In this interview with KINGSLEY ALU, the director- general, National Automotive Design and Development Council(NADDC), Mr Aminu Jalal, argues that until the nation’s policy structure begins to encourage local production of vehicles and discourage importation, the hype about Made-in-Nigeria vehicles will remain a pipe dream.
Nigeria having its own locally- produced cars by 2017
It will cost nearly N550 billion. The proposed launching of the Made-in-Nigeria vehicles in 2017 is not realistic due to unfriendly government policies that encourage vehicle importation to the detriment of local production.
Nigeria’s import duty is 10 per cent for commercial vehicles and 20 per cent for cars and right now, complete knock downs are being imported at 5 per cent.
When the duty was introduced in 2005, many companies closed down. If we do not change this tariff structure, then forget about any Made-in-Nigeria vehicle because nobody will invest in the sector. You see until now, the nation’s current policy structure encourages importation and discourages production and the NAC is trying to reverse this to what is obtainable in India and other places where it is easier to set up manufacturing plant than importing vehicles.
About 50,000 new and 150,000 used vehicles are imported into the country yearly. Nigerians spend an average of N550 billion on importing passenger-cars and by the time you add trucks and other vehicles, the amount Nigerians spend on imported vehicles will be running into N600 billion annually.
The market is there and with this market, automotive companies will be willing to invest in the country. But the constraint is the inauspicious import duty which made the vehicles to be cheap. Our current policy structure encourages importation and discourages production. That is why we are trying to reverse it to something that is obtainable in countries, like India and others, where it is easier to set up manufacturing plants.
Countries all over the world always give their companies a lot of protection. For instance, South Africa’s import duty is very high to protect their indigenous companies. Even some countries, like India, had raised their duty as high as 300 per cent before reducing it to 91 when the industry became stabilised. Note that the new automotive policy is a deliberate government effort to release a strategic and critical economic sector from the strangulating grip of dumping, and to allow it grow and flourish with all the attendant benefits, including massive employment.
Nigeria’s capacity and capability to meet a significant portion of its automotive needs has been undermined by massive wholesale, and seemingly, juicy imports. Facts about the operation capacity of Nigeria’s automotive sector in the past are well documented. The assembly and component manufacturing plants in the 1970s and 1980s peaked at over 120,000 cars, commercial vehicles, and tractors, per annum.
Even today, an entirely green plant, Innoson Motor Manufacturing Plant in Anambra State, is churning out buses and SUVs in spite of the daunting investment environment. The membership of the Nigerian Automotive Manufacturers Association (NAMA), has swelled recently with new bus and automotive body building companies. All the privatised assembly plants, including Volkswagen of Nigeria, now VON Nigeria; NTM, Kano; Steyr Nigeria Bauchi; Leyland Ibadan, now Leyland Busan; and Peugeot Automobile of Nigeria, now PAN Nigeria Limited are all operational but limping from the effect of the import duty. Their unutilised capacity and expansion spaces present an opportunity to fast-track production in partnership with global automotive firms. Nissan has already announced its partnership with the VON to assemble vehicles locally.
Considering the enormous potential for the automotive industry in Nigeria, including a population of over 160 million people, a middle-class currently estimated at 38 million people and growing, and an annual automotive import bill of over $3 billion, Nigeria’s success as an automotive manufacturing nation is a given. The nation does not even need an export market to succeed as South Africa did, although it can be better off with one.
Assembling operations alone can constitute as much as 25 per cent of the automotive vehicle value chain.The argument that Nigeria has not enough raw material may be true but it shouldn’t be a hindrance.Its robust petrochemical industry represents an opportunity to make automotive plastics and composite materials which has increasingly gained application in motor manufacturing. A four cold-rolled flat steel sheet production plants with huge capacity have been established in Nigeria.
Japan is one of the largest in terms of vehicle manufacturing but it has no single raw material. They import everything they use in manufacturing their cars down to the wood. They have forests, but they don’t like cutting their trees, and they don’t have a drop of oil. It is good to have the raw materials, but they may not matter if you have good policies, manpower, and other factors necessary for production.
We are blessed, we have the raw materials, we have plastics, we have the crude oil, there is aluminum. We also have iron ore, though it is not developed (but maybe a huge demand will encourage the private sector to come in and develop it because the automotive industry is a big user of iron and steel). Already, four companies are making slab sheets in Nigeria. So the industry is set in terms of raw materials, but a lot of other factors necessary for production are underdeveloped because those who want to develop them want to see the market.
There is also at the moment, a credit purchase scheme to enable Nigerians buy new cars and commercial vehicles, including agricultural tractors. Most commercial banks already have various products-offering in this regard. The NADDC will work closely with the private sector, including the auto companies, to launch a readily affordable scheme. Rickety vehicles may be traded in for new ones under the scheme.
Decision of the NADDC with regard to suspending the issuance of licences to new vehicle assembly plants
We took the decision to enable the council to consolidate the vehicle assembly operations and concentrate on developing local content. Our emphasis has now shifted to the development of automotive local content. Sites for automotive supplier parks in excess of 400 square hectares have been acquired across Nigeria and efforts are ongoing to acquire more while we are now evaluating tenders by global consulting firms with experience in the establishment of industrial parks. Training programmes have also been launched.
Like I mentioned earlier, the major objective of the National Automotive Industry Development Plan was to bring back the completely knocked down (CKD) automotive assembly and to develop local content. The response to the policy so far has exceeded our expectations, the current status of implementation of the policy is that the 14 existing assembly plants have started assembling new products (cars, SUVs, buses, pick-up trucks) since last year.
These plants include the VON Nigeria Limited, PAN Nigeria Limited, Innoson Vehicle Manufacturing Nigeria Limited, ANAMMCO Nigeria Limited, Leyland-Busan Nigeria Limited, NTM Nigeria Limited, and Steyr Nigeria Limited.
Nissan, VW, Hyundai, Kia, Honda cars and SUVs, Shacman and MAN Trucks and Ashok Leyland buses are now assembled in Nigeria. Also 11 new companies, including Century Auto (Toyota), TATA, Coscharis Auto (FORD, Joylong, Dongfeng), Dana Motors (Renault), Globe Motors (Higer), Leventis (FOTON-Diamler), Kewalram Chanrai (GM, Mitsubishi) have been given bona-fide manufacturing status and are on track to start assembly operations this year.
Automotive database to assist prospective investors
Yes, we have the National Automotive Database that could be used to assist prospective investors in their investment decisions. The council has developed an internet-based platform to capture the data of all vehicles registered in Nigeria, automotive component manufacturers, assembly plants, car dealership, etc. The provision of accurate and timely data on the Nigerian automotive industry was to ease the process of the decision making by the government and the general public.
http://leadership.ng/business/499210/made-nigeria-cars-not-feasible-2017-jalal
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