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Crisis looms in shipping sector as auto policy takes effect

By BusinessNews Staff on February 3, 2014

Freight forwarders who are protesting the new auto policy that takes effect this month have threatened industrial action against government, arguing that the regime of President Olusegun Obasanjo had in 1999 at a stakeholders’ meeting exercised caution in raising high tariff on fairly used vehicles when it was advised by foreign firms to do so as a condition for them to begin production of vehicles in the country, writes Francis Ugwoke

This is not the best of times for the nation’s shipping and indeed the freight forwarding trade. With February take off date, the auto policy is as good as having come on board. It is to boost the nation’s manufacturing sector, but for a price, so to say. it is expected to take toll on the shipping and freight forwarding subsector of the national economy. Already customs agents are full of lamentations that the consequences are going to be devastating than government ever imagined. The policy is to encourage manufacturing of Nigeria’s own vehicles, but the concern is that the companies expected to do this may never have the capacity to produce affordable vehicles for Nigerians.

In Davos, Switzerland, President Goodluck Jonathan spoke about the auto industry, saying the federal government was determined to develop the sector through a new National Automotive Policy (NAP). According to him, the objective of the new policy is to make new cars affordable to more Nigerians. Jonathan had with the statement heightened the fear of many importers of fairly used cars and freight forwarders when he added that “the only way to reduce the preponderance of second hand cars on our roads is to produce good quality cars with affordable pricing locally.” While government may have no intention to place a ban on importation of fairly used vehicles, it has designed a tariff regime that will see importers paying about 150 percent duty rates on such cargos.

The implication is more hard times for the importers, shipping companies handling vehicles import and freight forwarders. This will have so much effect on Nigerians who cannot afford to buy new cars. Already, importers of fairly used cars, it was gathered, have decided to raise the prices of their cars that arecurrently in the market from next week as February date begins. This is despite the fact that these cars were brought in long before now. But this trend gives a clear picture of what the situation would be when the auto policy takes full effect.

Bleak Future
Freight forwarders who spoke to THISDAY on the policy expressed worry about the future of their business if the federal government goes ahead to raise tariff on imported vehicles to as high as about 150 percent. President Association of Nigerian Licensed Customs Agents (ANLCA), Prince Olayiwora Shittu said that such high tariff will lead to massive loss of jobs, revenue and a blessing in disguise for smugglers. Describing the policy as devastating for the shipping industry, he estimated that no fewer than 20,000 customs agents will lose jobs.
Noting that government has not said it will ban importation of vehicles, he however argued that the planned hike in tariff will surely force importers to abandon the trade, which according to him, will bring doom to the freight forwarding practice.
Shittu maintained that such hike will make the prices of vehicles too high for many Nigerians to buy, arguing that this in turn will lead to serious lull in the businesses of international traders who import vehicles and freight forwarders who depend on such businesses to earn a living.

Threat of Industrial Action
The ANLCA President threatened to fight against the policy if the hike in tariff leads to massive loss of jobs of members of the association. He said that members would be called out to protest the policy if government does not halt the planned high tariff. He said that the number of people who will lose jobs will be more considering the employees of terminal operators, shipping companies specialising in vehicles handling. Shittu drew the attention of the Federal Government on the Roll-on-Roll-Off (RORO) operators whose terminals were under lease having been concessioned about seven years ago. He said that these companies may be forced to sack thousands of their workers.

Smuggling and Customs Revenue
The auto policy is also considered as a big boom for smugglers who would bring in vehicles from neighbouring countries into Nigeria through bush paths. With several porous border routes, Shittu said that many importers will be forced to smuggle their vehicles into the country. He described smugglers as those who will benefit more from the policy. Noting that already, there has been the issue of diversion of Nigerian goods through neighbouring countries, he said that the current policy would worsen the situation.

He told THISDAY that already, importers abroad who have studied the auto policy and the likely high tariff have indicated their plans to route their goods through the Cotonou ports. According to him, the importers have told their clearing agents to prepare to go to neighbouring seaport to receive their vehicles. Shittu pointed out that the nation’s borders, either from the North or South West, were so porous with unidentified routes that smugglers could afford to bring in smuggled vehicles.
He regretted that such a policy is being introduced in a country with high unemployment rate of graduates.
The ANLCA President was of the view that government should take a second look at raising the tariff on imported vehicles, explaining that the auto manufacturing companies may never meet the demand for vehicles needed in the country, considering the current capacity of those already in the business.
He recalled the policy on rice, adding that the price of the grain product has gone from N6,500 to N12,000 for 50kg bag since it was introduced last year.
According to him, government should look beyond what the proponents of the auto policy told them on their capacity to meet demand, wait and see the demand being met with affordable prices of such vehicles.

How Obasanjo Handled Proposal on Auto Manufacturing
Former President, Chief Olusegun Obasanjo, he disclosed, had in1999 called a stakeholders meeting when some foreign companies claimed they could manufacture vehicles in the country if only government could ban importation of Tokunbo vehicles. Obasanjo, he said, had during the stakeholders meeting held at Aso Rock told the investors to first begin the production of the vehicles and make the prices affordable by low income earners before his administration could ban importation of vehicles. Obasanjo position’s handling of the issue needs to be copied, adding that the best time to consider raising tariff on imported vehicles should be when affordable vehicles can be produced in the country.

[This Day]

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