Impact of Nigeria's new automotive policy - CNBC Africa

Impact of Nigeria's new automotive policy

Western Africa

by Elayne Wangalwa 0

Nigerians are gearing up for a hike in car prices as the government moves ahead with a new automotive policy. PHOTO: Getty Images

Under the new policy, import duty on cars has been increased to 35 per cent with an additional levy of 35 per cent compared to 10 per cent under the previous regime. This move makes imported cars more expensive.

“The benefits of this policy are long term while the impact of the policy is immediate. So any policy that is of destruction to the allocation of resources will come out with negative economic outcomes,” said Bismarck Rewane, CEO of Financial Derivatives told CNBC Africa.

(READ MORE: Nissan steers Nigeria's automotive industry)

According to Rewane, the impact and execution of the new policy is questionable.

“We will see an increase in transport fares especially in urban and town centres. This [hike in fares] feeds into the Consumer Price Index (CPI) and that begins to put pressure on the central bank to actually push up interest rates and protect the economy,” Rewane said.

The new tariff has already been approved by the government, as part of measures to develop Nigeria’s automotive industry.

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With the new policy in place, the government believes the automotive industry will create significant employment and a range of technologically advanced manufacturing opportunities.

“The government should stagger importing over the time. [It] can also subsidize manufacturers at this point so that they do not lose on the cost and then when they [Nigeria’s automotive industry] are competitive the government can kick in,” Rewane said.

Last year, the Nigerian government announced the introduction of the new auto policy in order to discourage the importation of cars and encourage local manufacturing of vehicles and gradually phase out used cars.

(WATCH VIDEO: Reforms in Nigeria's automotive industry)

Many international auto brands have started to assemble their products in Nigeria, while many others have expressed their willingness to open shop in Nigeria. Major car brands like Toyota, South Korean auto giant, KIA Motors, Indian auto manufacturers, TATA Motors, Peugeot Automobile Nigeria (PAN) Limited have revealed plans to establish manufacturing plants in Nigeria.

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