Stakeholders Warn Tariff Waiver Threatens Nigeria's Auto Policy Stability
Industry stakeholders have raised fresh concerns regarding the federal government's decision to waive import duties on electric vehicles, mass-transit buses, and selected machinery. Experts caution that this move could have unintended consequences for Nigeria's fragile automotive sector, potentially destabilizing the Nigeria Automotive Industry Development Plan (NAIDP).
Core Pillar of NAIDP at Risk
Luqman Mamudu, Managing Partner of Transtech Industrial Consulting, described the tariff differential as a core pillar of the NAIDP, deliberately designed to provide locally assembled vehicles with a cost advantage over fully built imports. He emphasized that adjusting this structure, despite good intentions, must be handled with extreme caution to avoid market distortions.
Mamudu noted that many vehicle-exporting countries heavily subsidize their automotive industries, meaning that lowering tariffs in Nigeria could quickly tilt the market back in favor of imports. This risk is particularly acute as key NAIDP support programs remain only partially implemented, leaving local manufacturers vulnerable.
Structural Pressures Drive Vehicle Prices
Challenging the notion that tariffs are the main driver of high vehicle prices in Nigeria, Mamudu pointed to structural pressures as dominant factors. These include exchange-rate depreciation, forex scarcity, port and logistics charges, inflation, and rising global vehicle costs. He argued that focusing on tariffs overlooks these deeper economic challenges.
Referring to the Finance Act 2020, Mamudu observed that the earlier removal of tariff incentives for commercial vehicle assembly failed to deliver sustained price reductions. Instead, it led to a contraction in local assembly as operators reverted to full importation. He stressed that this historical outcome should guide current policy decisions to prevent repeating past mistakes.
Policy Inconsistency and Investor Confidence
Femi Eguaikhide, Deputy Managing Director of RT Briscoe and Chairman of the LCCI Auto and Allied Sector Group, described the development as indicative of policy inconsistency, especially given earlier efforts to promote local manufacturing. He clarified that prevailing tariff assumptions may be misleading, noting that the 35 percent levy had already been suspended at the start of the current administration.
Eguaikhide emphasized that the new tariff adjustments cannot take effect until they are formally gazetted by the government. He highlighted that this situation underscores the urgent need to enact Nigeria's automotive policy into law to ensure stability and boost investor confidence. Without this legal framework, manufacturers may be reluctant to commit to local production, particularly as reduced tariffs make imported vehicles more price-competitive.
Balancing Affordability and Industrial Growth
While acknowledging government efforts to balance affordability with industrial growth, Mamudu warned that weakening protective measures for local assembly could reverse the modest gains achieved in the sector over the past decade. He added that industry groups, such as the Nigerian Automotive Manufacturers Association (NAMA), must intensify their advocacy to ensure that policymaking reflects operational realities.
Despite these concerns, Mamudu maintained that Nigeria's long-term fundamentals remain strong, particularly within the African Continental Free Trade Area (AfCFTA), which offers significant opportunities for regionally competitive production. However, he stressed that immediate policy actions must safeguard local industry to harness these future benefits effectively.
