The Federal Government of Nigeria has banned the importation of cars through the land borders from 1 January 2017. This ban, which applies to both new and used vehicles, is aimed at curbing smuggling of vehicles, a vice which not only denies the government of revenue from import-related taxes, but also undermines several economic policies.
Therefore, with effect from 1 January 2017, importation of cars into Nigeria shall be through the country’s sea ports only.
The following are some of the likely impacts of this directive by the government:
- Increased revenue generation: This seems to be the most immediate expectation from this ban. Going by reports that un-declared (that is due to smuggling activities) trade through the land borders competes favourably with declared trade, there is the likelihood of increasing revenues from import related taxes. There should also be increased patronage for terminal operators and related service providers.
- Increased gridlock at the sea ports: The Nigerian sea ports, especially the Lagos ports, which handles a significant amount of trade, is likely to experience greater traffic, which would increase pressure on the already struggling infrastructure. As a result, the frustrations of traders who already complain of intense delays in moving cargo through the ports, rather than being abated, may become exacerbated.
- Boost in implementation of the automotive policy: The National Automotive Industry Development Plan was introduced in 2013 to encourage local manufacture and purchase of ‘Made-in-Nigeria’ vehicles. However, besides competition received from used cars, local manufacturers of vehicles have long complained about the unfair competition from new cars smuggled across the borders. There is therefore a likelihood that the fortunes of local manufacturers would change with elimination, at least reduction, of new cars smuggled across the border.
- Creation of a ‘formal’ smuggling industry: Unfortunately, the fallout of the potential vehicle ban may follow the precedent already set with rice from a similar ban earlier in the year. At the moment, the Nigeria Customs Service are dealing with a rising rice smuggling industry. It is reported that a significant amount of rice sold in the local market is still smuggled across the borders despite the ban. Against this backdrop the seeming objective of the policy may be counterproductive.
In a related development, the House of Representatives (HOR) of the Federal Republic of Nigeria, passed a resolution proposing the suspension of the ban. According to the HOR, the government is yet to provide alternatives to ensure that Nigerians have access to affordable vehicles. Furthermore, the HOR stressed that the ban is likely to increase smuggling and inflation.
It is not clear how the executive arm of the government will respond to this call to suspend the ban. However, there is likely to be more debate about this ban in the days leading to the deadline.
We will continue to keenly monitor developments on this issue and publish further updates as they become available