Imported vehicles: FG loses 50% revenue to smuggling, underpayment

The Federal Government is losing about 50 per cent of its expected revenue from duties payable on imported vehicles as many automobile vehicles in Nigeria are reportedly coming in illegally through the borders and seaports without payment of duties to the government treasury.

Multiple sources in the nation’s automobile market comprising imported new and used vehicle outlets confirmed this in an investigation that lasted about a week.

One of the sources said, “It is a disputed fact that smuggling of vehicles into Nigeria is still ongoing. But what is disturbing is that a good number of vehicles come in through the seaports and yet they either bypass the duty payment outright or pay just a token, an amount that is about 50 per cent of the approved rate.

“At least one out of two vehicles imported into Nigeria does not pay the full import duty and levy.”

Investigation also revealed that the economic sabotage, which gained traction in the first quarter of 2016, when the land borders were closed by President Mohammadu Buhari regime, is perpetrated by either influential people/dealers who hand out signed documents to the Customs officers or bribe their way to clear the vehicles without due process.

In connivance with unscrupulous government officials, some dealers are treated as sacred cows and they are quick to get away with anything at the ports.

The illegal business does not stop at seaports alone; similar dealings have been reported in major land borders across the country.

It would be recalled that the Nigeria Customs Service (NCS) had in September 2019 raided some top car marts in Lagos.

The second hand vehicles dealers were not spared as most of their showrooms were equally closed too due to reasons that had to do with documentation.

The Comptroller General’s Strike Force and officers attached to the Federal Operations Unit (FOU), Zone ‘A’, Ikeja stormed Berger along Apapa-Oshodi Expressway and other premises across the state.

Many of the outlets were shut on the orders of the Comptroller General of the NCS, Col. Hameed Ali (retd), for allegedly retailing smuggled vehicles in the shops.

Major car dealers such as Affordable Cars Limited, Carlink Limited, Ineh Mic Autos, Globe Motors, Coscharis, Skymit Motors, Arrowhead Motors, Wonder Wheels Motors, Auto Point Motors, among others were raided. Showrooms in other states, including, Sokoto, Katsina were also affected.

Commenting on the issue, Executive Secretary, Nigeria Automotive Manufacturers Association, (NAMA), Mr Remi Olaofe, said, “You can’t say there is no smuggling in Nigeria; our borders are porous and we have done everything we needed to do to improve it, by shutting down the borders, but they are still porous.

Olaofe said it was a fallacy to say for every vehicle coming into the country, appropriate duties are being paid.

Stating that NAMA had proffered solution to the menace, Olaofe said that with their portal and that of the National Automotive Design and Development Council, it would be 100 per cent impossible for anybody to import a vehicle and not properly register in Nigeria because the portal will indicate that the appropriate amount of money is not paid.

 

“It is just as simple as that, but for the reason best known to the operators and the players in that market, they have refused to allow that portal to work”, he said.

Advising that vehicles must be registered for them to be driven on the road, Olaofe added, “You can’t be driving a vehicle that is not registered. To know this, they should go to the licensing office because the licensing office can not license a vehicle without first clarifying from the portal and that clears the vehicle. If that is not there, we have what is called the BIN number, will throw up a red flag.”

Explaining further, Olaofe said “I don’t represent the (FBU) Fully-Built Vehicle, my advocacy is for us to shut our doors against the FBUs. Assembling of vehicles in Nigeria is what I represent.”

Confirming that the duty waiver for vehicles had been adjusted, but there was no difference in the rate of vehicles, the NAMA executive secretary said, “We are saying that it is not duty that is affecting the rate we are paying as transportation fare, but the factors are the cost of fuel, infrastructure, security on the road, wear and tear, replacement of these spare parts and the conditions of the vehicles. They bring a lot of junks into this country.

“Africa Bilateral Free Trade Agreement has taken off, where is Nigeria in the scheme of things? Assembly plants are now moved to Ghana, what do we stand to benefit? Toyota, Hyundai and co are being assembled in Ghana, are those for Ghana economy? They are for Nigeria economy”, Olaofe added.

 

Also reacting to the situation, Kunle Jaiyesimi, Deputy Managing Director, Massilia Motors, dealers of Mitsubishi brand of vehicles said most car dealers, including Masillia Motors are still selling their old stock and that his company had stocked up to December for the 2021 business.

According to him, car market has really shrunk and that dealers have not really made major decisions in 2021 in terms of vehicle imports.

Jaiyesimi said, “To the assemblers, they are not happy with the Finance Act; it’s making the locally assembled vehicles uncompetitive compared to the Fully Built Units. For instance, Fuso and Canter (Mitsubishi) that we are assembling, it is cheaper to bring them in as FBU than locally assembling them. And that has affected our production lines.

 

Jaiyesimi who is also the Chairman, Auto Group of the LCCI proffered solutions, saying that “the only way for us have some gain on the assembly line is for govt to remove the import duty or reduce it. If they cannot remove it, they can bring it down to five per cent.”

The DMD said that, for now, they are charging 40 per cent (35 per cent import duty and five per cent for levy) on passenger cars for FBU; 10 per cent on (Semi Knocked Down (SKD) and 10 per cent on FBU buses.

He argued that whatever duty reduction the government had put in place for them to enjoy, the benefit was being wiped off by the exchange rate fluctuations, stressing that the CBN was not supporting vehicle importers at the SKD or FBU level.

 

According to him, stakeholders rely heavily on the black market to pay their suppliers.

” Once you are getting your FX from the black market, whatever gain that is coming from the import duty reduction is lost in the over 25 per cent increase in the FX rate”, Jaiyesimi added.

One of the implications of vehicle smuggling or duty evasion is that the vehicles from these illegal auto dealers are sold easily at cheap prices because they never pay the right duty to get them into the country.

Consequently, the genuine dealers are left to suffer the outcome as they cannot sell vehicles lower than the actual cost of bringing them to the showrooms.