Tariff Cut: No replacement for strong auto policy, says mobility expert

n n

By Theodore Opara

n

A mobility expert and Managing Partner at Transtech Industrial Consulting, Mr. Luqman Mamudu, has cautioned that the Federal Government’s recent reduction in vehicle import tariffs cannot replace the need for a clear and consistent automotive policy framework.

n

Speaking in an interview, Mamudu, a former acting Director General, National Automotive Design and Development Council (NADDC), warned that while tariff cuts might provide short-term relief, they risked undermining the long-term growth of local vehicle assembly if not backed by a well-structured policy direction.

n

He said, “The tariff differential being adjusted is a central pillar of the Nigeria Automotive Industry Development Plan. It was deliberately structured to give locally assembled vehicles a cost advantage over fully built imports, while government simultaneously supports the sector with financing schemes, testing infrastructure and other critical enablers.”

n

Luqman added that reducing the differential, even with good intentions, must be approached cautiously, noting that many exporting countries subsidise their automotive industries.

n

“In reality, lower tariffs in Nigeria can quickly tilt the market back in favour of imports—particularly when key local support programmes under the NAIDP remain only partially implemented,” he said.

n

On vehicle pricing, he clarified that tariffs are not the primary driver of high costs in the country.

n

“If the objective is to reduce vehicle prices, it is important to be clear: tariffs are not the main factor. Exchange rate depreciation, foreign exchange scarcity, port and logistics charges, shipping costs, inflation and rising global vehicle prices play far more significant roles,” he said.

n

He cited recent experience to support his position, pointing out that the removal of tariff advantages for commercial vehicle assembly under the Finance Act 2020 did not result in meaningful or sustained price reductions. Instead, it led to a contraction in local assembly, with several operators reverting to full importation.

n

“That outcome should serve as a guide for current policy decisions,” he said.

n

Luqman acknowledged the government’s effort to balance consumer affordability with industrial growth but warned that weakening existing protective measures could reverse the modest gains recorded in the sector over the past decade.

n

He also called for stronger stakeholder engagement, urging industry bodies such as NAMA to adopt a more visible and coordinated advocacy approach to ensure that policy decisions reflect industry realities.

n

Despite the concerns, he noted that the tariff adjustment alone is unlikely to deter serious investors, stressing that Nigeria’s long-term fundamentals remain strong—particularly under the African Continental Free Trade Area, which offers a vast regional market for competitive local production.

n n