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Auto Sector in 2016: More Tears than Cheers

FEMI OWOEYE

For the Nigerian auto industry, motoring public and motoring world, the just concluded year 2016 was filled with pains and tears and little to cheer till the world almost chorused HAPPY NEW YEAR, writes FEMI OWOEYE

[dropcap]T[/dropcap]owards the tail end of 2016, an ugly human angle of motoring was in the news, eliciting a brain waving question: “What is one man doing with 40 Sports Utility Vehicle?”

It was about an ex-permanent Secretary; from whom the Federal government seized 40 brand new SUVs, believed to have been stolen from government after living office.

Honourable Minister of Industry, Trade and Investment, Dr. Okechukwu Enalamah(4th from the right), Dr. Jumoke Oduwole, Senior special Assistant to the President on Industry, Trade & Investment, Office of the Vice President(5th from the right), Engr. Aminu Jalal, DG, National Automotive Design and Development Council, NADDC,(1st from the left) with some of the key stakeholders during the Stakeholders forum on the Nigerian Automotive Industry held recently at Oriental Holtel, Lekki, Lagos. (Photos: ROTIMI ASHER, Motoring World's Lagos Bureau Chief)
Honourable Minister of Industry, Trade and Investment, Dr. Okechukwu Enalamah(4th from the right), Dr. Jumoke Oduwole, Senior special Assistant to the President on Industry, Trade & Investment, Office of the Vice President(5th from the right), Engr. Aminu Jalal, DG, National Automotive Design and Development Council, NADDC,(1st from the left) with some of the key stakeholders during the Stakeholders forum on the Nigerian Automotive Industry held  at Oriental Holtel, Lekki, Lagos. (Photos: ROTIMI ASHER, Motoring World’s Lagos Bureau Chief)

Although Minister of Information and Culture, Lai Mohammed, who made the disclosure, did not mention the alleged car looter’s name, certain commentator wondered if the former civil servant had always had ambition of becoming a luxury car dealer.

To lovers of anti-corruption crusade, that was cheering news. But for the sceptics, it remains unbelievable until the culprit’s name is mentioned.

Fuel Subsidy Removal

However, what Nigerian motorists are unlikely to forget soon about 2016 was total removal of petroleum subsidy. It came with ugly and pretty faces-ugly in the sense that motorists have had to pay about 50% more to fill their tanks, a situation that has since made many to travel more by public transport; and pretty in the sense that it ended incessant queues for petrol, which almost brought the nation on its knees.

Unpronounced losers of the policy are petrol attendants, many of who turned millionaires at the expense of suffering motoring public. Removal of subsidy pegged petrol pump price at N145 per litre. At that price, queues disappeared. No more panic buying. Neither would anyone pay any extra to a petrol attendant just to jump a queue and buy petrol.

Hon Minister of Power, Works & Housing, Mr Babatunde Fashola, SAN(middle) discussing with Personnel of the Julius Berger Nigeria Plc during his inspection of the Rehabilitation, Reconstruction and Expansion of the Section One (Lagos-Sagamu) of the Lagos-Ibadan Expressway on Friday 26, August 2016.
Hon Minister of Power, Works & Housing, Mr Babatunde Fashola, SAN(middle) discussing with Personnel of the Julius Berger Nigeria Plc during his inspection of the Rehabilitation, Reconstruction and Expansion of the Section One (Lagos-Sagamu) of the Lagos-Ibadan Expressway on Friday 26, August 2016.

Other losers are petrol hawkers, who worsened the situation. Before the subsidy removal, the hawkers, in connivance with petrol stations’ managers and attendants, used to sell to hawkers fuel supplied to filling stations overnight. And the latter would resell to motorists at almost twenty times the pump price. Following subsidy removal, the culprits lost. So were fuel subsidy cons, who, for years, had fed fat on the nation’s commonwealth, fraudulently claiming millions of Naira of government subsidy for fuel they either never imported or when they did diverted to another country.

FOREX Scarcity

For the Nigerian automobile manufacturers, FOREX scarcity was an ugly face of the year 2016. So ugly it was that more than 2000 Nigerian workers lost their jobs, because the toddling assemblers found it difficult to produce vehicles for sale, as they could not access dollars with which to import their SKD or CKD kits. So after many months of inactivity, they could not afford to continue to pay salaries and so reluctantly asked sizeable number of their workers to leave.

