As Buhari’s tenure ends, auto policy remains elusive

Stakeholders in Nigeria’s automotive industry have expressed deep concerns over the failure of the present government to actualise the much talked about auto policy bill almost eight years into the life of the government.

With just a few weeks to the end of the administration, many stakeholders doubt the feasibility of the new bill being sent to the National Assembly for approval and subsequent presidential assent.

Last week, the Minister of Trade and Investment, Otunba Adeniyi Adebayo, disclosed that the ministry would soon submit a new auto policy for the Federal Executive Council (FEC)’s approval.

He stated this while addressing Senior Executive Course 45 participants of the National Institute of Policy and Strategic Studies (NIPSS), Kuru, Plateau State, who paid a visit to the ministry.

He said the auto policy was reviewed with the objective of increasing local production of vehicles.

Many stakeholders however take the minister’s revelation with some reservations given the fact that several promises, right from 2021, to send a new bill to the National Assembly have not been fulfilled.

Daily Trust reports that the bill seeks to provide, among others, a legal framework to guide investment in the automotive sector and provide incentives for investors especially the Original Equipment Manufacturers (OEMs) willing to set up plants in Nigeria.

This led to the development of the National Automotive Industry Development Plan (NAIDP) in 2013, which seeks to among others enable local assembly plants to import Completely Knocked-Down (CKD) vehicles at 0% duty and Semi-Knocked-Down vehicles at 5% duty, while importers pay a 70% duty on new and previously owned vehicles.

The plan, which was to run from 2014 to 2024, was passed by the National Assembly around 2019 but President Muhammadu Buhari declined assent citing conflicts on existing bills. Stakeholders worry that the lack of an extant law has made foreign investors shy away from the country.

The federal government however promised to send a fresh bill to the lawmakers to address the concerns.

In 2021, the minister said the bill was ready to be sent to the National Assembly and just a few weeks to the end of Buhari’s tenure, there is no such bill before the lawmakers amid the mounting challenges in the automotive sector which have stalled transition of local auto assemblers from SKD production to CKD or fully built.

Our findings revealed that out of 56 indigenous assemblers licensed by the federal government under the 10-year NAIDP with an installed capacity of over 500,000 units of vehicles per annum, only six are still active and at extremely low capacity. Many of the technicians employed have been either converted to after-sales personnel or are out of job.

The chairman of the Transit Support Service (TSS), Mr Frank Nneji, said his company which hitherto operated on the premises of ANAMMCO in Enugu before activating its own plant where it assembles heavy-duty automobiles, was forced to reduce its staff strength of 100 by half due to lull in business and inconsistent government policy.

Nigerians resort to importing used vehicles

Daily Trust reports that in the absence of affordable local vehicles in Nigeria, the people have continued to spend hugely to import used vehicles with N1.8 trillion spent in six years.

Data from the National Bureau of Statistics (NBS) in January 2023 indicated that Nigerians have continued to rely on used cars from the United States of America as cheaper alternatives.

Analysis of data on foreign trade reports conducted by the NBS from 2017 to 2022 indicated that Nigerians prefer cars from the US as of the N2.5trn of the commodity imported into the country, N1.8tr was imported from the US alone.

A breakdown of the figure for the commodity labelled ‘Used Vehicles, with diesel or semidiesel engines, of cylinder capacity >2500cc’ indicated that in 2017, N96bn of it was imported from the US out of a total of N145bn.

In 2018, from the N269bn imported into the country, N180bn was from the US. The figure further rose to N455bn in 2019 from a total of N580bn. In 2020, N529bn of the commodity was imported from the US out of the total of N718bn imported.

But the figure dropped to N399bn in 2021 for the commodity imported from the US while the total was N617bn. From January to September of 2022, N205bn of the commodities came from the US out of the N235bn imported.

No immediate hope for auto bill – Experts

With the few cars produced in the country out of the reach of ordinary Nigerians, the importation of used cars became the alternative for many.

In reaction to this influx, the Managing Partner at Transtech Industrial Consulting and former director of Policy and Planning at NADDC, Luqman Mamudu, stated that the used vehicles market in the United States offers a wider stock of vehicle variety and public auctions.

He said there is a huge stock of salvage vehicles that Nigerians cheaply refurbish locally, and a penchant for American standard fondly called American spec.

Also commenting about the auto policy recently, he said it may not be feasible in the life of the present government.

“However, it will be nice to submit and get the approval of the FEC before May so it can be pending at the cabinet office before the next regime…. Essentially, the way I know the bill, it’s an investor confidence policy.  I want to believe it remains as that perhaps with some modifications.

“I have no doubt that the incoming legislature will pass it. It has passed through it successfully before,” Mamudu said.

Speaking with Daily Trust, the Executive Secretary of the Nigeria Automotive Manufacturers’ Association (NAMA), Remi Olaofe, described as “painful” the delay in the passage of the auto policy bill. He said the delay in the last eight years has cost the nation unquantifiable losses.

He said it would be in the overall interest of the country if the government was able to achieve auto policy before the administration winds down.

Olaofe said: “We can’t put a figure to the delay in having this auto policy. Even from the social side, the number of people that have been thrown out of jobs, people that were gainfully employed, trained, money spent to train them; where are those people?

“At the macro level, the government is supposed to be deriving a lot of benefits in the area of trade and we should be moving towards a CKD arrangement but we are going back to where we started; many factories have shut down. Everybody has gone back to import.”

He noted that Ghana has become a hub in the West African automotive market by virtue of implementing the auto policy.

The Deputy Managing Director of CFAO, Mr Kunle Jaiyesinmi, said since the bill is yet to be transmitted to the National Assembly, it means “it’s not feasible in this dispensation and I am sure the incoming administration will have a different thinking and approach as regards the policy; meaning that we are back to square one.”

An auto enthusiast, Mr Femi Olawale, said made-in-Nigeria vehicles can dominate the Nigerian market with adequate support from the government and aggressive marketing. For instance, he said, Innoson has tried to set the pace with his venture but that more encouragement and marketing is needed to secure the buy-in of many Nigerians.