ROTIMI ASHER
Ordinarily, African Continental Free Trade Agreement (ACFTA), an ambitious trade pact to form the world’s largest free trade area by connecting almost 1.3 billion people across 54 African countries, should be a solution to one of the major problems confronting Nigeria’s auto industry.
But how can the country benefit from this sort of trade pact, when hurdles are left in the ways of investors, no thanks to policy summersault.
Recently, the Senior Special Assistant to the President on Public Sector Matters and Executive Secretary, National Action Committee on ACFTA, Francis Anatogu said, ‘’ the government will enable local demand for new made-in- Nigeria automobiles by 40% in the next five years, in a bid to take advantage of the ACFTA,’’ adding, ‘the strategic objective was to capture 10% of Africa’s imports and double the country’s revenues by 2035’’.
But auto industry watchers expressed reservations, saying the goal could only be achieved if the country already had a legal framework, backing the nation’s auto policy with relevant infrastructures.
Apart from South Africa, Egypt and Morocco which already have thriving auto manufacturing industries and so ready to take advantage of the ACFTA, Nigeria is one of the countries in Africa without adequate measures in place to benefit from the mega pact.
For instance, reacting to the dilemma, the former Acting DG of the National Automotive Design and Development Council (NADDC), Mr. Luqman Mamudu, said the trade agreement would have been a great opportunity for Nigeria’s auto industry, had Nigeria put in place the essential framework needed to explore the prospects?
He said: “Certainly, great prospects await the nation’s auto industry in the ACFTA, but only if we ramp up capacity utilization to make it worthwhile for components parts manufacturers from whom Assembly kits are presently sourced, to establish in Nigeria. For instance, it won’t make economic sense for a Car seat manufacturer to set up a facility in an industry, where demand from OEM is less than 1000 units a year.
“Once we achieve sufficiently high local content, then we can export across Africa at practically zero duty under the Rule of Origin.
“Unfortunately, low local content, bureaucracy and poor access to development funds are some of the hurdles standing between us and the ACFTA prospects.”
Also, Mike Whitfield, Managing Director, Nissan’s Africa regional business unit and president of the Association of African Automotive Manufacturers (AAAM), did not mince words, a few months ago, when he said it is incredibly difficult for the indigenous auto assemblers in Nigeria and other African countries without automotive industrial development policies and program to create a viable automotive market outside of government and corporate purchase. Reason: it is cheaper for them to import second hands vehicles.
Whitefield could not have put it better, because the nation’s 2020 Finance act has further exacerbated the problem bedeviling Nigeria’s auto industry, which, in 2019 alone, invested over N360 billion into the country’s economy, implying a capability to build at least over 400,000 vehicles annually.
Auto industry analysts have since been seeking the logic behind the suspension of the auto industry development plan and in its place reduce duties on imported commercial vehicles from 35% to 10% due to what the government called the rising cost of transportation.
Other hurdles that the industry has to scale before taking advantage of ACFTA include the lack of critical infrastructures, especially efficient generation and distribution of electricity. This is particularly a reason Toyota gave some years ago when asked why it had not set up a car assembly plant in Nigeria.
ACFTA is creating a single market for African countries engaged in manufacturing. Auto assembling of vehicles from SKD and CKD kits is inadequate for Nigeria’s auto industry to benefit from the pact. Loosening the market for automotive local content, building critical infrastructures and attracting OEMs into the country is vital.
Indeed, Nigeria could double its export revenue in the next decade through ACFTA, if it does needful, especially full implementation of the auto industry development plan and building of critical infrastructure.
The Director-General of NADDC, Mr. Jelani Aliyu, recently gave an assurance that the nation’s hanging NAIDP would be ready for full implementation before the end of the year. Yes, the year-end is not so far away.
From all indications, Nigerians have been sold another failed promise.
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