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Auto Policy, Forex Take Toll on Vehicle Importation, Present Opportunities for Local Production

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A combination of the Nigerian Automotive Industry Development Plan, otherwise known as the auto policy and the forex regime of the federal government has had a drastic effect on importation of vehicles into the country, including diversion of RORO (Roll On Roll Off) vessels to the neighbouring port of Cotonou, but also presents opportunities for local production.

The controversy over the auto policy appears to have come and gone, but not without leaving bruises on the faces of many. Between 2014 and early last year when the administration of former President Goodluck Jonathan was to introduce the Nigerian Automotive Industry Development Plan, government was advised to exercise caution for obvious reasons. Some politicians wanted such policy to come after the general election to avoid robbing the administration of votes. Government had planned some incentives for the local auto manufacturers, including what would have been duty free on production materials and higher tariff on vehicles import.

The manufacturers were granted zero per cent tariff on Completely Knocked Down (CKD). While appearing to put the implementation of the policy on hold, government cleverly increased the tariff on importation of vehicles. The full policy was to come up later, but for the fall of the administration. However, about a year after, the tariff on vehicles has continued to take a huge toll on importation of either new vehicles or fairly used vehicles as the case may be.

It is one policy that has affected all, from the importers of vehicles to the operators of Roll-On-Roll-Off (RORO) terminals who specialise in vehicles imports handling. Operators of some of the RORO terminals, importers, car dealers and also freight forwarders have all been hit by the high tariff on vehicles. Some of them have had to lay off some of the workers. To worsen the matter is the foreign exchange (forex) policy of the Central Bank of Nigeria, which has seen the value of Naira drop against the Dollar. Equally affected are final consumers, particularly those who have to struggle hard to buy a car for the first time or change an old one as the prices appear to be heading too high.
For vehicles coming into the country, the new tariff regime requires the importer to pay 35 per cent duty, 5 per cent VAT, 1 per cent inspection levy and 7 percent port surcharge. For new vehicles, the importer will have to pay additional levy of 35 per cent. A customs source said that the current tax regime was illegal as it had not gone through the National Assembly nor did it get the approval of the President. The source said the current tax regime could only be found in customs system as against the one published in the hard copy in which customs duty on vehicles is between 20 and 30 per cent. It was gathered that the 35 per cent duty and 35 per cent levy on vehicles import were decisions taken between the Ministry of Finance and the Customs Service.

Since the policy came into force, there has been a drop in importation of vehicles. For instance, records show that 15,031 new vehicles were imported by Nigerian auto dealers in 2015 as against 45,618 in 2014. Apart from the RORO terminal, the Customs Command of the port was also affected. For instance, the revenue generated by the PTML Command of the Customs in 2015 fell by 32 per cent to N63.18 billion. Mr. Steve Okonmah, who is the Public Relations Officer of the Command, disclosed that the Command had recorded N91.45 billion in 2014.

Okonmah attributed the short-fall in revenue to the 2015 election and the auto policy. Describing the auto policy as having a devastating effect on the economy, he said it had not been so bad in the history of the command. He said: “PTML is strictly a RORO vehicle port and the short fall in cargo throughput accounted for the decrease in revenue in 2015.In 2013, RORO vehicles were 172, 174 units; in 2014, there were 129,361 units and in 2015, the RORO vehicles were 66,823 units. Also in 2013, the command received 111,414 containers, had 99,706 containers in 2014; and 38, 343 containers in 2015”. Apart from the auto policy, he identified other problems of the port as bad access road, adding that many people spend a lot of time while coming to the port. He added that many clearing agents now have nothing to clear at the ports as many vehicles are being diverted through the neighbouring port of Cotonou.

A retired senior customs officer, Mr. Chinedu Ogbonna, who spoke to THISDAY said the auto policy had had very negative effect on importation of vehicles. He said in the past, between 60,000 to 100,000 vehicles came into the Tin Can Port/RORO port on monthly basis. But he lamented that the current situation is one in which less than 2,500 vehicles come through the seaport monthly.
Worried about the situation, the management of the PTML recently opened up to the federal government during a visit to the terminal by the Transportation Minister, Mr. Rotimi Amaechi. The terminal said it was worried about the diversion of Nigeria-bound vessels bringing vehicles to Benin Republic.

The Managing Director of Grimaldi Group, which runs the RORO terminal, Tin Can Island Port, Mr. Ascanio Russo, told Amaechi that the implementation of the auto policy affected traffic in the terminal as many vehicles meant for Nigeria were being diverted to Cotonou port. He kicked against allowing vehicles come through the land borders to avoid smuggling. According to him, “We are of the opinion that vehicles should be allowed to be Customs-released in Nigeria only if they are discharged at Nigerian port and not at the borders. So any importer, who wants to clear vehicles for Nigeria should do so at a Customs command in Nigerian port and not at the border.”

