For some weeks now, Nigeria’s maritime industry has been riddled with controversy following the introduction of the 15 per cent National Automotive Council levy by the Nigeria Customs Service. This piece examines the implications of this policy in the automobile industry
When the management of the Nigeria Customs Service, in April 2022, came up with the introduction of an additional 15 per cent cost on the already high cost of clearing imported vehicles under the guise of the National Automotive Council levy, they failed to envisage that the policy would bring about upheavals and controversies.
Though the Service said that the directive was from the Federal Ministry of Finance and that it was only implementing it, the directive could best be described as a victim of circumstances coming at the time when the clearing agents operating at the nation’s ports were already tense with the introduction of the Vehicles Identification Number for the valuation of imported vehicles.
The VIN valuation on imported used vehicles, an artificial intelligence manual that drives documentation processes in an electronically digitised format, was a child of necessity. The services said it addressed the discrepancies in duties payable on vehicles of the same maker, year, and model.
While the VIN was still generating controversy, which led to the eventual suspension of the platform for 30 days, the NCS early last month reviewed duty on imported used cars from 35% to 20 %, which complied with the directive from the Common External Tariff of Economic Community of West African States.
The Service, not being satisfied with the ECOWAS directive on duties, went further to introduce the 15% NAC levy, which enabled the Service to regain the 15% from the former import duty on imported used vehicles taking the duty payable on imported vehicles back to 35% that it was before the directive from ECOWAS.
Imported used vehicles will still have to pay 20% import duty plus 15% NAC levy, amounting to 35%.
A spokesperson for the NCS, Timi Bomodi, had in a statement said that the new tariff was in line with adjustments stipulated in the Common External Tariff of the Economic Community of West African States protocol, of which Nigeria is a signatory.
The statement read, “On Friday, April 1st, 2022, the Nigeria Customs Service migrated from the ECOWAS Common External Tariff, 2017- 2021 to the new version, 2022- 2026. This is in line with the World Customs Organisation’s five-year review of the nomenclature. The contracting parties are expected to adopt the review based on regional considerations and national economic policy.”
“The nation has adopted all tariff lines with few adjustments in the extant CET. As allowed for in Annex II of the 2022-2026 CET edition, and in line with the Finance Act and the National Automotive Policy, NCS has retained a duty rate of 20% for used vehicles as was transmitted by ECOWAS with a NAC levy of 15%. New vehicles will also pay a duty of 20% with a NAC levy of 20%, as directed in the Federal Ministry of Finance letter Ref. No. HMF BNP/NCS/CET/4/2022 of April 7th, 2022.”
“It is instructive to note that domestic fiscal policy on the importation of motor vehicles and other items is targeted at growing the local economy in these sectors. The focus of the NCS is on implementing these policies in the hope that it achieves its desired objectives in line with National Automotive Policy and other fiscal policies of the government.”
“In Chapter 98 of the current CET Bonafide Assemblers importing Completely Knocked Down CKD and Semi Knocked Down SKD is to enjoy a concession of 0% and 10% Duty rate respectively. While within ECOWAS, the duty rate for the same items is 5% and 10%, respectively. Incentivising their efforts through policy interventions guarantees a win-win situation for the nation in the long run. Implementing the current CET takes immediate effect, please.”
Nigerians believed introducing the 15% NAC levy was illegal and contravened financial acts. They said that the essence of the NAC levy, which was 2% when it was introduced, was to boost indigenous car manufacturing, even though they did not achieve the purpose of the levy.
A former member of the National Automobile Commission committee, Lucky Amiwero, has described the controversial 15% levy slammed on imported vehicles by the Nigeria Customs Service as illegal, saying that it contravenes the nation’s Finance Act.
“Well, the issue about that is not clear yet, because what the law says is that the 15% is on the NAC. And on the NAC law, I was a member of the committee meeting that nullified NAC, and it is only two percent for the NAC law.
“So, bringing NAC to 15% is illegal. It is not legal. The whole policy isn’t very clear and doesn’t make sense when you look at the whole policy. The circular, which the minister issued in March, gives this clarity. The one Customs signed, which they referred to as migration, has to do with simply moving from the Harmonised System Code of the World Customs Organisation. And when you are migrating, you are dropping many items which are no more useful in trade by the whole world.”
Amiwero said that the NAC law passed in 2014 contained just a 2 percent collection for insurance.
“The NAC law, the National Automotive Design and Development Council, was passed in 2014. Under the financial provision, we have a 2 percent collection of insurance costs, so if you are bringing in 15%, you are contravening the NAC law.”
He also said that the 2001 and 2020 Finance Acts did not say anything about the 15% levy.
“The Finance Acts of 2001, 2020 did not contain all those things they were quoting. The Acts only contain issues of reduction. It doesn’t contain a levy. The two Acts did not contain those things; the Financial Act of 2020 doesn’t, so where did they get that one? So, that one must have been incorporated by them.
The Finance Act of 2020 has provisions for reducing vehicles, and there is no levy on the Financial Act. There is no levy of 20 or 15%, so they should take it to the National Assembly, and in the Finance Act of 2021, there is nothing like the levy,” he said.
The Lagos chapter chairman of the Association of Motor Dealers of Nigeria, Metche Nnadiekwe, lamented that the government did not involve members of the association as stakeholders before making decisions like this.
“Some people are stakeholders in certain businesses, and when you want to introduce certain policies, why don’t you consider them? Can’t you even discuss with them to know how these people are going to be affected? So, it looks as if it is a calculated attempt to deal with certain people. We don’t know what is going on here, and, remember, wherever there is this type of thing, Nigerians will be the ones that suffer it.”
A maritime lawyer and a Senior Advocate of Nigeria, Jean-Chiazor Anishere, said that the levy’s introduction was wrong, adding that a court order should restrain the imposition.
Experts in the maritime sector have raised concerns that the country should be expecting a hike in vehicle smuggling with the introduction of the controversial 15% levy on imported vehicles coupled with the recent border reopening.
A member of the National Association of Government Approved Freight Forwarders, Nnadi Ugochukwu, says that the 15% levy implies that it is making Nigerians poorer.
He also queried the whereabouts of the two percent NAC levy collected before.
“For a long time, the government has been charging 2 percent NAC on imported vehicles. It says the money will be used to encourage local manufacturing of vehicles. So where is the money collected all these years, what has been done to the money and what was the money used for? Now they have brought back the 15% to new vehicles, making them pay 20% as against the 5 percent they were paying before. You can see that the duties are now unbearable. The implication is that it is making Nigerians poorer,” he said.
Also, a member of the Association of Nigerian Licensed Customs Agents, Akintoye Ojo, laments that the implications will be massive for the transportation sector.
“Cars will be very expensive, and the common person will not be able to afford them. The prices will go up, and whether we like it or not, it will affect the transportation industry because transport fares will go up. A common person will not be able to afford a car. Owning a car is not an issue if you have a good transportation system where things work properly. Even if you don’t have a car, there are some countries that no one will notice.”
However, Nnadiekwe also says that the introduction of a 15% NAC levy will hike the prices of cars at the shops. The group, at some point, threatened to close down shops if the issues were not properly addressed.
A professor of Taxation and the past President of the Chartered Institute of Taxation of Nigeria, Teju Somorin, said, “Prices of transportation may go up. Uber and Bolt that use imported vehicles for their businesses may have to raise their fares.”
She says that the levy can result in the high cost of imported vehicles.
A trader, Harrison Ike, said, “To buy cars now is a very big task. I have long to get one, even if it is a Toyota Corolla for family use, but the more I try to save for that, the more things get expensive. I am tired of the whole thing.”