The Lagos Chamber of Commerce and Industry (LCCI) yesterday expressed concerns over the federal government’s recent automotive policy which it said, had given rise to sharp increases in import tariff and levies on motor vehicles in the country.
The President of LCCI, Alhaji Remi Bello, explained that the policy had potential harmful effects on the economy and the welfare of citizens in the nation.
Bello, while briefing journalists during the chamber’s second quarter press conference, explained that in pursuit of the laudable aspiration, proper policy sequencing was imperative, maintaining that import dependency was only a manifestation of deeper issues of low productivity and weak competitiveness.
According to him, the recent tariff review would have negative outcomes for the economy, stressing that the policy would bring about escalation of the smuggling of motor vehicles with corresponding loss of revenue to the government; force out compliant enterprises in the sector due to weak institutional capacity to enforce the new tariff and the porosity of the borders.
He added that the policy would also lead to higher transportation costs with corresponding impact on inflationary conditions in the economy since over 85 per cent of the freight in the country is moved by road.
“Vehicle ownership will be put further beyond the reach of the Nigerian middle class, especially in the face of poor credit access and high lending rates in the economy. As a major stakeholder in the economy, the chamber welcomes a policy thrust that seeks to promote self-reliance in the Nigerian economy due to great value in domesticating spending,” he stressed.
The LCCI boss said given the potential threat that the anticipated high election-related spending in the run up to the 2015 general election poses, Nigeria should expect higher levels of inflation in the months to come pointing out that interest rate would continue to remain high thereby putting pressure on operating costs in the country.
He noted that Nigeria’s inflation rate rose from 7.8 per cent in March per cent in April and 8 per cent in May 2014, saying the nation’s level of inflation remained significantly higher than its counterparts.
“Nigeria’s 2013 annual average inflation rate of 8.5 per cent is higher than that of Africa, emerging markets and advanced economies at 5.8 per cent, 6.3 per cent and 1.4 per cent respectively. The country’s annual average of 7.85 per cent year-to-date is above the International Monetary Fund (IMF’s) projection of 7.3 per cent and those of most of its peers,” he said.
According to him, “The foreign exchange market has been relatively stable with slight appreciation of the Naira witnessed only at the Interbank and Bureau De Change segments of the markets. With the stability witnessed, there are concerns that increased yields and interest rate in the US could have negative impact on capital flow and hence the stability of the naira exchange rate. There is the risk of high domestic liquidity which could exert sustained pressure on both the exchange rate and consumer prices which further depletes the country’s external reserves.”
He stated that accessing credit to finance businesses was still a major challenge, pointing out that, investors across sectors expressed concerns over the persistent difficulty in accessing credit from the banks with investors in the real sector greatly affected.
He stressed that banks tolerance of manufacturing sector continues to decline; many Small and Medium Enterprises (SMEs) lack the capacity to package bankable credit request; many entrepreneurs cannot meet the bank’s credit requirements and experience of the banks with loan quality of manufacturing and other real sectors would not dispose banks to give further loans.
“The summary is that the economy is characterised by tight credit conditions for investors. It will be difficult to create jobs if this situation persists. The condition was compounded by the fact that government treasury bills and bonds have returns of between 11-15 percent. The consequence is that available funds have been mopped up by government,” he said.