CEM REPORT, FINANCE | Economists have frowned at the fiscal policy for 2023, which increases import duty on vehicles to 40 per cent, as well as the government’s introduction of a green tax of two per cent and four per cent for high-capacity vehicles.
Industry experts say the proposed policy will increase import duty on some of the vehicles to either 42 per cent or 44 per cent.
Experts at the Centre for the Promotion of Private Enterprise (CPPE) have said that the policy will only encourage more smuggling and affect vulnerable sectors of the economy.
According to Muda Yusuf, Director of CPPE in a statement, the measures could exacerbate inflationary pressures which are detrimental to economic growth and manufacturing, construction and transportation sectors.
He explained that fiscal policy measures must seek to ensure a good balance between objectives of revenue generation, boosting domestic production, enhancing the welfare of citizens, promoting economic growth, deepening economic inclusion, facilitating job creation and recognizing societal ethos, beliefs and values.
“These policy measures failed to reckon with the multifarious challenges which industry operators are currently grappling with, some of which include the following.
“Weak and declining consumer purchasing power, Naira exchange rate depreciation which is taking a huge toll on the cost of production, High energy cost.”
Speaking further on the increase of import duty on vehicles, Yusuf said the policy is insensitive to the government.
He noted that the country is about 90 per cent dependent on road transportation which underscores the importance of motor vehicles in the economy.
He also noted that the government has not provided easier means of transportation for the masses adding that vehicle ownership has become a necessity, especially for the middle class.
He further explained that there is limited access to credit for vehicle purchases by Nigerians.
“There is an increasing affordability problem for citizens with regard to vehicle acquisition, especially by the middle class of Nigerian society.
“Costs of locally assembled vehicles are beyond the reach of most Nigerians, contrary to the assurance given by the government at the inception of the auto policy,” he said.
“Over 90 per cent of purchases are done out of pocket, which is extremely challenging. And where the credit facilities exist, the interest rates are outrageous, between 25-30 per cent,” he added.
“The economy has experienced huge exchange rate depreciation which had already exacerbated vehicle acquisition cost in the first place.”