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Forex Policy Puts Vehicle Assembly Plants In Comatose

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• Stakeholders Call For Auto Policy Review
IN 2014, when the National Automotive Design and Development Council (NADDC) came into being, the aim was to position Nigeria as one of the leading auto manufacturing nations. The council was mandated to create the enabling environment needed for local production of vehicles that can withstand global competition in terms of pricing, using local human and material resources.

The NADDC is a merger of the defunct National Automotive Council (NAC) and the Centre for Automotive Design and Development (CADD). The merger was effected by the Federal Government enactment of Act No. 60, 2014.

That same year, government came up with the National Automotive Policy in recognition of the importance and basic role of automotive industry in the industrial development of the country.

With that policy, government intended to ensure provision of automotive vehicles for urban and rural areas, accelerate technological development of the country, increase employment opportunities for Nigerians, conserve foreign exchange, increase private sector participation in the establishment of auto industry and the acquisition of technology among others.

And though the policy is almost four years old, the implementation is still fraught with a lot of inconsistencies, making stakeholders call for its review, as they claim that the right environment for its full implementation is lacking.

During the week, they renewed the call for a review, and a section of the stakeholders met to take a decision on the matter. At the end, they agreed to present the case to the Minister of Finance, the Minister of Industry, as well as other relevant bodies. During the week, members of the Automobile and allied products group of the Lagos Chamber of Commerce and Industry (LCCI) also met to review the 2016 Economic outlook for the auto industry and said there was need to impress it on government to review the country’s auto policy, as it has failed to fulfill its objective.

In the policy, there is a provision that when you assemble one vehicle, you get waiver to import two equivalent ones. But that is not being implemented, as an incentive for local production. Scarcity of forex is another impediment. We need to import SKD and CKD and other equipment.

“There is need to review the policy, because there are those that set up the assembly plant from the scratch and there are those that are importing. We must go to the ministry with facts and figures, when demanding for a review. These assembly plants are not there to produce made in Nigeria vehicles. The 70 per cent tariff is high and it is encouraging smuggling. The business environment for vehicle manufacturing in Nigeria is not conducive and the National Automotive Council (NAC) is not in control.

They don’t have the statistics of what is going on in the auto sector. There is no data about local assembly for policy purpose. We don’t have records of Complete Knocked Down (CKD) and Semi Knocked Down (SKD) that are being imported into the country,” another chief executive of an auto company lamented.

Another member of the group who spoke on the condition of anonymity, whose company is among those licensed by government to manufacture vehicles, said his company is yet to commence manufacturing activities because of the increasing value of the dollar against the naira. He also called for a policy review for a vibrant auto industry.

“The forex situation in the country is making it difficult for many company, which got licence to commence operation because the CKD and SKD needed for assembly are imported and nobody can import now because of the rising value of the dollar. They need to revert to a staggered implementation of the policy for it to be efficient. The situation, where we are all compelled to move from SKD TO CKD, is not realistic and that alone is affecting proper implementation of the policy,” he said.

In the same vein, managing director of a multinational company, who also called for a review, said the right condition for a successful implementation of the policy is still lacking.

To implement the policy successfully, he said an efficient and cost effective system must be put in place. The system must be sound, while a good vehicle financing system should also be put in place.

“In the policy, there is a provision that when you assemble one vehicle, you get waiver to import two equivalent ones. But that is not being implemented, as an incentive for local production. Scarcity of forex is another impediment. We need to import SKD and CKD and other equipment. That we can not do now, because not only is there scarcity of foreign currencies, but there is also rising value against the local currency,” he said.

Since the formulation of the policy, no fewer than 35 auto companies have been licensed to kick-start automobile production.
These include Innoson Vehicle Manufacturing Co. Ltd., ANAMCO in Enugu, Iron Products Industries Ltd, Leyland Busan Motors Ltd., National Trucks Manufacturers, PAN Nig. Ltd., Proforce Ltd., Scoa Nig. Ltd. Steyr Nig. Ltd., Stallion Nissan Motors Nig. Ltd., Stallion Motors Ltd., VON Automobile Nigeria Ltd., Dana Motors, Hyundai Motors Nig. Ltd., Nigeria-China Manufacturing Company Ltd., Honda Manufacturing Nig. Ltd., Sanyo, R.T. Briscoe Nigeria Ltd., Globe Motors, Toyota Nigeria Ltd., Coscharis Motors Ltd., CFAO Motors Nigeria Ltd and Kewalarams Chanrai Nig. Ltd, Leftbart Innovations and Consulting Ltd, Transit Support Services Ltd, Zahav Automotive Co.Nig Ltd, Nigeria Sino trucks Limited, Perfection Motors Co. Ltd, Richbon Nigeria Limited, General Appliances West Africa Ltd, Transguinea Ltd/ Leventis Motors, Tilad Nigeria Ltd, Aston Motors, Bascon Nigeria, Lanre Shittu Motors and Koncept Autocentre Nigeria Ltd.

