Since the collapse of Peugeot, Volkswagen and other automobile assembly plants decades ago, Nigeria has largely depended on importation of vehicles with the import bill as at 2012 standing at $3.4billion. However, the new Automotive Industrial Policy Development Plan appears set to facilitate the revival of the comatose sector, though stakeholders fear that policy implementation could fall short of expectations. ADEDEJI ADEMIGBUJI, reports.
From its automobile plants in, Nnewi, Anambra state, where it produces about 300 units of vehicles monthly with knock down parts from Chinese, German and Japanese makers, Innoson Group, a local conglomerate seems to be spearheading the re-emergence of automobile assembly plants in the country. The effort brings back the memories of the early 1960s when private companies like UAC, Leventis, SCOA, BEWAC and R.T. Briscoe pioneered the establishment of auto assembly plants using Completely Knocked Down, CKD, or Semi-Knocked Down, SKD, parts.
However, with the government’s involvement in the industry between 1970 and 1980 after concluding agreements with a number of automobile plants in Europe to set up two car and four truck/light commercial vehicle assembly plants using CKD, the industry’s growth prospect began to decline as a result of the failure of the government to protect the industry through import policy framework that finally led to massive importation of cars. Besides the closure of the plants, other player chains within the sector such as Dunlop, Michelin tyre production factories did not have automobile factories to produce for while massive importation of “tokunbo” tyre shrank their sales in the face of price competition.
Nevertheless, in a fresh move, the Federal Government has announced a National Automobile policy to revive the comatose industry. And to show its seriousness, it has announced through the Minister of Industry, Trade and Investment, Mr. Olusegun Aganga an increase in tariff on imported cars while President Goodluck Jonathan had also expressed possibility of a ban on imported vehicles into the country.
Before this new move, the country once had two car plants-Peugeot Nigeria Ltd., PAN, Kaduna, and Volkswagen of Nigeria Limited, VON, Lagos and four truck commercial plants: Anambra Motor Manufacturing Company, ANAMMCO, Enugu; Styer Nigeria Limited, Bauchi; National Truck Manufacturers, NTM, Kano and Leyland Nigeria Ltd., Ibadan.
But following the failure of the implementation of 1982 agreements the Federal Government had with five manufacturers for the establishment of five light commercial vehicle assembly plants: Mitsubishi in Ilorin, Nissan in Minna, Peugeot in Gusau, Isuzu in Maiduguri and Mazda in Umuahia and GM which subsequently entered into partnership with UAC to produce Isuzu by FMI of UAC, which later became GM Nigeria Ltd, the nation has spent billions of dollars on importation of vehicles and spares.
With a current inflow of 50,000 new and 150,000 used vehicles into the country on yearly basis, with Toyota being the largest supplier, accounting for 70 per cent of imports, Aganga said government hopes to significantly reduce the $3.4 billion vehicle import bill incurred in 2012 and encourage patronage of locally-assembled brands and boost local employment and technology. While the ban or increase on tariff would also save naira against dollars, Aganga stated further that three automotive clusters were envisaged in the country, as well as the revival of the steel sector and tyre manufacturing.
He also said the government would purchase only locally-assembled cars, except where unavailable Currently, several engineers and students have made efforts to produce Nigeria made cars. Though some have continued to struggle with getting materials to enhance standard but the progress made so far by a local investor, Mr. Innocent Chukwuma, whose assembly plant opened by President Goodluck Jonathan in 2007, is re-igniting the rebound of made-in-Nigeria vehicles. Innoson Group exports cars to other African countries and also supplies some MDAs.
The plant manufactures cars, trucks and buses as Nigeria’s first set of sundry commercial automobiles to break the jinx which perhaps forced the Federal Government, on October 3, to announced increase in tariff on imported cars 24 hours after it unfurled the Automotive Industrial Policy Development Plan.
The Minister of Industry, Trade and Investment, Olusegun Aganga, had said the new tariff might likely take effect on cars ordered after October 4 though its not clear yet if it has taken off. According to Aganga, the highlights of the auto policy are to encourage local manufacturing of vehicles, enforce a gradual phasing out of used cars, which analyst said would help achieve a more favorable balance of trade which currently stands at N2.14trn in second quarter of 2013 and reduce the import bill currently at N1.6trn in same quarter. The new policy is expected to run as a 10-year plan while it will be reviewed every five years.
Accordingly, an integral part of the policy is the establishment of automotive clusters in three regions, which will enhance productivity and cost efficiencies. “The policy is expected to create at least 700,000 jobs as well as make brand new cars more affordable for Nigerians in the long run,” said Aganga. While the policy appears like the ultimate answer to the agitation of industrialists, there has been widespread accolades for the planned policy as a result of government approach.
The House of Representatives Committee on Industry commended the Federal Government on the introduction of new automotive policy, saying that the new measures would help transform the automotive sector. The Committee chairman, Hon. Mohammed Ogoshi Onawo, said the implementation of the new measures would attract new investments into the sector, protect local automotive manufacturers and create employment.
