Finance

Nigeria bans the import of vehicles via the land borders

In a statement released today by the Nigerian Customs Service, the import of used and new vehicles via the land borders has been banned with effect from the 1st of January 2017. This means the only avenue to import vehicles is via the country’s sea ports. This follows a similar ban placed on rice imports earlier in the year.

The weakened naira has reduced imports of vehicles into Nigeria. This policy will further reduce the volume of car imports into Nigeria if smuggling can be curtailed effectively. There will be a definite rise in smuggling activities and this has to be tackled for this policy to yield fruit.

The question that needs to be answered is what is the objective of this policy? Is it to increase government revenue, to stimulate local production or to eliminate smuggling? It is a well known fact that the land borders are porous. They are also manned by some corrupt officials too. The final clearing costs of a vehicle via the land borders includes bribes paid to get documents signed. Sometimes, the official clearing cost paid to the government is reduced to account for some of these bribes. This leads to a shortfall in revenues accruing to the FGN. Would this policy succeed in increasing government revenues? Time will tell.

The broader impact of this policy would negatively affect Benin Republic. Demand for vehicles will drop and there will be a fall in imports – leading to a reduction in custom duties for the government. A coherent economic policy needs to be put forward by the Federal Government of Nigeria. Clear communication of this policy is critical. The government needs the buy in of Nigerians to ensure the success of this policy. The initial reaction of Nigerians to this policy banning the importation of cars via the land borders is one of distrust and an attempt of the government to further inflict hardship on Nigerians. This shouldn’t be so.

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