BusinessDay 11 Dec 2017

12 BUSINESS DAY C002D5556 Monday 11 December 2017
EDITORIAL
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The endangered Nigerian middle-class
From independence
in 1960 to the early
1980s Nigeria grew
a solid and robust
middle class of professionals
– Doctors, teachers,
professors, Engineers etc – who
were financially secure, lived in
GRAs around the country, could
afford to educate their children
up to university levels (then our
universities were still centres
of excellence), visited cinemas
and prestigious restaurants and
social clubs often, shopped in
exclusive shopping malls and
could buy new cars easily.
Then came the structural adjustment
programme (SAP) and
the devaluation of the naira. The
unintended consequence was
the decimation of the salaries
of the middle class. Imported
goods became expensive and
out of the reach to all but the
elite. New cars automatically
went out of the rich of the middle
class and they had to resort to
buying used vehicles popularly
known as Tokumbo in Nigeria.
Gradually, those professionals
(majority of them) who
had the opportunity to relocate
abroad left and those who
couldn’t leave or didn’t want to
leave were demoralised. Also,
the desired locations of the middle
class became run down and
shabby. By the time Nigeria returned
to democracy in 1999, the
middle class had all but vanished.
However, by the turn of the
21st century, a noticeable change
occurred. Through the great work
done by the democratic regime
of President Olusegun Obasanjo,
the middle class was gradually
restored and began to grow in
leaps and bounds to such an extent
that Nigeria became an attractive
investment destination to many
auto firms (to set up assembly
plants) and large chain supermarket
stores.
However, the progress has
now firmly been cut short. Due to
the deliberate policy choices and
inactions of the government, of
course, sparked by low oil prices
and scarcity of foreign exchange,
the naira has taken such a severe
hit that the country was thrown
into recession.
Expectedly, the economic recession
with its attendant suffering
is not affecting the poor alone.
True, prices of consumer goods
and services consumed mostly
by the poor have tripled. But the
steep decline in the value of the
naira has also affected the prices
of luxury and aspirational goods
and services demanded by the
middle class also.
Just like it happened in the
late 1980s and 90s, Nigeria’s robust
but fragile middle class that
expanded greatly from 2002 due
to deliberate government policy
is now shrinking and at the risk
of disappearing entirely. Their fat
salaries have been eroded by the
steep decline in the value of the
naira and they can hardly afford
to shop in foreign boutiques and
stores in Victoria Island and Ikoyi
again. Even the fanciful cars they
had always bought is now largely
above their reach and they had
to make do with imported used
(Tokunbo) cars.
To drive the nail into the coffin
of the middle class, a deliberate
government policy has now priced
Tokumbo cars out of the reach of
the middle class. The justification
was the implementation of the
National Automotive Industry
Development Plan (NAIDP) of
2013 meant to grow the volume
of locally assembled vehicles by
raising tariffs on imported cars.
However, the devaluation of
the naira has made rubbish of that
policy. But how does the government
care? It has gone ahead with
the implementation of the policy
charging 35 percent import duty
and another 35 percent surcharge,
making it a total of 70 percent of
the market price of the vehicle.
The new charge, which applies to
a unit of any imported vehicle, irrespective
of the model or brand,
makes importation through the
land borders (smuggling) far
cheaper than through Nigerian
seaports.
But it is not only the people that
are suffering. By implementing
such punitive tariff regime on imported
vehicles, the government
has ceded most of the revenues
it should be making to Benin Republic,
which has taken advantage
of the Nigerian government’s irrational
policy action to lower its
duty on imported vehicles. What
is more, the current structure now
provides a rich avenue of corruption
to customs’ officials who give
genuine customs’ documents to
these smuggled vehicles for a fee.
We are baffled that the government
can be so retrogressive and
almost irrational in policy decisions.
The lack of effective demand
for new cars has stymied any plans
to establish vehicle assembly
plants in Nigeria. The plan is now
helping to price out used cars
from the reach of Nigerians. that
is most retrogressive and should
be stopped.
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