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The budget, policy and the automobile sector

The budget, policy and the automobile sector

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The challenge of development and economic growth in Nigeria is one of ideas, policy prescriptions and implementation. It is not a challenge founded on lack of financial resources. Indeed, financial resources are products of the human imagination and intellect. Development is the ability of a society to harness its resources for its own purpose thereby adding or creating value, wealth, jobs as well as devising a concentric circle that ensures it contributes and retains a good part of the products of scientific progress in the community.

Development should be about harmony between fiscal, monetary, industrial, trade, labour etc. policies.  It abhors disarticulation of policies but produces low-hanging fruits which can be easily tapped.  When budgets are crafted by federal, state and local governments, they are titled with fancy names such as budgets of development, job creation, consolidation, etc. The framers and implementers of the budget hardly think through nor understand what a budget is or should be. It is the assertion of this discourse that budgets should be instruments for implementing plans and policies in the policy, plan budget continuum.

This brings us to the issue of local content, local capacity building and improvements in value addition. A good part of capital projects planned in budgets over the years are veritable activities for capital flight and official mocking of our few productive industries. The automobile sector will be used to demonstrate this. We still live in an age where virtually 80 per cent of vehicles bought with public funds are imported into the country despite the automobile policy launched with fanfare by a previous administration. Nigeria has vehicle assembly plants as well as a vehicle manufacturing plant. But government officials write the names of foreign brands directly into the budget and the budget therefore approves the specific name of the brand. The officials now feel themselves duty bound to now buy this brand. So, how can the Nigerian brands grow without government patronage considering that government is virtually the largest single buyer of goods and services in the Nigerian economy.

There is a plethora of reasons that informs the demand for government to lead the pack in the patronage of locally made products. The other day, the social media was rife with information that federal legislators turned down a request to purchase a Nigerian made SUV as their official vehicles. If this is true, then it is a very unfortunate development. And there is no reason why the convoy of the President and governors should not have locally made brands in their forefront. This would send a message greater than the speech made at the official launch of the “Buy made-in-Nigeria” campaign. Many Nigerians look up to the top echelons of politicians as the role models in terms of what to consume, buy or wear. The fact that the President, the Senate President, or the governor drives a car makes it politically correct for other Nigerians to aspire to drive the same vehicle.

When the vehicle manufacturer thrives, the company will employ Nigerians and thereby contribute to taking so many young men and women off the job que. The company will pay corporate income tax while the employees will pay personal income tax thereby creating more revenue for government to finance development. A thriving company will invest more in research and improvement of its brands and thereby become more competitive, develop new technologies and more attractive, fuel efficient and improved performing engines. Also, the demand for local production of projects in the entire value chain of rubber, leather, plastics and electrical and welded products will increase and create more jobs, more taxable natural and artificial persons, etc. The confidence of selling products in the large Nigerian domestic market will encourage manufacturers to begin to explore the markets in the African region. Thus, we are discussing a sector whose value chain has the capacity to create not less than two million jobs and contribute up to seven per cent of Gross Domestic product.

Beyond tariff measures to ensure that locally built vehicles are competitive, their patronage could be increased by an automobile credit intervention, the type that the Central Bank of Nigeria always roll out,  through a special fund that gives credit to buy the locally made products with loans that attract single digit interest rates. Also, the control of smuggling by the customs will play a pivotal role in building up this sector. This will ensure that the right duties are paid by importers of new and used vehicles so that government will not lose revenue. With our large population, we could be discussing the production of up to a million cars a year for the local market and for export within the African region. Whenever our government decides to play its Father Christmas role, it will do so in kind with locally made products rather than imported ones. Thus, government can come out with the “Drive Nigeria Policy” which will state that at any given time when public procurements are to be made, the public officers are under obligation to first buy Nigerian made products and can only resort to foreign made ones when there is no Nigerian product to effectively satisfy the demand.

The concentric nature of policy results will guarantee that public and private research institutes will be charged and dedicated to getting the prototypes of various improved parts and components of the automobile value chain. The relevant faculties and departments in universities and colleges of technology will be incentivised through grants and other incentives to convert their scientific teachings and knowledge to specific technical innovations that can drive the sector. Existing and new mechanic and car repair technicians will be trained in the repair and maintenance of the brands. Further, funding and revenue gains made in the sector will be partly channelled to a special project to meet new innovations and demands of global industrialisation which is leaving behind the fossil fuel engine and replacing same with electric vehicles.

Some years ago, Nigeria launched the National Automotive Industry Development Plan. And the previous administration made some soundbites out of the policy. Where is the policy today and the scorecard of its implementation? Policy discontinuity or tepid policy implementation cannot drive development in any sector. We all know what to do to develop the sector. But do we have the political will or the presence of mind to drive the developmental initiatives?

The template of the automobile initiative can be replicated in so many sectors of the economy if the right knowledge, attitude and drive are brought to bear on policy formulation and implementation. Knowledge and vision will continue to rule the world and drive development. Development, poverty and misery are conscious policy choices. It is up to Nigerians to decide on what exactly they want.
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