Nigerian Automobile Manufacturers Association (NAMA) at a press briefing, condemning purchase of imported cars by the Nigerian Senate
Nigerian Automobile Manufacturers Association (NAMA) at a press briefing, condemning purchase of imported cars by the Nigerian Senate

What went wrong? Due to the nation’s economic downturn, which made dollar almost as scarce as hen’s teeth, the Central Bank of Nigeria (CBN) had to rationalize the meagre FOREX available. Unfortunately, while certain companies known to engage in capital flight to their countries of origin were said to be in the CBN’s priority list of FOREX distribution, the nation’s auto industry was starved.

Smuggling

Another ugly face of the year 2016 was high rate of smuggling of automobiles via the land borders. Although federal government, later in the year banned importation of cars via the land borders, starting from Sunday, January 1st 2017, smuggling and mass import of used vehicles via land border almost caused a repeat of history of what led to collapse of the nation’s auto manufacturing sector, which blossomed from 1970s to late 1980s.

Vehicle Import Restriction Order

Fuel hawkers having a field day before removal of fuel subsidy
Fuel hawkers having a field day before removal of fuel subsidy

An auto industry stakeholders’ meeting held in the second quarter of 2016 was attended by the minister and officials of the Federal Ministry of Industry, Trade and Investment. The forum generated two key suggestions:

  1. Ban on vehicle importation via the land border and
  2. Introduction of Vehicle Identification Number (VIN)

The two suggestions were put forward as solution to mass smuggling of vehicles via the nation’s porous land borders as well as a way of discouraging Nigerians from purchasing imported used vehicles instead of locally assembled ones.

The argument then was that, unless those suggestions were implemented, any measure or step taken to help the nation’s industry to grow, including increase of import duty or even total ban on imported used vehicles, popularly known in Nigeria as Tokunbo, would be frustrated.

President Muhammadu Buhari’s government confirmed its promise to support the nation’s auto policy by announcing a ban on importation of vehicles via land border as well as introduction of VIN from January 2017 and March 2017 respectively.

To vehicle smugglers and their political and media backers, both are bad and ugly policies. But to the suffering and staggering stakeholders of the nation’s auto industry, both policies shone a ray of hope for local auto manufacturing.

President of the Senate, Abubakar Bukola Saraki: senate he presides over stabbed Nigerian auto industry sector on the back
Senate President, Abubakar Bukola Saraki: He presided over the senate that stabbed Nigerian auto sector on the back

Economic Sabotage

What could be likened to economic sabotage, when, during the year under review, Nigerian upper legislative chamber, illegally shunned the nation’s struggling local auto manufacturers and dealers and purchased imported brand new Sport utility Vehicles, Toyota Landcruiser Prado, which cost N36.5 million each, as their official cars.

It was even more painful to Nigerians, because the Senators acquired the said expensive SUVs at a time, when Nigeria was nosing deeper into recession and  the nation’s automobile dealers and manufacturers were suffering in silence and even sacking many of their workers. It was a time, they, like other well-meaning Nigerians, expected Nigerian ruling elites to be sensitive to the plight of the nation’s suffering corporations and citizens. But the reverse was the case.

So shocked by what to them was the Senate’s insensitive action, Nigeria Automobile Manufacturers Association (NAMA) called a press conference, expressing shock and disappointment.

With other Motoring journalists, Femi Owoeye alighting from the F-Pace he test-drove along a rough terrain in South Africa
With other Motoring journalists, Femi Owoeye alighting from the F-Pace he test-drove along a rough terrain in South Africa

According to the NAMA chairman, Mr. Tokunbo Aromolaran, before importing the SUVs, the senators deceptively requested Nigerian auto dealers to submit tenders and stake their claim and qualification to supply the senate with locally assembled vehicles that meet their specification.

“About that time,” lamented Mr. Aromolaran, “the news that the upper chamber had settled for an SUV for N36.5million apiece, set to cost the government a whopping N3.9 billion was in the air. The executive arm of government expressed its disapproval for this move, urging the senate to be sensitive to the tough economic environment and requesting for a re-think to a more moderate option. The feedback from the senate was that of anger, claiming the executive had no authority to dictate what the legislative arm should appropriate for itself.

