was built-up over years to
dissipate rapidly for nothing. How does the minister hope to bring back
the complex production interconnection that sustained the auto industry
years ago to make the new policy meaningful?
To convince one importer of fully
built-up cars to transform overnight to a manufacturer does not answer
the vital question of value creation. Since the accompanying industrial
infrastructures are dead, what Aganga will achieve with his policy is
importation of fully built cars by another name. Which component of the
Nissan car that will be assembled in Nigeria will be locally sourced?
Even if the fellows are ready to run with the policy on local content,
there are no manufacturers of tyres, batteries, belts, glass, bolts,
nuts, etc to build the required percentage of that content.
To answer the question about change,
things have actually changed greatly but not in the direction we
envisaged. Public electricity is almost nonexistent in spite of load of
official promises to turnaround things. This is a change. The tokubo
culture has come to stay and in fact, is the most vibrant sector of the
auto industry in Nigeria. This is also a change, which began in the mid
80s. While it takes about N2.5million to get an average brand new car,
whether locally assembled or imported, about 28 per cent of that amount
or N700,000 will fetch a good second hand version that will serve the
same purpose.
Part of the challenges therefore is
convincing a man (and woman too) whose annual income is less than
N3million to go for a brand new car that will be assembled in Ngeria
instead of a tokubo. It is needless to add that brand new vehicles have
vanished from the domestic scheme of the Nigerian middle class. It is
now the exclusive luxury of the upper class, public officials and the
corporate world.
The other thing that could help the
new automotive policy is unfortunately lacking in Nigeria. This is
efficient mass transit system. And because it is this way, everybody
needs a personal car to transit from point ‘A’ to ‘B.’ The Aganga idea
of a Nigerian car cannot meet this vital need of Nigerians.
Thus everything taken together,
Minister Aganga is not offering any solution either in the short or long
run with the prohibitive 70 per cent tariff on auto imports. The
starting point is to create an environment to bring back the service
companies, which will ultimately lead to the return of the assembly
plants. His prescription is too automatic for a good cure and also
sounds too much like building something on nothing. If e too much,
Nigerians will flood neighbouring countries to guarantee their tokunbos
and even brand new cars. And thesecountries, if Aganga cares to know,
are all too ready to lower their tarrifs to undercut Nigeria. In the
end, it will be penny wise, pound foolish
This kind of disconnection is somehow
becoming the trademark of the imported experts in the federal cabinet.
They are the Bretton Woods professionals who love to stand out from the
crowd even when it does not pay to do so. They concoct noisy theories
that do not blend well with the socio-political milieu and call it best
practices as if what is best is practised in isolation of other
variables.
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