How federal government is reducing transportation cost

Many have questioned the Federal Government’s reduction of levy on motor vehicles for the transportation of persons (cars) from 35% to 5%. They have called instead for prices of food items, petrol, electricity, etc to be reduced.

Some have even said they have no cars and do not have any intentions of buying one, so why should the 30% slash excite them?

Let me explain why this reduction affects all of us and why it is a good thing. The reduction on duty to be paid on imported vehicles was influenced by Vice President Yemi Osinbajo to check inflation brought on by the high cost of transportation.

This high cost of transportation includes the transportation of food items and people. December is almost here and our transport operators in their usual style have begun hiking transport fares.

When the Vice President was explaining the reduction, he said, “The point of the reduction in levies on motor vehicles, commercial vehicles for transportation is to reduce the cost of transportation by reducing the cost of vehicles”.

“With subsidy removal and the increase in fuel price and the pass-through to food prices, transportation costs had to be reduced”.

The automotive policy the Vice President explained, “is directed at localizing production of vehicles. So the logic was to increase the duty and levies so that local production becomes more competitive”.

To those kicking against the duty reduction on vehicles, the Prof Yemi Osinbajo noted that “the annual demand for vehicles is about 720,000 vehicles per year. Actual Local production is 14,000 vehicles a year. So the problem is that at the current rate of production, we will not meet the serious national needs and this will just mean higher prices of vehicles and greater strain on other sectors of the economy that depend on transportation”.

He assured auto manufacturers that government is “not giving up on the auto industry”.

According to him, there are “two important things to note: the first is that we still have relatively high duty 35% so there is still a disincentive for importation; second is that we are promoting policy that government must buy only locally manufactured cars”.

The Vice President appealed to the private sector to make “maximum use of the provisions of the ESP and the Finance Bill when it is passed by the National Assembly and also by retaining and creating jobs so as to keep people at work. In a similar spirit of partnership, private sector enterprises should also pay their due taxes”.