Nigeria's automotive industry plans: What exactly are the expectations? (2)

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Nigeria's automotive industry plans

What exactly are the expectations? (2)

As laudable as the automotive industry plan may appear to be, a close analysis reveals that it only makes 21st century Nigeria “road centric”

The Nigerian Automotive Industry Development Plan (NAIDP or the Plan) provides for the following fiscal incentives for the initial phase covering the 2013 to 2015 fiscal years. These incentives are targeted at creating an environment for existing assembly plants to thrive and attracting new investors in the sector:

  • Commercial vehicles (HS Headings 87.01, 87.02, 87.04, 87.05, 87.16) are to attract 35% duty without levy while cars (HS Heading 87.03) are to attract levy of 35% charged on the Fully Built Units (FBU) in addition to the 35% import duty.
  • Tariff on Completely Knocked Down parts 1(CKD), Semi Knocked Down parts I 2(SKDI) and Semi Knocked Down parts II3 (SKDII) for use by local assembly plants will be 0%, 5%, and 10% respectively.
  • Assembly plants to import FBU for cars at 35% duty without levy and commercial vehicles at 20% duty without levy, in numbers equal to twice their imported CKD/SKD kits.

In addition to the above incentives detailed in the Plan, the Federal Ministry of Finance in its Circular (ref: BD/FP/DO/09/1/224) confirmed the past President's approval of the following incentives to encourage additional investments in the Nigerian automotive sector:

  • All machinery and equipment for tyre production are now duty and VAT free.
  • All machinery and equipment imported for the purpose of vehicle assembly will attract zero percent import duty and will be VAT free.
  • Pioneer status to be granted to all tyre plants.
  • Harmonized 20% duty on car, lorry and bus tyres.

While some of the fiscal incentives relating to increase in tariffs and duty paid for imported cars and reduction of the tariffs for CKDs and SKDs may not require any amendment to existing laws for the incentives to be valid, others may. For instance, the Value Added Tax (VAT) Act empowers the Minister of Finance to amend, vary or modify the list of VAT exempt / zero rated goods and services through a publication in the federal gazette. To the extent that such a gazette is yet to be issued, would the enjoyment of that exemption be hassle free for the beneficiaries in practice?

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Nigeria's automotive industry plans: What exactly are the expectations? (2)
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