But the council said last year that although it had issued 36 Auto Assembly licenses, only three of them are in operation. Others exist only in name, a situation that made it to suspend issuance of further licences despite increasing demand by would-be entrants.

Analysts are, however, of the view that the increasing demand is an indication that with the right policy and environment, Nigeria could become an Auto Manufacturing hub because of its huge market, compared to South Africa, which currently serves as the auto hub in the continent.

Presently, Nigeria has the least auto manufacturing activities in the continent. Going by recent revelation that Morocco, with only two assembly plants, is producing 460,000 units and Egypt, which has 26 assembly plants currently boasts of 325, 000 production capacity, while Nigeria with an allegedly 36 assembly plants only has 15, 000 production capacity, an indication or proliferation of licences for assembly plants that are not operational.

There are few reference points, as far as the success story of the Automobile policy implementation is concerned. One of them is the reviewing of the Kaduna Plant of PAN Nigeria. The makers of Peugeot and its technical partner, AP of France parted ways many years ago. But with the introduction of National Automobile Industrial Development Programme (NAIDP), there was new approach that led to the resurgence and production in the plant.

Another reference point in this regard is Innoson Vehicles Manufacturing Company, a 100 per cent Nigerian-owned company, which had its production lines officially commissioned in 2010, and has made remarkable impression within a short period.

Chairman of the company, Chief Innocent Chukwuma had lamented the low patronage of the company products in Nigeria, when he said: “We are in various parts of Africa and at the moment, our vehicles are being bought and sold in Ghana. We are also selling in Cote d’Ivoire and Mali. In Chad, there are Innoson vehicles and the interesting thing is that in these countries, our vehicles are so well accepted. You would think we have been in the market for several decades. Their satisfaction is not just from the mere fact that we are able to supply them good quality motor vehicles, but they take pride in the fact that this is an African initiative. This might be a test case for the kind of leapfrog the continent could witness, if all talents are harnessed towards that purpose. In other African countries where we have sold these vehicles, the joy that we have seen is greater than what was the case in our home market, Nigeria,” he said.

The Nigerian automotive industry has performed poorly due to the low patronage by government and the general public, very low capacity utilisation, poor perception of locally made goods, high cost operating environment, insufficient government protection policy, absence of low cost, long term funds, weak and deteriorating infrastructure, as well as inconsistency in tariff policy.

Many Nigerians had criticised the implementation of the new auto policy, saying the implementation is too hasty. They argued that the import prohibition and increase in tariff on imported vehicles from 35 percent to 75 percent, when the assemblies have not started to roll out their products, is uncalled for and makes no economic sense. They advocated for gradual prohibition of auto product so as not to make life unbearable for Nigerians. Their point is that you cannot ban the product or make it impossible for people to acquire, when government is yet to provide alternative source of such acquisition and at competitive price

At a symposium and launching of the Automobile and Allied Products Group of the Lagos Chamber of Commerce and Industry in Lagos recently, a popular auto dealer, Chief Ade Ojo, said the country’s auto policy was put in place and implemented without proper planning.

Although, the policy has attracted marginal investment to the auto sector, there is no corresponding investment in the local component-manufacturing segment, which is very critical to the success of the policy. More than 95 per cent of the firms, which were issued licences to assemble vehicle are still keeping their licenses, waiting for a clear policy direction from the Federal Government

Stakeholders in this segment said funding was paramount for the revival of the comatose component manufacturing companies.
The Chairman, Motor and Miscellaneous Assembly (MMA) sectorial group of the Manufacturers Association of Nigeria, Chief David V.C. Obi said recently that the sector had been lying comatose for over 17 years, and that efforts are on to revive it.

“The lack of integrated plans to develop local content was one of the reasons for the failure of automotive industry in the past. But a stakeholders’ meeting was convened last month to discuss the prospect of developing local content, and to form a strong automotive component industry that will produce vehicle parts and components for locally assembled auto products. “

There are plans by stakeholders to form automotive component system with tier1 and tier 2 suppliers, which will also carry out independent research and development,” he said.

To do this perfectly, he noted that auto component manufacturers were divided into plastic and rubber, chemical, welded parts, metal and electrical component to identify parts and components to be developed, conduct national industrial gaps and required skills for manufacturing, technical demands and process, including market demand.

“We want serious auto manufacturers that will start from the scratch with local content. Auto manufacturing is not a small business. Nigeria must show high level of seriousness for foreign investors to come and start from the beginning.”



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