From: FRED ITUA, Abuja The Senate has passed the 2018-2020 Medium Term Expenditure Framework (MTEF) and the Fiscal Strategy Paper (FSP). In the passed documents, the Senate pegged the exchange rate at N305 to $1. It pegged one barrel of oil at $46, while daily production was put at 2.3 million barrel per day. Details…
By Moses Akaigwe
Failure of successive Nigerian administrations to fully implement the nation’s various industrialisation agenda is now haunting its transport industry and threatening to throw its operators out of business.
This is because the cost of a unit of Mercedes Benz or Marcopolo luxury bus has risen to over N150 million as against below N100 million paid on such vehicles a few years ago.
But those who have been following the nation’s development and industrialisation programme from independence in 1960 have blamed the situation on the failure of the Federal Government to implement an efficient industrialisation policy that would have made Nigeria manufacturing and industrial nation, capable of manufacturing its own automobiles.
They reckoned that Nigeria began its industrialisation programme with countries like Brazil and several South East African countries in the sixties and early 1970s, but regretted that today, many of those countries now manufacture their own vehicles, while Nigeria is still a net importer of automobiles.
Today, however, luxury buses are on the verge of ‘extinction’ following the inability of inter-city transporters, who are the bulk buyers, to replenish their fleet for years now as the prices of the vehicles continue to soar beyond their purchasing power.
The buses are also called coaches when built to suit the convenience and comfort of long distance travellers (with features like toilet, for instance).
A survey of the bus market and the relevant transport segment showed that well equipped new coaches built on the popular Mercedes-Benz engine/chassis and those from another respected brand, Scania, cost between N140 million and N150 million, to put on the road.
The calculation includes the ex-factory cost, freight, bank charges, duty and insurance for buses built by Marcopolo and Irizar on Mercedes-Benz 0500 engine/chassis or Scania’s 360.
The visible result is that the transporters, particularly those hitherto operating only luxury bus fleets, have either resorted to purchasing the cheaper Chinese versions, with unpleasant consequences or turned to mini buses (used in many parts of the world for less tasking purposes like shuttle services and light cargo deliveries).
Lamenting the “dire situation” in which the transporters have found themselves over the soaring prices of luxury buses, the President of the Association of Luxury Bus Owners (ALBON), Sir Dan Okemuo, said only a couple of members of the association have been able procure new buses in the past few years.
Those who patronised Chinese business for about N80 million each, don’t seem to be satisfied with their performances and quality on the road. This, he explained, means that return on investment is an uphill task in today’s road transportation.
The transporter blamed the exorbitant prices of the luxury buses on the low value of the naira in exchange for the dollar and the increase of duty on the buses from 10 per cent to 35 per cent in 2014. He identified other challenges confronting passenger transportation as the menace of armed robbers, worsening condition of the highways and high cost of maintenance.
Okemuo who is the Chairman of Dan Dollars Motors Ltd, a luxury bus transport company, recalled that at the time a dollar was exchanging for about N150, and Customs duty was pegged at 10 per cent, the average cost of putting a new luxury bus on the road was less than N80 million.
However, with the dollar to naira exchange rate hitting above N500 last year, and currently about N360, with unpleasant impact on the landing cost of the big buses, many of his colleagues, he said, would rather refurbish their old vehicles or procure the smaller versions in multiples.
“If you buy a good luxury bus at that high price, how can you recover your money? Even in the next 10 years, you will not be able to recover your investment, not to talk of making profit at a time when all the money a bus makes goes into maintenance because of the bad condition of roads, which leads to wear and tear on the vehicle,” the ALBON President remarked.
Reacting to the development, Mr. Mirko Plath, Managing Director of Weststar Associates Ltd, authorised general distributor of Mercedes-Benz vehicles in Nigeria, confirmed that the high tariff on the buses and unfavourable exchange rate are two major factors jerking the prices of the coaches out of reach.
“The C&F (cost and freight) value was reduced by the manufacturers,” observed Plath, who spoke through the Manager in charge of luxury buses at Weststar, Mr. Ifeanyi Igbokwe. “But the above mentioned factors further increased the final cost.”
Similarly, the General Manager of COSPAM Nigeria Ltd, marketers of Scania buses, Mr. Nath Okekeocha, bemoaned the effect of forex and high duty on the landing cost of the buses, disclosing that, “nobody is buying; demand for the luxury buses is zero now.”
The COSPAM General Manager disclosed that the transporters, who used to procure many units of the luxury buses at a time, are now scared to buy even one because they fear they will not be able to recoup their investments, considering challenges like the effect of bad roads on vehicles, mishaps and rising cost of maintenance.
He stated that the use of mini buses is not the needed solution, because they are not built for long distance operations, and have been involved in many accidents on various routes across the country.
Okekeocha said appeals made to the Federal Government for incentives and allocation of forex at concessionary rate have so far not yielded the desired results.
