Tuesday, December 06, 2016 5:12 PM / Dr. Mudasiru Salami (Editorial add-ons by OBG)
The global trend towards more open trade has in recent years faced a number of setbacks, ranging from stalled World Trade Organisation talks to rising protectionism and the UK’s vote to leave the EU. Nigeria is no exception, where a push to increase import substitution, which is intended to reverse a decline in foreign exchange and reduce the non-oil trade deficit, is being rolled out at the same time as the 184m-person, $520bn economy is engaged in negotiations on new trade agreements.
Successive administrations in Nigeria have pushed for more open trade relationships with bilateral partners, as articulated in the 2014 Nigeria Industrial Revolution Plan, which states: “Increased openness in the global economy is inevitable, and well industrialised countries are better positioned to take advantage of increased access to new markets.” Nigeria has been a part of the discussions on a trade pact with the EU, and already has committed to gradual tariff reduction as part of its membership in the regional integration organisation ECOWAS. However, these reciprocal deals for market access run counter to Nigeria’s hope to replace imports with domestic manufacturing, if those local products are not able to compete on cost and quality with imported options.
At the regional level (west Africa), integration initiatives may help the country to prepare for an eventual EPA with the EU. For example, the ECOWAS common external tariff controls taxation for goods in four categories.
1. Essential social goods can move between countries untaxed,
2. Primary necessity, raw materials and specific inputs have under a 5% rate,
3. Intermediate goods are taxed at 10%, and
4. those for final consumption at 20%.
Meanwhile, through the African Growth and Opportunity Act (AGOA) Nigeria has access to the US market. Initially passed in 2000, it provides tariff- and quota-free access to the US market for 7000 types of exports. In June 2015 the programme was extended a further 10 years to 2025.
In reacting to the story that FG bans vehicle imports through land borders, Dr. Mudasiru Salami of IMudahTV posited that this was a good move and provided reasons why Nigerians should support this government decision/policy, viz:
1. Ensures the proper documentation and duty collection on vehicles that comes into the country. Many vehicles brought in through land borders find ways and means to avoid payment of duties thereby shortchanging Nigeria.
2. Reduction in smuggling of vehicles older than 15 years into the country. Many of these vehicles have a lot of harmful exhaust which could be responsible for increasing cases of lung cancers seen in younger people in Nigeria. The government cannot control the vehicles imported through land borders with some as old as 20 years!
3. Reduction of corruption and bribery of customs by smugglers through land borders and of course the attendant security challenges whereby arms and other dangerous products can be smuggled in along with those vehicles.
4. Avoidance of double payment of duties on imported vehicles. Most Nigerians who buy used vehicles brought in through land borders still have to pay as much as extra 300,000 Naira as duties to customs within Nigeria, with many vehicles impounded along with the pains to the affected individuals.
5. Reduction in 419, armed robbery and several other losses to Nigerian buyers who travel all the way through land to buy used vehicles in neighboring countries.
6. Reduces pressure on our foreign exchange market.
7. Helps to protect the local auto industry and makes government more responsible.