In response, Amaechi who explained that the auto policy was to save foreign exchange had promised increased security at the border posts. He said: “What you should ask government to do is to protect our borders to ensure that the goods smuggled in through the borders are not allowed. Part of the remedy will not be to remove the duty on imported vehicles but to enhance security of the border posts to ensure that all vehicles coming into the country come through the appropriate channel”.
For low income earners wishing to buy fairly used cars, the prices have gone up by more than 50 percent. A market survey showed that a car which was sold at N1.2 million now sells for over N1.6million. For instance, Lexus SUV L300 which was sold for N1.8million early last year now sells for N2.7million. Other latest versions of the car, such as L330 and L350 are now sold for N3.5million and N4million respectively. Before they were sold for N2.7m and N3.2million respectively depending on the state of the vehicle. An auto dealer, Mr. Tony Oromi, said apart from the auto policy, the price of any car is now determined by the foreign exchange rate of dollar to naira.

He said many importers had been on the waiting game, hoping that the exchange rate for dollar would improve before placing new orders.
Determined to remain in business, many importers now use the neighbouring ports as ports of destination. While some try to pay duties at the border posts in order not to run into problem with the Customs, others still dare security agents and take to smuggling. About two weeks ago, the Federal Operations Unit of the Customs seized 23 different vehicles from smugglers. There had been regular seizures of vehicles from smugglers in the past one year.

However, industry sources said the Customs Service did not have the capacity to stop all smuggling activities involving vehicles because of the porous borders throughout the country. Besides, many of the officers are accused of having strong accord with the smugglers. Such arrangement, a source alleged exists between some unscrupulous security operatives at the border routes and smugglers.

Since the National Automotive Industry Plan was announced by the government in 2013, the Nigerian automotive industry has witnessed serious interest from global and local automobile brands.
Following independence in 1960, Nigeria experienced significant increase in automobile sales. And with this, it also recorded growth of dealerships like Leventis, R.T. Briscoe and UAC, who provided sales and aftersales services to customers. Assembling of cars did however not commence until the 1970s when government entered into partnerships with the French company Peugeot to set up Peugeot Automobile Nigeria (PAN) in Kaduna. The establishment of Volkswagen of Nigeria (VON), Anambra Motor Manufacturing Limited (popularly called ANAMMCO) and Steyr Nigeria Limited led to increased production of locally assembled cars.

The economic crisis suffered by the country in the 1990s which led to a slump in manufacturing sector, hit the automobile industry badly as local assembling and manufacturing of vehicles came to a halt. Though there had been several efforts to revive the automotive industry such as the 1993 Auto Policy, such efforts were hindered by the new dynamics in the global auto market, as reflected in the rise of Japanese automakers due to their fuel efficient technologies.

The 2013 Automotive Industry Plan which is aimed at stimulating investments in domestic vehicle production and assembly is however recording some significant successes. With several major global automobile companies setting up assembling plants in the country for local production, the sector is forecasting a positive outlook already.

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WAIVER CESSATION: Igbokwe urges NIMASA to evolve stronger collaboration with Ships owners

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…Stresses the need for timely disbursement of N44.6billion CVFF***

Highly revered Nigerian Maritime Lawyer, and Senior Advocate of Nigeria (SAN), Mike Igbokwe has urged the Nigeria Maritime Administration and safety Agency (NIMASA) to partner with ship owners and relevant association in the industry to evolving a more vibrant merchant shipping and cabotage trade regime.

Igbokwe gave the counsel during his paper presentation at the just concluded two-day stakeholders’ meeting on Cabotage waiver restrictions, organized by NIMASA.

“NIMASA and shipowners should develop merchant shipping including cabotage trade. A good start is to partner with the relevant associations in this field, such as the Nigeria Indigenous Shipowners Association (NISA), Shipowners Association of Nigeria (SOAN), Oil Trade Group & Maritime Trade Group of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA).

“A cursory look at their vision, mission and objectives, show that they are willing to improve the maritime sector, not just for their members but for stakeholders in the maritime economy and the country”.

Adding that it is of utmost importance for NIMASA to have a through briefing and regular consultation with ships owners, in other to have insight on the challenges facing the ship owners.

“It is of utmost importance for NIMASA to have a thorough briefing and regular consultations with shipowners, to receive insight on the challenges they face, and how the Agency can assist in solving them and encouraging them to invest and participate in the maritime sector, for its development. 

“NIMASA should see them as partners in progress because, if they do not invest in buying ships and registering them in Nigeria, there would be no Nigerian-owned ships in its Register and NIMASA would be unable to discharge its main objective.

