Reappraising Nigeria’s auto policy for effective implementation

By Bankole Orimisan   |   23 December 2015   |   2:04 am  

To match Analysis USA-AUTOS/ECONOMYWhile there is no doubt that Nigeria has always witnessed well-articulated economic and social reforms intended to launch the nation on the path of meaningful development, implementing such reforms or policy frameworks remains a concern for stakeholders and investors. Often times, the gap between intentions and results or expectations and actual performance is always wide and discouraging. Having issued about 36 Auto assembly licenses to kick-start automobile production in the country, only three of them are in operation, according to the National Automotive Council (NAC). FEMI ADEKOYA writes on why Federal Government may need to reappraise the policy before it becomes another failed project.

Hitherto, many Nigerians have criticised the implementation of the new auto policy, saying the implementation is too hasty.

Many stakeholders argued that the import prohibition and the increase in tariff on imported vehicles from 35 percent to 75 percent, when the assemblies have not started to roll out their products, is not necessary. They advocated a gradual prohibition of auto product so as not to make life unbearable for Nigerians.

Their argument borders on the fact that government cannot ban the product or make it impossible for people to acquire when it is yet to provide alternative source of such acquisition and at competitive price.

With dependence on crude oil being discouraged by many stakeholders, especially in the light of fewer jobs for a teeming youth population and inability to generate enough funds from taxes, the federal government resolved to explore incentivised manufacturing option to attract investment in the sectors.

Emerging challenges like the huge decline in the inflow of foreign exchange into the nation’s economy has equally reinforced the need to implement policies which emphasise local manufacturing of products for which so much money is spent in forex yearly.

In the light of the forex crisis therefore, the commencement of the implementation of a national automobile policy by the former minister of Industry, Olusegun Aganga, under the Goodluck Jonathan-led federal government, with the ultimate objective of promoting the local assembly and production of vehicles to cut down the over $6 billion annual vehicle importation bill, shows uncommon foresight.

Since this policy known as the New Auto Industry Development Plan (NAIDP) was introduced in earnest around 2013, research firms noted that significant progress has been made in the achieving the goals of the initiative.

For instance, the recent report on the automobile sector by PriceWaterhouseCoopers (PWC) stated that the Nigerian auto industry will be able to produce locally, four million (4,000,000) cars yearly, by the year 2050 with credit to the (NAIDP).

The PWC report summed its findings thus: “We believe that by the year 2050, Nigeria should produce over 4 million vehicles. We have also created a pessimistic scenario because the world may not turn out the way we think, but even with the pessimistic scenario, Nigeria will be producing about 2 million vehicles, instead of the 4 million from the other scenario. Essentially, PWC is saying that by 2050, Nigeria is going to be a market that makes at least 4 million vehicles a year and would also stop importation of used vehicles.”

The appropriateness of this policy, its timeliness and prospects notwithstanding, some operators in the auto industry have however raised the alarm that most of the so-called local vehicle manufacturers and assemblers are not implementing the NAIDP, instead they have cloaked their activities under the immunity provided by the federal government for companies that are effectively implementing the policy and they are ripping the country off in the process.

Already, stakeholders have expressed concerns that major players who are expected to take the lead in the implementation the otherwise lofty auto policy are simply going abroad to purchase fully built cars, paying an extra cost to partially dismember these cars and then ship them into Nigeria as knocked down components of the cars for assembly in-country, in order to qualify for the zero tariff given by government to companies actually assembling cars locally.

At a symposium and luncheon of the Automobile and Allied Products Group of the Lagos Chamber of Commerce and Industry in Lagos recently, a popular auto dealer, Chief Ade Ojo said the country’s auto policy was put in place and implemented without proper planning.

“The policy must be executed very well. With the new government, things have been slowed down for everybody to run faster in the future. An industry, like auto industry, needs proper planning. We cannot sit down and say in two years, we want to have an assembly plant that will produce our auto requirement in Nigeria. The pretentious assembling that is going on now cannot help us. It is meant to favour some people.

“We must put in place ancillary industry to be able to say we want to create 70,000 jobs. We have to sit down to plan the way forward. The necessary things that we need to do have not been done. I do agree that Nigeria is a potential auto hub in Africa, but we need to do the necessary planning for an industry that is capable of employing millions of Nigerians. We cannot start the way we started. It is time for us to sit down to plan. Those that gained from the emerging situation and others must sit down and plan”.

Indeed, Morocco has only two assembly plants with 460,000 units of production capacity followed by Egypt has 26 assembly plants with 325,000-production capacity, while Nigeria allegedly has 36 assembly plants with only 15,000-production capacity, therefore raising concerns on the sincerity of licensees of assembly plants in the country.

Although, the policy has attracted marginal investment to the auto sector, there is no corresponding investment in the local component-manufacturing segment, which is very critical to the success of the policy.



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