Vehicles assembling and manufacturing companies operating in Nigeria should brace for a hard time ahead as the Federal Government through the draft 2020 finance bill moves to reduce the levy on imported vehicles from 35 percent to 10 percent.
In a tweet by the media aide to the Vice President Yemi Osinbajo, Laolu Akande, President Muhammadu Buhari is proposing to reduce import duty on tractors, transport vehicles and others from 35 percent to 10 percent and even to zero.
He said “President Muhammadu Buhari’s administration is proposing more tax incentives in the 2020 Finance Bill including import duty reductions from 35 to 10% & 0% levies on tractors, transport vehicles & co, 50% reduction of minimum tax, specific TETFUND exemption.
“There would also be tax relief for contributions to the COVID-19 Relief Fund, while retirees’ compensation exemption threshold is to be raised from N10,000 to N10million & software acquisition would now qualify as capital expenditure allowing for tax recovery of same. Expect more.”
The largely counterproductive policy seeks to open the Nigerian market to foreign vehicles at the expense of few assembling plants, manufacturers like Innoson and new job creation to facilitate transportation of farm produce when pumping price has been on the high side.
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, on Wednesday after the Federal Executive Council (FEC) meeting said the reduction in import duties and levies was to lower the cost of transportation she claimed is responsible for inflaton, “especially food production”.
“The reason for us is to reduce the cost of transportation which is a major driver of inflation especially food production,” she told state house correspondents.
Specifically, a report by theCable, said the government is planning to slash the levy on imported cars from 35 percent to 5 percent in the same bill. Ignoring the very reason the nation’s land borders were closed to stimulate local production and deepen local patronage.
It is shocking that more emphasis was placed on purchase rather than maintenance and sustenance of operations amid a record high inflation rate, rising fuel price and high foreign exchange rate.
Also, the new bill, if passed, would increase forex scarcity and plunge Naira value as demand for imported vehicles is expected to rise.