Managing Partner, Transtech Industrial Consulting and former Acting Director-General of the National Automotive Design and Development Council (NADDC), Luqman Mamudu in this chat with Daily Trust warns that Nigeria may become a dumping ground for used vehicles in the wake of the uncertainty over the Auto Sector Bill. Excerpts!
How would you rate the performance of Nigeria’s automotive sector in 2021?
On a scale of 1-10, I will say 5.
Are we progressing, or retrogressing?
Both. I will explain. The Nigeria automotive industry until 2014 had less than 70,000 installed capacity for the assembly of cars and commercial vehicles, including CKD/SKD capability, almost zero components, and parts capacity. However, only about 1,600 units were assembled annually, largely dominated by Peugeot products. This was between PAN Nigeria (Peugeot), NTM, Kano (Sino-truck), Styre Bauchi (Agricultural Tractors), ANNAMCO Enugu (Mercedes Trucks), Leyland Ibadan (BUSAN Commercial Vehicles), and Innoson Motors Manufacturing (Buses, SUVs, and Cars).
There were considerable local activities in commercial vehicle bodybuilding, especially Tanks for lifting wet products and open Trailer Buckets for construction materials movement /general goods. Then very extensive capacity for wet cargo tanks. Companies like IPI (Lagos), Arewa Metals Kaduna, Gorgeous Metals (Kaduna). Proforce (armored), all other assembly plants active in Nigeria before then had completely shut down with equipment stripped in some cases.
Once the National Automotive Industry Development Plan was launched in 2013/14, activities with new entrants gradually ramped up to about 500,000 installed capacity or 700 percent jump but capacity utilization remained low at less than 4 percent or 15,000 vehicles per annum. Meanwhile, Nigeria import averaged 400,000 vehicles annually from official customs statistics but smuggling activities were prevalent.
All vehicles destined for Nigeria were shipped to Cotonou and neighboring countries and gradually smuggled in. This remained the case between 2017 to 2020 as assembly activities and potential to increase capacity utilization remained undermined by the increased importation of used vehicles from scraps yards of Europe, North America, etc.
Did you notice major changes in 2021?
There was hardly any positive change in 2021 except that some significant Global Motor Companies like Gilly, XCMG, and new local brands joined the ranks of local assemblers. The industry suffered a significant setback with the passage of the 2020 Finance Act which completely shut down assembly activities in commercial vehicles assembly and vehicle bodybuilding.
Don’t forget that Nigeria had already a long-established capacity for commercial vehicle bodybuilding. Section 38 of the 2020 Finance Act reduced the import duty on all fully built commercial vehicles including tankers and open body trailers from 35% provided under NAIDP to protect the industry to 10% which is exactly the same as imported Semi Knocked down (SKD) meant to be assembled in Nigeria.
Naturally, all assembly and bodybuilding activities ceased with critical personnel lay-offs. All assemblers simply resorted to outright importation of FBUs as they were forced under NAIDP assembly anyway. It didn’t make commercial sense to continue. Suddenly, from a total import volume of 558,000 vehicles in 2019, this jumped to 849,756 vehicles during 2021 or well over 40% increase. These statistics are available from Nigeria Customs. The industry can be said to have been totally frustrated during the year.
What are the issues responsible for this?
There was clearly no attempt to find out nor resolve the factors constraining increased utilization in Nigeria’s various assembly plants nor were the assemblers consulted. Levies on car assembly were not spared. They were practically slashed to allow free importation of luxury vehicles which was the disguised purpose for manipulating the tariff lines, especially for commercial vehicles. The whole idea was to give the impression that the plight of the masses was being addressed.
What is the effect of the uncertainty surrounding the automotive policy bill?
The President returned the bill unsigned because as is normal he will seek the opinion of relevant MDAs before consideration. He was advised not to sign because a certain clause in it conflicted with a provision of pioneer status in the NIPC (Nigeria Investment Promotion Council) Act. Ordinarily, this ought to have been quickly addressed and returned but nothing happened. The global investment community already poised to increase investment in Nigeria shied away. There was no assurance either from any quarters that this would be addressed. The pipeline for automotive investment was already established before 2020 with the entrance of NISSAN, FORD, KIA, SINO TRUCK, SHACKMAN, FORD, HYUNDAI, TATA, PEUGEOT, MAN TRUCKS and other OEMs of no less status has remained frozen or canceled. Other African countries are now being considered as possible automotive hubs for West Africa with the exclusion of Nigeria by the African Association of Automotive Assemblers (AAAM) which is an umbrella organization of global OEMs operating in Africa. This is sad because Nigeria remains the biggest single market. It means that under AfCFTA Nigeria will simply be a dumping ground as we become a single market.