Also, the Director-General, National Automotive Council, NAC, Mr. Aminu Jalal, said the country must not give up on the pursuit of its automotive agenda. To encourage patronage of locally-made cars, Jalal said the Council has set aside the sum of N3.5billion as seed money for a fund to be accessed at single digit interest rate to those who purchase locally assembled vehicles.
He said the implication of killing the dream of Nigerian made car means that the country will continue to fund jobs projects abroad to the tune of over $3.5billion annually at the expense of its teeming masses of unemployed and the existing huge investment in manufacturing and assembly.
“The Nigerian market, estimated at N600 billion annually is sufficient to sustain a local automotive industry if the investment environment is right. The automotive technology is over a hundred years old and no one needs to reinvent the wheel,” he said while lamenting that about 50,000 new and 150,000 used vehicles were imported into Nigeria yearly.
“Nigerians spend an average of N400 billion on importing passengers’ cars and by the time you add trucks and other vehicles, the amount Nigerians spend on imported vehicles will be running to N600 billion annually, adding that the money can be plowed into the country’s automotive industry. Apart from the existing Assembly plants with a combined capacity of nearly 100,000 vehicles per annum, there exist numerous automotive body building facilities with impressive capacities.”
“Nigerians have mastered the act of vehicle assembly and even the production of a long list of automotive components and parts including all automotive glass, brake pads, all light and reinforced plastic parts, seats, exhausts systems, fuel, air and oil filters, some pressed parts, wire harnesses, tyres, batteries, cables, trim etc,” said Jalal. He pointed out that the entirely green plant, Innoson Vehicle Manufacturing Limited, IVM, supported by NAC, is recorded to have produced over 2,000 pickups vans buses in only three years of its existence.
“The IVMs are what you would call a Nigerian brand as they are named after the Chairman and Chief executive –INNOSON. IVMs have very high local content and the company continues to pursue this program vigorously with the support of NAC. The Council has extended support to over 20 component manufacturers including Dunlop, which received over N1.4 billion to establish its Radial Steel Truck tyres, although the lowering of import duty on truck tyres in 2005 crippled the tyre industry,” he affirms.
While the new direction by the government appears plausible, industry stakeholders are skeptical as a result of handling of similar policy for the sector in the past. According to a report on Pro- Share, “Given the mention of a “new” automotive policy, a concerned Nigerian could ask “What was the previous automotive policy?” In 1990, the Federal Government of Nigeria resuscitated the technical committee on national automotive industry (now National Automotive Council – ‘NAC’ with the sole purpose of reviving and developing the domestic automotive industry.
The NAC in collaboration with The Nigerian Automobile Manufacturer’s Association ,NAMA and other relevant stakeholders were involved in the formulation of the policy. The resulting policy was approved by the Ernest Shonekan-led transitional council in 1993.
The objective of the policy which was to be promoted by NAC was to ensure the development, survival and growth of the Nigerian automotive industry using domestic human and material resources. Like most Nigerian policy initiatives, NAC’s intention to revive the automotive industry was not achieved due to the lack of a suitable framework to support the tenets of the policy.”
Low patronage, the lack of infrastructure, non-implementation and inappropriate tariff regime, among others were some of the reasons have been cited as the short-coming of the previous automotive policy.
However, with assurance from Aganga, that government had identified the pitfalls, putting in place measures that would guard against the inadequacies and encourage the success of the new policy; some foreign investors are beginning to express interest to bring their vehicle manufacturing plants to Nigeria especially given that the country is driving the African auto market share massively. Besides, with the growth of the nation’s economic indices and her high returns on investment, the investors express readiness to jumpstart the plan.
The Director, Sub-Sahara Africa, Nissan South Africa, Jimmy Dando, said the company was in Abuja recently to let the Federal Government understand move to start a production lines and assembly plants. Dando said the negotiation was strategic for both the government and auto investors because it was a move to fast track the revival of the nation’s automobile manufacturing sector and bring down the prices of new vehicles for Nigerians.
The Nissan’s helmsman pointed out that for the negotiation meeting to have a positive impact, the Federal Government, as a matter of urgency, must look critically at finding a lasting solution to the grey market by eliminating it, adding that the phenomenon has adversely affected their sales and market share in Nigeria. He said that allowing influx of used vehicles in the country was not good for the country’s image, considering the size of her population and economic indices.
“Nigeria has a large population index and there is need for automobile plants in the country because with auto plants, it can drive job creation for the teeming youths. In South Africa, after minning sector, which is the largest employer of labour, the auto manufacturing is the next highest employer of labour. If Nigeria could accept this plan, believe me, it will go a long way in sharpening the country’s economic development and her manufacturing sector,” he added.
For Ford’s Regional Sales and Marketing Manager, sub-Saharan Africa, Ezio Tuniz, the Nigerian market share for Ford motors has been phenomenal since its entry into the nation’s auto market some decades ago. He said that Nigeria accounted for about 40 per cent market share of vehicles sold by the Ford Group, from 2010 to 2011, and eight per cent last year despite the challenges in the nation’s auto industry. According to him, Nigeria has become the hub of sub-Sahara market because of the amount of vehicles being sold hereRebound of automobile assembly plants by ngcareers