FEMI OWOEYE
Although Nigeria’s auto policy was launched almost three decades ago (1993), a necessary industry development framework was not initiated until two decades after (2013). That was under President Goodluck Jonathan’s regime.
The policy and its development plan were aimed at boosting up demands for made-in- Nigeria vehicles and encouraging Original Equipment Manufacturers (OEMs) to set up local content manufacturing. Ultimately, it was expected to revitalize and grow the Nigerian automotive sector with a multiplier effect on the nation’s economy.
No doubt, as a result of the partly implemented policy, the sector, within the last seven years, has not only generated ample employment, it has also grown with an installed capacity to assemble about 500,000 vehicles per annum. To this end, the industry has attracted most OEMs, including Honda, Mitsubishi, Ford, Geely, Kia, Nissan, Hyundai, Sinotruck, Shackman, Dongfeng, XCMG, Peugeot, MAN, Yutong FAW, etc, which have opened investment pipelines to Nigeria, mostly in form of a technical partnership with Nigeria entrepreneurs. The industry also generated direct investment by indigenous brands like Honda, Innoson, Jetvan, Proforce etc.
However, due to poor policy administration, coupled with a failure to implement certain essential provisions of the policy, the policy suffered a summersault, recording constrained capacity utilization. That is why, 28 years down the line, the nation’s auto industry stakeholders are still hopelessly awaiting full implementation.
Fielding questions from this writer, Mr. Luqman Mamudu, former Director of Policy and Acting Director-General of the National Automotive Design and Development Council (NADDC), reiterated that poor project implementation on the part of the Federal government had caused a setback for the nation’s auto industry.
“Seven years into its 10-year tenure,” he said, “there has been practically no monitoring and evaluation of the policy, apart from initial sector report in 2016/17. All the associated programs designed to create demand for vehicles assembled in Nigeria and grow local content have been abandoned by institutions responsible to do so.”
Moreover, the auto Finance provision, which, in the original draft of the NAIDP, was meant to grant affordable loans to Nigerians to acquire locally assembled vehicles, thereby creating demand and making the secondhand imports unattractive over the years, has been jettisoned.
As if that was not enough, the Federal Ministry of Finance, by section 38 of Finance Act 2020, further worsened the situation by reducing the protective tariff for imported fully built (FBU) commercial vehicles from 35% to 10 %, while imported Semi Knocked Down (SKD) kits remain at 10%.
“As a result,” Mamudu pointed out, “Nigerian ports and streets are now flooded with all manner of used commercial vehicles and cars with consequent depletion of the nation’s FOREX reserves and a weakened Naira.
“Sadly, although Nigeria has established tremendous capacity utilization in commercial vehicle bodybuilding, now you do not have to build locally, just import.”
Following the invocation of the 2020 Finance Act, it has become more profitable to simply import vehicles for sale than venturing into local assembling.
Mamudu stated further: “Automotive assembly, especially a final assembly, which dominates assembly activities in Nigeria, is certainly unprofitable to the assemblers compared to outright import. The protective tariff and levies is equally vexatious to many interests, as they wish to import freely.
“So, implementation process needed to have been carefully managed to quickly ramp up to CKD and components manufacture, where all would be happy.
“This is why the process requires close monitoring and adjustment to align with public concern. It is because there is no reasonable feedback that those who had earlier opposed the policy in the first place seem to be having the upper hand. The finance act 2020 with its devastating effect is one such example. It particularly accused the policy of slow or ineffective impact and set forth to remove the protective measures without consulting stakeholders.
“The implementation of the auto policy requires sacrifice from all in the interest of growing the real sector. But such sacrifice has its limit, especially in time-space. The protective tariff was designed to be reduced as the industry gained traction, but it’s not being nurtured to do so.”
On the state of the NAIDP bill, Mamudu, who is now the Managing Partner, Transtech Industrial Consulting, said the last information he had was that the bill was under expert review.
In his view, however, the reviewed draft of the NAIDP should be shared for stakeholders’ input, particularly Nigeria Automotive Manufacturers Association (NAMA) before its final passage and signing into law.
Being the largest economy in Africa, Nigeria has, in the past six years, been under pressure from OEMs to complete the implementation circle of its auto industry development policy. OEMs could see Nigeria becoming an automotive manufacturing hub of the continent.
But, as at the time of putting this story together, the nation’s auto policy remains under a dark silence. Even stakeholders, we gathered, remain in the dark.
In the meantime, happy importers of used and new (FBU) vehicles smile to the bank. And consequently, the nation’s economy bleeds.
This article was first published in the 2021 edition of NIGERIA Auto Journal
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