Nigeria’s automotive industry plans: What exactly are the expectations? (1)

Auto-FactoryA direct result of the global economic slump of the last decade is the shift in emphasis in policy making from pure economic output to job creation. The need to create jobs at a rate that will demystify the challenge of unemployment has never been so critical. As the world and its commerce becomes more dependent on advances in information and communications technology and their several applications for businesses, sectors with significant capacity for job creation or employment opportunities must be unlocked.

The automobile industry remains one industry that has largely embraced technology while still creating jobs in large numbers. In South Africa for instance, the industry employs over 300,000 people while contributing about 6% to the country’s GDP1.

Perhaps it is these rosy numbers that inspired the then Minister of Trade and Investment under the administration of former President, Dr. Goodluck Ebele Jonathan, to design the National Automotive Industry Development Plan (NAIDP) in order to stimulate investments in domestic vehicle production and assembly.

Nigeria experienced significant surge in automobile sales following independence in 1960. This led to the growth of dealerships like Leventis, R.T. Briscoe and UAC, who provided sales and aftersales services to customers.

Assembling of cars only commenced in the 1970s when government entered into partnerships with the French company Peugeot to set up Peugeot Automobile Nigeria (PAN) in Kaduna. Other similar arrangements led to the creation of Volkswagen of Nigeria (VON), Anambra Motor Manufacturing Limited (popularly called ANAMMCO) and Steyr Nigeria Limited. This resulted in increased production of locally assembled cars.

However, as the country’s economic fortunes suffered significant decline in the 1990s, leading to a slump in manufacturing sector, major industries like automobile and textiles industries also suffered huge losses. Subsequently, in the midst of the economic decline, local assembling and manufacturing of vehicles came to a halt. Subsequent efforts to revive the automotive industry such as the 1993 Auto Policy also failed owing to the new dynamics in the global auto market, which led to the rise of Japanese automakers such as Toyota due to their fuel efficient technologies. In the end, the local assembly plants and firms like PAN and VON became worse off as importation of fairly used vehicles popularly known as “Tokunbos” became the order of the day up until recently.

Perhaps it is these rosy numbers that inspired the then Minister of Trade and Investment under the administration of former President, Dr. Goodluck Ebele Jonathan, to design the National Automotive Industry Development Plan (NAIDP) in order to stimulate investments in domestic vehicle production and assembly.

Nigeria experienced significant surge in automobile sales following independence in 1960. This led to the growth of dealerships like Leventis, R.T. Briscoe and UAC, who provided sales and aftersales services to customers.

Assembling of cars only commenced in the 1970s when government entered into partnerships with the French company Peugeot to set up Peugeot Automobile Nigeria (PAN) in Kaduna. Other similar arrangements led to the creation of Volkswagen of Nigeria (VON), Anambra Motor Manufacturing Limited (popularly called ANAMMCO) and Steyr Nigeria Limited. This resulted in increased production of locally assembled cars.

However, as the country’s economic fortunes suffered significant decline in the 1990s, leading to a slump in manufacturing sector, major industries like automobile and textiles industries also suffered huge losses. Subsequently, in the midst of the economic decline, local assembling and manufacturing of vehicles came to a halt. Subsequent efforts to revive the automotive industry such as the 1993 Auto Policy also failed owing to the new dynamics in the global auto market, which led to the rise of Japanese automakers such as Toyota due to their fuel efficient technologies. In the end, the local assembly plants and firms like PAN and VON became worse off as importation of fairly used vehicles popularly known as “Tokunbos” became the order of the day up until recently.

e value chain within the industry will defeat the purpose of the automotive policy. According to the policy, it is expected that most vehicle parts will be imported in the early years of implementation with a focus on assembling locally before domesticating the manufacturing of the component parts. The policy concentrates on some components that the country currently has capacity to produce such as welded parts, electrical parts, plastic and rubber parts etc.

Some major recommendations included in the Plan include revival of the tyre industry by granting pioneer status incentive to all tyre plants. Tyre manufacturing plants can also import tyres at 5% import duty to meet the shortfall in supply in the initial period. Further, tariffs on car and truck tyres will be harmonised and tyre manufacturing equipment will be allowed to be imported duty free.

However, apart from few indigenous producers, the industry is basically void of local manufacturers leaving most of the supply in the hands of foreign companies. The importance of deepening the value chain in the automotive industry cannot be overemphasized if we are to achieve the objective of creating jobs through the policy. As usual, the Federal Government has thrown some package of fiscal incentives as part of sweeteners under the NAIDP to persuade target investors. This and other considerations are reviewed in the concluding instalment of this publication.

1 http://www.southafrica.info/business/economy/sectors/automotive-overview.htm#.VcOxVHnJBes
2 NAIDP policy
3 http://venturesafrica.com/nigerias-new-automotive-policy-a-reminiscent-air-of-positivity

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2 Comments
  • Ikorodua

    Typical Nigeria:- AWFUL roads/infrastructure, and dangerous motorists (lack of basic motoring culture due to laughable driving instructions/trainings), and here we are ‘IMPORTING/EXPORTING/LOCAL’ and the rest uncordinated plans. Na wao.

  • emmanuel kalu

    The policy was poorly designed and implemented. auto industry requires a huge amount of input and raw material. those input and raw material are not yet in place. The industry also needs time and demand, that is where the govt can come in with financial support and consuming support( federal govt purchasing and only using made in nigeria cars).This kind of demand by the govt would allow the auto industry to produce vehicle that inexpensive, while building up for the medium to high priced vehicles.

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