“The question of who controls the excesses of the legislative arm of government continues to linger. Believing in the patriotic spirit of our elected senators, NAMA members submitted tenders to provide the senate as well as the House of Representatives with vehicles assembled in Nigeria by Nigerians to globally accepted standards.

Derek Kirkby(third from left), Ford DSFL training Director, South Africa, who took participants through a theoretical session of Driving Skill for Life (Copyright: Motoring World Intl.)
Derek Kirkby(third from left), Ford DSFL training Director, South Africa, who took participants through a theoretical session of Driving Skill for Life (Copyright: Motoring World Intl.)

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“It was a rude shock to learn of the decision of the senate to procure imported fully built SUVs, when much more affordable locally assembled alternatives were offered. We listened to the pathetic explanation of the Senate House Services Committee Chair and were filled with nothing but pity for the country. The insensitivity of an elected body could not have been so clearly displayed, when you consider:

  • The senate could have saved suffering Nigerians 40% of the eventual outlay by being patriotic and promoting vehicles assembled by extremely talented and diligent Nigerian workforce.
  • The senate would have secured the continuous employment of about 4000 Nigerians for a whole year by supporting local industry. The Patronage alone may be enough to ensure its successful take-off.
  • The senate would have supported about 50 component manufacturers that supply the auto industry and help create a value chain that typically impacts no less than four other sectors of the Nigerian economy.
  • Had the senate not decided to starve the local industry of patronage, it would have helped grow and sustain at least 50 medium scale enterprises whose future revenue streams would flow into our corporate and personal taxation system, helping to sustain the government revenue base.

The senate has by this self-cantered decision held down the automotive industry for at least four years. A pity indeed.”

That was like a salt on the injury of the NAMA member’s inability to source FOREX to keep running their plants, what the late Fela Anikulapo Kuti in one of his popular records would describe as “double wahala for dead  body..”

speed-limiter-use
FRSC personnel on the road, following the take-off of compulsory installation of speed limiting devices in all Nigerian commercial vehicles

Accuse turned Accuser

As if hitting back at NAMA for condemning its unpatriotic act, a committee of the upper legislative chamber was sent to pay an unscheduled visit to Volkswagen Nigeria, a plant managed by NAMA’s chairman, Mr. Tokunbo Aromolaran, and afterward accused the auto assembler of economic sabotage. VON Automobile Nigeria denied the allegation.

Whereas Nigerian Senate justified its unpatriotic and illegal action.

Patriotic House of Representatives?

Contrary to what many saw as Nigerian senators’ insensitive behaviour, Nigerian House of Representative showed an act of patriotism by acquiring locally assembled cars, Peugeot 508, as their official vehicles.

But the purchase also generated condemnation from certain members of the public and a section of the Nigerian media, because to critics, the timing was wrong, being a period when the nation was neck deep in economic recession.

Speed Limiter

The year under review saw commencement of compulsory installation of speed limiters in all commercial vehicles in Nigeria, courtesy of the Federal Road Safety Corps (FRSC).

Auto Journalists Training

With active involvement of Ford sub-Sahara Africa and a number of Nigerian auto industry stakeholders,  maiden edition of Annual Training for Nigerian Motoring Journalists held in Lagos Nigeria. The event was spiced by Ford’s Driving Skill for Life held on the second day of the training.

Nigeria Car of the Year Award

Peugeot 301, winner of NAJA's 2016 Car of the Year Award still being trailed with smoke of controversy
Peugeot 301, NAJA’s 2016 Car of the Year

Nigeria Auto Journalists Association (NAJA) held its annual auto award at Eko Hotel in Lagos during which Peugeot 301 was declared Car of the Year.

Expectations in 2017

Although towards the end of 2016, auto industry analysts believe that the problem militating against the auto assemblers throughout 2016 are most likely to continue through most part of this New Year, recent global economic indices are likely to prove otherwise.

They include recent surge in world oil price, President Muhammadu Buhari‘s policy of restriction and control of vehicle importation into the country as well as likelihood of the country to soon begin to export agricultural products, especially rice. All these would increase government revenue and availability of FOREX.

More than the foregoing, we gathered that this year will mark beginning of implementation of auto financing scheme, which, if well implemented, will encourage Nigerian working class to look inward and buy locally produced automobiles instead of imported junks called Tokunbo.

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