Middle class attrition may keep sector down despite economic upturn
While reports by the National Bureau of Statistics (NBS) said Nigeria ebbed out of recession with Gross Domestic Product (GDP) growth of 0.55 per cent in the second quarter of 2017, analysts and players in the automotive sector have said eroded middle class may continue to keep the sector down.
The country’s economic downturn had shrunk vehicle sales, particularly with the inability of government to introduce vehicle finance scheme to enable the masses purchase brand new vehicles.
Indeed, operators have said prevailing harsh operating environment and other challenges pushed production output down by about 95 per cent across vehicle assembly plants.
The immediate past Chairman, Auto and Allied Sector Group of the Lagos Chamber of Commerce and Industry (LCCI), Dr. Oseme Oigiagbe, who said the automotive sector was the worst hit by the Nigerian economic downturn, said the NBS report doesn’t match the reality in the automotive sector yet.
He was pessimistic about a quick recovery in the sector since the middle class was badly affected and currently almost eroded.
Oigiagbe said: “There is a direct relationship between the level of recession the country experienced and the automotive sector. Since we are out of recession according to NBS, it can not translate to a direct or effective positioning of the sector yet. We can’t see anything that will say we are out of recession.
“The middle class, which is supposed to have the purchasing power to acquire vehicles has completely been eroded. That is the potential market that we all run after. Right now,it is only government or higher class individuals that can acquire vehicles.”
The Deputy Managing Director at Kewalram Chanrai Group, Victor Eburajolo, said the automotive sector has not felt the impact of the recovery and may not witnessed significant changes on till December.
He said: “when you get out recession it will not affect immediately, particularly a sector like automotive. We are not seeing the impact yet in the automotive sector, that may be possible towards the end of the year. But we may begin to see the impact in the consumer goods.”
An automobile analyst and Principal Consultant, Media Advocate Limited, Manny Philipson, said he shared the NBS viewpoint on economic emancipation even though the recovery is insignificant at 0.55 per cent.
“Like the report observed the oil, manufacturing and agricultural sectors are the sectors that witnessed transformation. It is gradual and I am optimistic the growth would impact in the auto sector. Generally, there have been a relatively noticeable growth across board, thanks to the availability of FOREX,” he said.
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