The Maritime lawyer also urged NIMASA  to disburse the Cabotage Vessel Financing Fund (CVFF)that currently stands at about N44.6 billion.

“Lest it be forgotten, what is on the lips of almost every shipowner, is the need to disburse the Cabotage Vessel Financing Fund (the CVFF’), which was established by the Coastal and Inland Shipping Act, 2003. It was established to promote the development of indigenous ship acquisition capacity, by providing financial assistance to Nigerian citizens and shipping companies wholly owned by Nigerian operating in the domestic coastal shipping, to purchase and maintain vessels and build shipping capacity. 

“Research shows that this fund has grown to about N44.6billion; and that due to its non-disbursement, financial institutions have repossessed some vessels, resulting in a 43% reduction of the number of operational indigenous shipping companies in Nigeria, in the past few years. 

“Without beating around the bush, to promote indigenous maritime development, prompt action must be taken by NIMASA to commence the disbursement of this Fund to qualified shipowners pursuant to the extant Cabotage Vessel Financing Fund (“CVFF”) Regulations.

Mike Igbokwe (SAN)

“Indeed, as part of its statutory functions, NIMASA is to enforce and administer the provisions of the Cabotage Act 2003 and develop and implement policies and programmes which will facilitate the growth of local capacity in ownership, manning and construction of ships and other maritime infrastructure. Disbursing the CVFF is one of the ways NIMASA can fulfill this mandate.

“To assist in this task, there must be collaboration between NIMASA, financial institutions, the Minister of Transportation, as contained in the CVFF Regulations that are yet to be implemented”, the legal guru highlighted further. 

He urged the agency to create the right environment for its stakeholders to build on and engender the needed capacities to fill the gaps; and ensure that steps are being taken to solve the challenges being faced by stakeholders.

“Lastly, which is the main reason why we are all here, cessation of ministerial waivers on some cabotage requirements, which I believe is worth applause in favour of NIMASA. 

“This is because it appears that the readiness to obtain/grant waivers had made some of the vessels and their owners engaged in cabotage trade, to become complacent and indifferent in quickly ensuring that they updated their capacities, so as not to require the waivers. 

“The cessation of waivers is a way of forcing the relevant stakeholders of the maritime sector, to find workable solutions within, for maritime development and fill the gaps in the local capacities in 100% Nigerian crewing, ship ownership, and ship building, that had necessitated the existence of the waivers since about 15 years ago, when the Cabotage Act came into being. 

“However, NIMASA must ensure that the right environment is provided for its stakeholders to build and possess the needed capacities to fill the gaps; and ensure that steps are being taken to solve the challenges being faced by stakeholders. Or better still, that they are solved within the next 5 years of its intention to stop granting waivers”, he further explained. 

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Breaking News: The Funeral Rites of Matriarch C. Ogbeifun is Live

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The Burial Ceremony of Engr. Greg Ogbeifun’s mother is live. Watch on the website: www.maritimefirstnewspaper.com and on Youtube: Maritimefirst Newspaper.

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Wind Farm Vessel Collision Leaves 15 Injured

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…As Valles Steamship Orders 112,000 dwt Tanker from South Korea***

A wind farm supply vessel and a cargo ship collided in the Baltic Sea on Tuesday leaving 15 injured.

The Cyprus-flagged 80-meter general cargo ship Raba collided with Denmark-flagged 31-meter wind farm supply vessel World Bora near Rügen Island, about three nautical miles off the coast of Hamburg. 

Many of those injured were service engineers on the wind farm vessel, and 10 were seriously hurt. 

They were headed to Iberdrola’s 350MW Wikinger wind farm. Nine of the people on board the World Bora were employees of Siemens Gamesa, two were employees of Iberdrola and four were crew.

The cause of the incident is not yet known, and no pollution has been reported.

After the collision, the two ships were able to proceed to Rügen under their own power, and the injured were then taken to hospital. 

Lifeboat crews from the German Maritime Search and Rescue Service tended to them prior to their transport to hospital via ambulance and helicopter.

“Iberdrola wishes to thank the rescue services for their diligence and professionalism,” the company said in a statement.

In the meantime, the Hong Kong-based shipowner Valles Steamship has ordered a new 112,000 dwt crude oil tanker from South Korea’s Sumitomo Heavy Industries Marine & Engineering.

Sumitomo is to deliver the Aframax to Valles Steamship by the end of 2020, according to data provided by Asiasis.

The newbuild Aframax will join seven other Aframaxes in Valles Steamship’s fleet. Other ships operated by the company include Panamax bulkers and medium and long range product tankers.

The company’s most-recently delivered unit is the 114,426 dwt Aframax tanker Seagalaxy. The naming and delivery of the tanker took place in February 2019, at Namura Shipbuilding’s yard in Japan.

Maritime Executive with additional report from World Maritime News

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