26 October 2014, Lagos – When the President, Dr Goodluck Jonathan, announced the new automotive industry policy on October 2, 2013, he breathed new life into a vital sector of Nigeria’s economy which had been comatose for several years.
Clearly, Nigeria has a worrisome problem of over dependence on foreign goods and services coupled with the unemployment issue. In 2012 alone, according to data from the Nigerian Automotive Manufacturers Association (NAMA), the Nigerian Bureau of Statistics (NBS) and United Nations Conference on Trade and Development, Nigeria, spent in excess of N550 billion ($3.5 billion) on the importation of about 400,000 cars (over 60 per cent of which were used cars). Although vehicle importation appears to meet the immediate need of Nigerians to drive and own cars, it erodes the merits and gains associated with automotive industries in other countries of the world.
Across the globe, and especially in Africa, the automotive industry plays a huge role in economic development, job creations and technological advancement.
Nigeria, with the largest economy in Africa today, a teeming population of over 170 million, a growing middle class and an estimated demand of approximately 1,000,000 cars annually, still relies on vehicle importation.
Efforts made at developing a national automobile sector dates back to 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.
In the 70’s, the Nigerian government went into partnerships with governments of some developed countries such as France, Germany and America to establish automobile assembling plants in Nigeria. This lofty vision led to the establishment of six main automobile plants, namely: Peugeot Automobile Nigeria Limited (PAN), Volkswagen of Nigeria Limited (VWON), Steyr Nigeria Limited, Anambra Motor Manufacturing Limited (ANAMMCO), Leyland Nigeria Limited Ibadan (LNL) and National Truck Manufacturing (NTM).
The recorded successes were unprecedented and remarkable. These companies went on to make affordable, built for Nigerian road cars that were largely accepted by the Nigerian Populace and some of these cars even became the status symbols of the day. What was more exciting was that beyond the production of cars accepted by the Nigerian people, these companies contributed significantly to the environment where they operated and the overall economy of Nigeria. PAN for example in the 1970’s/1980’s while in full operation hired over 4,000 Nigerians, built a school and staff club in Kaduna and organized various sporting competitions in the nation.
However over the years, a combination of wrong policies, government neglect and dilapidation of infrastructure have led to the decay of this industry and the disappearance of its attendant benefits.
The average middle class Nigerian who in those days could easily afford a brand new car from the assembly line of these companies, now gives testimonies when they purchase used “Tokunbo” cars.
It is this sense of history and nostalgia, coupled with the successes currently being witnessed in other emerging economies like Brazil, Egypt, Malaysia, and India that made many patriotic Nigerians and corporations commend the efforts of the minister of trade and investment, Dr. Segun Aganga and President Jonathan, for the development of the Nigerian Automotive Industry Development Plan (NAIDP).
In broad terms, the NAIDP developed by the Federal Ministry of Industry, Trade and Investments aims to transform the Nigerian automotive industry and attract investment into the sector. It also aims to diversify Nigeria’s economy and revenues through industry and to increase manufacturing sector’s contribution to GDP from 4% today, to 6% by 2015, and finally above 10% by 2017.
According to the Minster, Mr. Olusegun Aganga, the NAIDP which will kick off in October 2014 and subsists for a number of decades aims to curtail Nigeria’s dependence on imports and to meet a significant proportion of its demand through domestic production. Other benefits of this plan will include industrial infrastructure, improvement of manufacturing standards, job creation, Investment promotions, skills development and vehicle purchase scheme.
Although the benefits of the policy and its multiplier effects on the economy are glaring, there are three main groups of people who have raised serious concerns against it. These concerns cannot be ignored if we must record the level of success seen in other parts of the world.
As expected, the first group to rise against the policy are those in the vehicle importation business, who opined that the policy will make it more expensive to import vehicles, and will ultimately reduce their market size and profitability.
The policy however takes care of this group, allowing companies who have keyed into the policy through investments in the establishment of assembly plants in Nigeria, a buffer period of five years when they can still import the difference of what they cannot produce at 35 per cent duty. However, companies who are not willing to invest in assembly plants can still import cars, but at 70 per cent duty.
The second group of people are the potential used vehicle owners who are worried that the high tariffs placed on used cars will make it difficult to purchase used cars before the local plants can ramp up production.
– This Day