… as low purchasing power hampers new vehicle acquisition
The Nigerian government is making efforts to boost local automobile manufacturing, but importation of ‘Tokunbo’, legislation, low-lending constitute stumbling blocks. Victoria Onu reports from Abuja.
Despite efforts by the Federal Government to encourage patronage of locally assembled vehicles, Nigerians spent N823bn importing used vehicles in 2020 between January to December.
Interestingly, the entire capital budgetary allocation of the Ministries of Transport, Power, and Education for 2021 stood at N548.56bn.
According to the 2021 Appropriation Act, the Federal Government allocated the sum of N198.28bn to the Ministry of Power, N197.41bn to Ministry of Education and N152.77bn to the Ministry of Health.
The amount spent by Nigerians importing used vehicles is also higher than the 2021 capital allocation of N366bn to 60 government owned enterprises, including the Central Bank of Nigeria, the Nigerian Communications Commissions, the Nigerian National Petroleum Corporation and the Nigeria Television Authority, among others, as captured in the Fiscal Responsibility Act.
Recall that the Federal Government launched the 10-year (2013-2023) National Automotive Industry Policy Development Plan (NAIDP) in 2013, as part of efforts to revive the moribund automobile industry. It was aimed at attracting at least $5bn investment to the sector.
To encourage investment in local vehicle production and local content development, the NAIDP banned, from 1st January 2017, the importation of vehicles into Nigeria through land borders.
It was also expected to generate over 100,000 jobs and assemble 10,000 units of vehicles annually, focusing on five key areas, including infrastructure, market growth, standards, investment promotion and skills development.
The FG also tasked the National Automotive Design and Development Council with ensuring NAIDP’s full implementation. As at August 2017, a total of 52 local automobile assemblers had been granted assembly status by NADDC, but currently, only nine of them have started assembling semi-knocked down vehicles in Nigeria.
The companies, according to investigations, are Peugeot, Nissan, Honda, Innoson, Hyundai, Ford, GAC, JAC and Kia Motors.
Those who know aver that a major clog in the wheel of progress is the pending NAIDP Bill that the Nigerian Senate has yet to pass into law.
Also, findings by The Point revealed that the inability of the Federal Government to implement a national vehicle finance scheme and the smuggling of vehicles into the country had been hampering the projected production and market absorption of two million new vehicles annually. Another restraining factor is limited purchasing power of Nigerians.
These are some of the key factors hampering the much desired investments into the sector as envisaged by the automotive policy.
About six years after the commencement of the policy, several local auto manufacturers are still having difficulties to scale up production due to sustained smuggling of used vehicles, which has led to low demand for new ones. Industry officials are of the opinion that smuggling of vehicles through various land borders into the country is still thriving.
A senior official in one of the automobile assembling companies, who craved anonymity, told our correspondent that many of the local automobile firms were feeling the negative impact of smuggling because such practice was not encouraging them to produce new vehicles.
Based on figures obtained by The Point from the National Bureau of Statistics, cars are imported into Nigeria from the United States of America, Brazil, Canada and other European countries such as Italy, Belgium, Germany, Netherlands and Canada.
Analysis of the trade statistics showed that in Q1, 2020, the sum of N190.57bn was spent by Nigerians on importation of used cars.
Of this amount, import from the US accounted for N123.65bn, Italy N5.79bn; Belgium, N4.42bn; Canada, N3.77bn; and Germany, N3.38bn.
Similarly, in the Q2, 2020, Nigerians imported used cars worth N177.89bn.
A breakdown of the N177.89bn showed that the US accounted for the highest source of vehicle importation into Nigeria with N116.02bn.
This is followed by Netherlands with N28.45bn, while Brazil, Italy and Canada recorded N24.65bn, N4.56bn and N4.18bn, respectively.
In Q3 and Q4, 2020, Nigerians spent the sum of N210bn and N241,45bn, respectively, on importation of used vehicles.
On the impact of imported vehicles on the commercial viability of local assembling plants, a manager in one of the major automobile firms in Nigeria described the situation as worrisome.
The Manager, who didn’t want to be named as he was not officially designated to speak on the matter, said, “Many of the local auto companies are feeling the negative impact of the activities of importers of used vehicles.
“How do you encourage an investor who has set up an assembling plant in Nigeria with a huge operating cost to produce vehicles that would compete in terms of pricing with used vehicles imported into the country?
“We have advocated the need for government to completely stop the importation of used vehicles, provide adequate support for auto firms to set up vehicle assembling plants in Nigeria, then come up with a solid vehicle finance scheme. Then you will see how the sector would add value to the economy through job creation, poverty reduction and economic development.”
However, the Director-General, Nigeria Automotive Design and Development Council, Jelani Aliyu, revealed that the agency had been working behind the scenes towards a vehicle finance scheme that would help Nigerians to acquire new vehicles.
The NADDC said it had already reached an understanding with three banks for loans to be given to eligible Nigerians after they must have deposited 10 per cent of the cost of the vehicle. He disclosed the identities of the banks as Wema Bank Plc, Stanbic IBTC Bank and Jaiz Bank Plc. He highlighted that the loans would be provided at a single digit interest rate of eight per cent.
“We are working with three banks – Wema Bank, Stanbic IBTC and Jaiz Bank to offer vehicle financing at a single digit interest rate. We’ve reached an advanced stage,” he said.
The DG added that the government was also encouraging automobile manufacturers to continue to increase the level of their investments in the country.
