Where are we on the auto policy?

National Automotive Policy

Car manufacturing and assembly in Nigeria can be traced to the arrival of the colonialists in Nigeria. The British companies such as 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 to advance their economic interest in the country.

The government however thought it wise to encourage technology substitution under the second national development plan and by 1969 declared an invitation for proposals for the establishment of passenger car assembly industry in Nigeria through the Federal Republic of Nigeria Official Gazette No. 53 of 9th October, 1969. The government later selected Peugeot and Volkswagen and by 1975 Peugeot Automobile of Nigeria (PAN) and Volkswagen of Nigeria (VWON) were established in Kaduna and Lagos respectively. The government was a major investor in both companies. In PAN, the Federal Government held 35 per cent, Kaduna State government 10 per cent, Nigeria Industrial Development Bank 5 per cent; Automobiles Peugeot of France, 40 per cent. In VWON, the Federal Government held 35 per cent equity, Lagos State government 4 per cent; local distributors 10 per cent; BHF (German Investment Bank) 11 per cent and Volkswagen 40 per cent. These companies started assembly plants with capacity to assemble 10, 000 units of cars and grew in capacity with time. Nigerians got used to the vehicles and both brands practically became the official vehicles for the growing population. The companies were so successful that in their heydays they were producing over 100 vehicles per day and providing thousands of direct and indirect employment. The growth and survival of these firms also gave the impetus for the advancement of ancillary companies such as Michelin, Dunlop, Berger Paints and many more.

The third national development plan of the government 1975-1980 resulted in the establishment of more assembly plants in the country bringing the total to six, with government having interest in all. The first major problem that affected the automotive industry in Nigeria was the Structural Adjustment Programme that devalued the Naira and made importation of needed materials and equipment difficult. Nonetheless, the auto companies survived the harsh economic terrain until 1992 when the government introduced the free importation policy paving the way for massive importation of new and fairly used vehicles. That was the beginning of “Tokunbo” vehicles in Nigeria. The government that should have protected the industry by patronising the local auto companies also joined the trend of importing vehicles from Europe and America. Consequently, the auto industry in the country began a downward slope and every attempt at rescuing the local assembly business has practically proved abortive.

August 1993 through Act 84, the government established the National Automotive Council. Prior to setting up the Council, government had introduced the National Automotive Policy designed to ensure the survival, growth and development of the Nigerian automotive industry using local human and material resources. The policy was launched on August 23 1993 and two days later the National Automotive Council was established by law as a parastatal in the Federal Ministry of Industry. The responsibilities of the Council were to regularly study and review the automotive components development industry in Nigeria, and recommend incentive measures for ensuring compliance with approved local programmes, among other responsibilities. In 2013, the Nigerian Automotive Industry Development Plan (NAIDP) was launched to restore the nation’s lost glory in vehicle assemblage and improve local content. To further concretise government’s resolve, a bill was sent to the national assembly for consideration. And in November 2017, the senate passed a bill on the Nigerian Automotive Industry Development Plan. Similarly, ECOWAS ministers of industry adopted the automotive industry as one of the four priority industrial development areas along with agro-processing, pharmaceuticals and construction thereby opening a potential auto market for vehicles assembled in Nigeria.

READ ALSO  Air Peace explains flight disruptions, apologises to customers

The introduction of the NAIDP saw an immediate resuscitation of erstwhile dead vehicle assembly plants and the entrance of new ones. The spokesperson for another body in the auto revival plan, National Automotive Design and Development Council, NADDC, Mr Bello Rasheed in 2015 announced that licences had been awarded for the establishment of 12 new vehicle assembly plants in the country expected to produce wide-ranging automobile products including sport utility vehicles (SUVs), passenger cars, pickup vans, buses, tricycles and motorcycles. The licensed companies were Toyota, Honda, General Appliances West Africa, Perfection Motors Company, and Richbon Nigeria. The others are R.T. Briscoe Nigeria, Nigeria-China Manufacturing Company, Nigeria Sino Trucks, Coacharis Motors, DAG Motorcycle Industry Nigeria, Globe Motors Nigeria, Century Auto-Assembly Nigeria, and Concept Auto Centre.  However, contrary to the preceding list of licensed companies, the National Automotive Council only has six automotive infrastructure centres listed on its website. They include Peugeot Nigeria Ltd (PAN),Kaduna, Volkswagen of Nigeria Ltd. (VWON) Lagos; Anambra Motor Manufacturing Company (ANAMMCO); Styer Nigeria Ltd. Bauchi, National Truck Manufacturer (NMT),Kano and Leyland Nigeria Ltd. Ibadan. The intended benefits of the local assemblage of vehicles are to forced down price, create jobs through increased local content, promote technology substitution and transfer, and ultimately grow the economy.

