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Government explains delay in auto policy review

By Kingsley Jeremiah   |   14 October 2016   |   2:06 am
Innoson’s made-in-Nigeria vehicle

Innoson’s made-in-Nigeria vehicle

Investors express mixed reactions

While the Director General of the National Automotive Design and Development Council, (NADDC) Aminu Jalal, said the Federal Government is on the verge of introducing changes to the National Automotive Industry Development Plan (NAIDP), investors in the scheme are divided over the timeliness of the plan.

Jalal told The Guardian in a telephone conversation that government remains committed to the policy, adding that the agency would proceed for presidential endorsement after a Monday meeting with the National Economic Council (NEC).

He said the review, which is only minor would affect concession that allows local assemblers to bring one new fully built vehicle for free after they assemble a vehicle locally.

Part of the review would also involve strict control that would check illegal importation of vehicles, particularly used vehicle into the country, Jalal said,

“Government is committed to continue with the policy. The review is a minor review, for instance, the concession import of one-to-one will continue but will now be based on value. Sometimes you can assemble a car worth N5 million and use the concession agreement to bring in another car that may cost N20 million, government now wants the value to match.

Some of the investors, said delay in the review is creating so much uncertainty that may jeopardize progress in the sector.

But others insisted that the current economic slump in the country has done more harm to their operations than the delay, noting that they were optimistic that the review would be timely and total.

Indeed, investigation showed that most expatriates and other workers, particularly those who earn in foreign currency are being shown exist door, while the organisations embark on cost cutting method to remain in business.

Minister of Industry, Trade and Investment, Okechukwu Enelamah, at a one-day stakeholders’ forum on the policy in June this year, said the President Muhammadu Buhari-led administration was in support of the plan but stressed the need for review in order to fine-tune the plan.

The policy, introduced in 2013 by the then government of former President Goodluck Jonathan to boost assemblage of vehicles locally has come under criticism as some stakeholders insisted that the strategy neglected fundamental issues.

Chief Executive Officer of Proforce Defence Limited, an indigenous armoured carmaker in Nigeria, Ade Ogundeyin believes that though the plan is taking longer time, government would ensure the review address key concerns raised by stakeholders.

Ogundeyin, who had about 250 expatriate in his workforce now has about 10 to enable the company survive the country’s harsh economic situation.

“I think the government is trying to put in a lasting solution and a game plan that would be fair to all party. Government also has a lot of things to deal with now. I think that is why it is taking some time. I am almost certain, how they are going to fine-tune the automotive policy will favour the manufacturers.”

“We are optimistic as an organisation even if the review is not going to favour us. We have tried as much as possible to bring down our cost. We have sent a lot of the expatriates that we do not need back to their countries. We had 250 expatriates, we reduced them to 85 initially and further reduced to 65. Now we have only nine because Nigerians have acquired the technical know-how. Though Nigerians may not be excellent but with a lot of training we are getting there.

“The power holding company was giving us a bill of about N150 million monthly and there have never been a month that we pay less than N100 million. We told them to disconnect us and we bought a huge generator. We realize that our total cost in a month is N25 million”, he said.

General Manager, Boulos Enterprises Limited, Julian Hardy said the sector needs clarity, particularly on the automotive policy.

“We need clarity because no body really knows what is going on at the moment. We still have huge numbers of imported used vehicles coming into the market. The new car market will continue to fight with the used car market, which are sold very cheap because they are vehicles that have been rejected in other countries.”

Speaking about the disparity between naira and dollar, Hardy said business operation has become extremely difficult for the firm, which planned to roll out locally assembled vehicles from its plant in Lagos this month.

He disclosed that the organisation, which has to source forex from the parallel market may not meet up with the plan of launching assembled-in-Nigeria Suzuki this month, as delivery of parts are expected to arrive by the end of the month.

While Jalal disclosed that government would soon announce financial scheme that would enable people buy new vehicles, Hardy said Boulos is in discussion with key financial institutions that would help the company to lease out vehicles and recycle after few years.

Group Deputy Managing Director, Kewalram Chanrai Group, authorize dealers of Mitsubishi, Isuzu and some Chinese vehicles in Nigeria, Victor Eburajolo believes that government needed more time to finalise the policy review.

He said the unavailability of forex remain the basic concern in the sector.

Eburajolo, who was hopeful that the policy would not be tempered with, said the orgnanisation’s assembly plant, which was launched earlier in the year is running at a slow pace because of the economic sitaution, as the company is concentrating on three and two wheelers.

Chairman of Elizade Nigeria Limited, Herbert Ajayi, had said: “The not-so-coordinated economic policy of government in the automotive industry is not helping matters.

Managing Director of the company, Ademola Adejo, who said the sector was struck by double tsunami – government continuous silence and economic slump, urged government to give a clear path that would enable investors make necessary plans.

“We have put up plants, investing billions of naira into assemblage however, when setting up plants; you are to have markets for the vehicle you want to building. But what we see today is a shrinking market. In 2014 we had total size of 50, 000 units but the market size has crashed.

“Things are getting more difficult than we expected. We can’t make new purchase to go ahead with our businesses. The market is grossly uncertain. With a population of about 180 million people, Nigeria has the potential to manufacture vehicles, but how can we attract investment if we make the situation uncertain to investors?”

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