Stakeholders in Nigeria’s automotive industry have called for a shift from fuel subsidy to affordable vehicle financing, arguing that access to credit could improve mobility while stimulating local vehicle assembly and component manufacturing.

The call was made at the Lagos Chamber of Commerce and Industry (LCCI)/National Automotive Design and Development Council (NADDC) Automobile Symposium, themed, ‘From Subsidy to Credit: Can Vehicle Financing Replace Fuel Subsidy as Nigeria’s Mobility Equaliser?’ held in Lagos.

Chairman, LCCI Auto and Allied Sector Group, Dr Femi Eguaikhide, said affordable vehicle credit could make mobility more accessible to Nigerians, improve productivity and expand the market for locally produced vehicles.

According to him, the fuel subsidy had, for years, functioned as a de facto mobility policy by keeping transportation costs relatively affordable for millions of Nigerians, including commercial transport operators, teachers and small business owners.

However, he said the removal of the subsidy in May 2023 had increased mobility costs, with higher transport fares feeding into the prices of goods and services and putting additional pressure on household incomes.

He argued that a properly structured vehicle-financing system could enable Nigerians to acquire productive assets and repay loans with income generated by their use.

Eguaikhide called for affordable, preferably single-digit interest rates and longer-tenor lease-to-own arrangements for commercial transport operators using buses, tricycles and motorcycles.

He also urged financial institutions to develop financing products based on borrowers’ earning capacity and cash flows.

The LCCI official proposed deploying vehicle telematics, tracking systems, and cash-flow data to develop what he described as “mobility credit scores” that could enable lenders to better assess commercial transport operators.

Beyond expanding vehicle ownership, he said, financing policy must be designed to support Nigeria’s automotive industrialisation rather than deepen dependence on imported used vehicles.

“If we use credit to import more Tokunbo automobiles, we’ve solved nothing,” he said, advocating financing for CNG conversions, locally assembled electric and hybrid vehicles, as well as mass-transit buses.

Also speaking at the symposium, Chairman of Cedric Masters Group, Anselm Ilekuba, called for a fundamental restructuring of vehicle financing to address both vehicle affordability and local automotive production.

Ilekuba, represented by the company’s Chief Finance Officer and Head of Accounts and Strategy, Christabel Mmesoma Ilekuba, said high financing costs, short repayment periods and declining household purchasing power had made vehicle ownership increasingly difficult despite sustained demand for mobility.

He urged the Federal Government to give greater consideration to the proposed National Automotive Bank being championed by NADDC, describing it as a specialised financing platform that could serve consumers, vehicle assemblers and component manufacturers.

Under the proposed model, he called for longer-tenor financing for qualifying locally assembled vehicles, alongside industrial credit for manufacturers and funding for machinery, technology, certification and capacity expansion for component producers.

Ilekuba also stressed the need for stronger localisation of automotive components, citing the proposed National Automotive Components Parts Gateway being developed by the Automotive Local Content Manufacturers Association of Nigeria (ALCMAN) with Chinese partners.

He said combining an automotive bank with a components gateway could create a financing and production ecosystem in which increased vehicle purchases stimulate local assembly, component demand and job creation while reducing pressure on foreign exchange.