Regrettably, in spite of the lofty dreams spelt out in the automotive policy and NAIDP it is clear that the country is nowhere near the dreams and aspirations in the automotive industry. In fact the NAC had an ambitious programme for the design and prototyping of a low cost Nigerian vehicle essentially built for Nigerian roads. Years after the programme was conceived, nothing of such has happened despite the establishment of the Specialized Auto Industry Research Fund. What we have seen are news of auto companies returning to Nigeria to begin assemblage of vehicles. For instance, in July 2014, Kia Motors announced that it would begin the production of selected models – Kia Rio, Cerato and Optima – in Nigeria by September of the same year. Whilst the company claims these brands are assembled in Nigeria, it has not in anyway forced down the price of the vehicles. Many other auto companies have announced the opening of assembly plants in Nigeria but with no direct positive visible impact on the auto industry in Nigeria. Observers have noted that the policy may not be fulfilling its mandate because of the manner it is being implemented. First of all, despite the touted local capacity, a number of the assembly plants in Nigeria are not producing vehicles and in some cases they import virtually the entire vehicle and conduct minor finishing in Nigeria but declare the vehicle as “made in Nigeria.”According to the National Automotive Council, the Nigerian automotive industry has installed capacity to produce 108,000 cars, 56,000 commercial vehicles, 10,000 tractors, 1,000,000 motor cycles and 1,000,000 bicycles annually. Capacity utilisation in vehicle manufacture is below 10% and about 40% in motorcycle, bicycle and components parts manufacturing.

READ ALSO  Indonesia picks Hyundai for $4bn refinery upgrade

Yet, to discourage the importation of vehicles, especially fairly used, the government increased import tariffs from 20 per cent duty on passenger cars (PC) and 10 per cent on commercial vehicles (CV) to 70 per cent and 35 per cent respectively.Equally, a ban was placed on importation of vehicles through land borders. In essence, the government has been losing money to the policy due to these stringent policies because importation through the ports has reduced but smuggling has been on the increase. The Managing Director, of the Nigerian Ports Authority (NPA) Ms. Hadiza Usman upon assumption of office had hinted of a possible review of the policy following the criticisms that followed its implementation. In her words: “We are discussing with the Federal Ministry of Trade and Investment regarding where we are following the automobile policy because federal government needs to review some of its policies to determine the benefits that will accrue to the government following the period of implementation.” “We will aggressively sustain this discussion to ensure that in a timely manner the government concludes its assessment of this policy and takes a decision on the way forward as it relates to the revenue being lost within the Authority and also the development of the automobile industry itself.”

National Automotive Design and Development Council (NADDC) has consistently declared its resolve to strengthen the implementation of the Nigerian Automotive Industry Development Plan (NAIDP) to ensure its mandates are fulfilled but it appears the government has chosen to believe things are improving whilst the automotive industry remains stagnant. What is clear is that the policy, development plan, and Councils have not delivered an industry that is capable of meeting local demands, neither have they produced affordable vehicles for the Nigerian that cannot afford a brand new vehicle. Rather the current implementation of the policy has led to revenue loss for the country while it generates earnings for neighbouring countries. Importation through the ports has reduced but smuggling has not been nipped in the bud. The auto policy does not have to go away but it can be implemented in a way that does not hurt local businesses. A review may truly be necessary at this point.