Both the bus importers and operators, who commented on the issue, argued that special allocation of forex for the importation of the buses, as well as reduction in duty, would substantially reduce the prices of the luxury buses.
“Just like the government sets out a special exchange rate for pilgrimages, they should also ensure that bus operators enjoy same privileges because this would equally help in reducing the cost of purchasing luxury buses for mass transportation,” Igbokwe remarked.
He argued that since policymakers are aware that road transportation is a major means of movement in Nigeria with thousands of people moving from city to city everyday, government should put in place incentives that will ensure that their business remains viable.
However, while echoing the call for concessions on tariff and forex, another popular transporter and Chief Executive Officer of ABC Transport Plc, Mr. Frank Nneji, made a case for the production of the luxury buses in Nigeria taking advantage of the incentives provided by the automotive policy.
Describing local production as a more enduring and long-term solution, Nneji who currently assembles Shacman and Forland trucks, as well as BAW mini buses in Enugu (all through a subsidiary of ABC Transport called Transit Support Services), argued that collaborating with owners of bus brands to produce relevant models locally would make the prices considerably lower.
This, he further stressed, is in addition to stimulating the development of linkage industries like local content manufacturing.
“The 500 Shacman heavy duty trucks ordered by the Dangote Group recently from us is a good example. We imported thousands of tyres to assemble the vehicles at ANAMMCO. This is business that would have gone to the local tyre industry if we had a viable auto industry with motivated local content providers in place,” Nneji said.
However, it is not only the big buses that need price-reduction measures to make them affordable, even as prices of the mini buses have gone considerably high. For instance, a 14-seater Toyota Hiace high-roof, which was far below N20 million some years ago, now sells for N27.5 million, while its closest rival, Nissan Urvan, now goes for N22 million. The Chinese versions, which have become attractive to some of the transporters, remain below N20 million.
But the dominance of the mini buses on all the long distance routes, including Lagos-Abuja, Lagos-Onitsha/Owerri Port-Harcourt and Abuja to various destinations on the eastern flank, has brought in its wake a great deal of safety concerns.
Apart from the argument that the mini buses are not built for the long haul, they have also come under criticisms for their involvement in many fatal accidents in many parts of the country.
Responding to Daily Sun’s inquiries on Thursday, a Corps Commander and spokesman for the Federal Road Safety Corps (FRSC), Mr. Bisi Kazeem, said there was no regulation barring the small buses from plying long distances. Rather, according to him, the FRSC is using the Road Transport Safety Standardisation Scheme (RTSSS) as a means of ensuring compliance with regulations by the users of such vehicles and all fleet owners.
Kazeem, who is the Corps Public Education Officer, stated: “There are no issues with the category of such vehicles (mini buses). Compliance with the traffic rules and safety regulations is the key and that was the essence of RTSSS.”
Among other measures, the scheme requires companies, agencies and organisations operating fleets of (at least five) vehicles to place emphasis on adequate training and create safety departments headed by managers, to ensure that safety and maintenance regulations are not breached.
Echoing the need for strict compliance with safety standards in operating the mini buses, Nneji explained that in addition to the rising cost of procuring the coaches, the small buses are now preferred by the transporters because they are comparatively better at manoeuvring through the bad roads across the country than the former.
He conceded that the massive deployment of the mini buses for commercial operation on long distance routes, including Lagos-Accra, “is an anomaly”, which the vehicle owners can do little or nothing about. “Moreover, the transporters are responding to the preferences of the customers.
The market trend is tilting towards the small buses,” the ABC Transport CEO said.
It was in an effort to find solutions to the rising cost of procuring new buses and other challenges facing the sector that ALBON and another umbrella body of transport owners – the Association of Mass Transit Operators of Nigeria (AMTO) – met in Enugu a few weeks ago and resolved to merge.
As corollary to the Enugu forum, the luxury bus owners and other road passenger transport bodies held a conference in Lagos on June 22, 2017, with a resolution to fuse into one, all-inclusive umbrella body for all inter-state bus associations in about two months.
ALBON, AMTO, Benin Transport Owners Association (BTOA) and other road transporters that participated in the inaugural Lagos conference, agreed to reach out to all inter-state road passenger transporters nationwide to ensure they are part of the fusion.
The conference deliberated extensively on major common challenges facing all inter-state road passenger bus owners/operators in Nigeria, as well as the urgent and compelling need for them to come together as one, unifying and nationwide body, to develop strategies for tackling the challenges.
In his keynote remarks, Okemuo, who is also the Chairman of the coalition steering committee, identified poor road infrastructure, insecurity and rising cost of imported buses, as some of the transporters’ major challenges which the new association would be seeking solutions to.
He bemoaned the inability of transporters to replenish their fleets as result of the unaffordable costs of procuring new coaches and mini buses.
The transporters also resolved that the proposed all-embracing association should retain the services of a member of the Chartered Institute of Logistics of Nigeria (CILT), as a consultant with immediate effect.