Tariff Cut May Undermine Local Auto Assembly, Expert Warns

By Mr. Luqman Mamudu

Expert Mobility Consultant and Managing Partner at Transtech Industrial Consulting and Former Director of Policy and Strategy at National Automotive Design and Development Council (NADDC), Mr. Luqman Mamudu.

A mobility expert and former adviser to the Nigerian government on automotive industry development has cautioned that the Federal Government’s recent decision to reduce import tariffs on passenger vehicles could weaken local vehicle assembly if not carefully managed.

The Federal Government recently announced a reduction in the total effective tariff on fully built passenger vehicles from 70 per cent under the 2015 policy to 40 per cent under the 2026 Fiscal Policy Measures approved by the administration of President Bola Ahmed Tinubu.

The move is aimed at improving affordability, stimulating economic activity, and enhancing competitiveness across key sectors.

Reacting to the development, mobility expert and Managing Partner of Transtech Industrial Consulting, Luqman Mamudu, said the tariff differential between fully built imported vehicles and locally assembled vehicles is a critical pillar of the Nigeria Automotive Industry Development Plan (NAIDP).

According to him, the policy was deliberately structured to give locally assembled vehicles a price advantage over imports while government simultaneously provides industry support through financing schemes, testing infrastructure, and other institutional frameworks.

He warned that adjusting the tariff differential, even with positive intentions, must be approached cautiously.

Mamudu explained that many automobile exporting countries provide heavy subsidies to their domestic automotive industries, which means reducing tariffs in Nigeria could quickly shift the market back in favour of imported vehicles, particularly when key support programmes under the NAIDP remain only partially implemented.

He further noted that tariffs are not the primary factor responsible for high vehicle prices in Nigeria.

According to him, factors such as exchange rate depreciation, scarcity of foreign exchange, port and logistics charges, shipping costs, inflation, and rising global vehicle prices have a far greater impact on vehicle affordability.

The expert cited recent policy experience as evidence. He said the removal of tariff advantages for commercial vehicle assembly under the Finance Act 2020 did not lead to significant or sustained reductions in vehicle prices.

Instead, he said the move led to a contraction in local vehicle assembly activities, with several operators reverting to full importation.

“That outcome should guide current policy thinking,” he noted.

Mamudu acknowledged that the Federal Government is attempting to balance consumer affordability with long-term industrial growth but warned that weakening the few protective measures supporting local assembly could reverse the modest gains recorded in Nigeria’s automotive sector over the past decade.

He also urged stronger industry engagement, noting that stakeholders particularly the Nigerian Automotive Manufacturers Association (NAMA) must intensify advocacy and coordination to ensure policy decisions reflect the realities faced by operators in the sector.

Despite his concerns, Mamudu maintained that the tariff adjustment alone is unlikely to deter serious investors from Nigeria’s automotive sector.

He pointed to the opportunities offered by the African Continental Free Trade Area (AfCFTA), which provides a large regional market capable of supporting competitive local vehicle production.

In his view, sustainable progress in the sector will depend less on tariff reductions and more on restoring policy clarity, implementing pending NAIDP programmes, and maintaining a careful balance between consumer interests and industrial development.