Eight years of automotive policy: Where are the vehicles?
The current administration has shown more of a passing interest in the full implementation of the automotive policy in the last eight years. BENJAMIN ALADE writes that more disastrous to the private sector’s buy-in is the government’s flip-flop on local production of automobiles.
Stakeholders in the automotive industry are concerned over the failure of the current government to see through the automotive policy. Last week, the Minister of Trade and Investment, Adeniyi Adebayo, disclosed that the ministry would soon submit a new auto policy for the Federal Executive Council (FEC)’s approval.
He stated this while addressing Senior Executive Course 45 participants of the National Institute of Policy and Strategic Studies (NIPSS), Kuru, Plateau State, who paid a visit to the ministry.
He said the automotive policy was reviewed to increase local production of vehicles. Many stakeholders, however, took the minister’s revelation with some reservations, given that several promises, right from 2021 when a new bill to the National Assembly, have not been fulfilled.
Besides, the bill seeks to provide, among others, a legal framework to guide investment in the automotive sector and provide incentives for investors, especially the Original Equipment Manufacturers (OEMs) willing to set up plants in Nigeria.
This led to the development of the National Automotive Industry Development Plan (NAIDP) in 2013, which seeks to among others enable local assembly plants to import completely knocked-down (CKD) vehicles at zero per cent duty and semi-knocked-down vehicles at five per cent duty, while importers pay a 70 per cent duty on new and previously owned vehicles.
The plan, which was to run from 2014 to 2024, was passed by the National Assembly around 2019 but President Muhammadu Buhari declined assent citing conflicts with existing bills.
Stakeholders worry that the lack of an extant law has made foreign investors shy away from the country. The Federal Government, however, promised to send a fresh bill to the lawmakers to address the concerns.
In 2021, the Minister said the bill was ready to be sent to the National Assembly, and just a few weeks to the end of Buhari’s tenure, there is no such bill before the lawmakers amid the mounting challenges in the automotive sector, which have stalled transition of local auto assemblers from SKD production to CKD or fully built.
Findings revealed that out of 56 indigenous assemblers licensed by the Federal Government under the 10-year NAIDP with an installed capacity of over 500,000 units of vehicles per annum, only six are still active and at extremely low capacity. Many of the technicians employed have been either converted to after-sales personnel or are out of jobs.
According to the Deputy Managing Director of CFAO Motors, Kunle Jaiyesimi, the unfortunate development in the automotive sector is attributable to policy inconsistency on the part of the government.
He said his company, CFAO, is not isolated from the catalogue of woes that the local automotive industry is passing through, despite all the efforts made to build the sector to an enviable position.
To keep the employees, he disclosed that CFAO had since converted their workers in assembly plants to after-sales staff.
Nigerians resort to importing used vehicles
In the absence of affordable local vehicles in Nigeria, the people have continued to depend on imported used vehicles with N1.8 trillion spent in six years.
Data from the National Bureau of Statistics (NBS) in January 2023 indicated that Nigerians have continued to rely on used cars from the United States of America as cheaper alternatives.
Analysis of data on foreign trade reports conducted by the NBS from 2017 to 2022 indicated that Nigerians prefer cars from the U.S. as of the N2.5 trillion of the commodities imported into the country, N1.8 trillion was imported from the US alone.
A breakdown of the figure for the commodity labelled ‘Used Vehicles, with diesel or semidiesel engines, of cylinder capacity >2500cc’ indicated that in 2017, N96 billion of it was imported from the U.S. out of a total of N145 billion.
In 2018, from the N269 billion imported into the country, N180 billion was from the US. The figure further rose to N455 billion in 2019 from a total of N580 billion. In 2020, N529 billion of the commodity was imported from the US out of the total of N718 billion imported.
But the figure dropped to N399 billion in 2021 for the commodity imported from the US while the total was N617 billion. From January to September of 2022, N205 billion of the commodities came from the US out of the N235 billion imported.
No hope for legislation
With the few cars produced in the country out of the reach of ordinary Nigerians, the importation of used cars became the alternative for many. Former dean, School of Transport and Logistics, Lagos State University (LASU), Prof Samuel Odewumi, said the policy is a barber chair syndrome, ‘motions without movement’. Note that policy summersaults and half-hearted implementation is the hallmark of the automotive policy.
“The fact eludes us that we need long term strategic vision and consistency to reap the dividend of our policy choice,” he said.
An automotive communication consultant, and university lecturer, Dr. Oscar Odiboh, said the pandemic is a delaying factor likewise the recession, which means that funds are not available; whatever is available is being rationed. An industry that requires heavy injection of funds remains at the backburner, which is the problem of inflation.
The automotive consultant who is also a lecturer at the Covenant University, Ota in Ogun State, said: “We need the government both the legislature and the executive to agree on the needs of the industry. I am not saying they are disagreeing but they are not looking the way they are expected to look at. There is no gainsaying that the industry is an industry that can raise the bar of our industrial development but the government is not looking at that.
“We have seen over the years that this hasn’t been done. We expect the government to create an enabling environment for the automotive industry to thrive thereby leading to technological advancement, leading to smoother and more friendly transportation systems, leading to the genuine establishment of auto assemblers, leading to the creation of employment opportunities.
“We have asked for special waivers for importers of materials, for semi-knocked-down parts to put together and also the completed knocked-down part. We need some import rebates for the prices of the products of the cars to come down. Because if the cost of importation is high, the cost of production would increase likewise the cost of cars. In this case, people would still go back to the Tokunbo cars we are putting on our roads.
“Probably if the industry gets the kind of attention, the 2023 elections got, maybe our industry would be better for it. But unfortunately, our problems are not the problems of politicians today,” he said.
An official of Stallion Motors who spoke on the condition of anonymity complained about sales. The policy is redundant because the government had not put in place the necessary infrastructure for the policy to prosper.
He said the country was not yet ripe for the policy as there is no electricity to power the assembling plants, no local content; we just bring in knock-down parts and assemble them here. Government is not even consistent in policy initiation; this is also creating problems for the industry.
“When the auto policy was announced, without due consultation, government went and increased tariff on new vehicles to 70 per cent without first putting infrastructures on the ground to support local production, the result is the smuggling that is taking over the industry why, because tokunbo (used) vehicles are cheaper and affordable, so many Nigerians are going for used cars and the market is booming.”
“The country is not receiving good patronage because the cars assembled here are relatively expensive because the cost of production is high, so there is no wide difference between the cost of cars assembled in Nigeria and those imported which defeats the aim of the policy put in place to make available new and affordable vehicles in the country,” he explained.
“If government can provide an environment where Nigerians can afford new cars at an affordable rate, more people will buy new cars and as a result, smuggling will reduce due to the reduction in demand for used vehicles,” he stated.
The Executive Secretary of the Nigeria Automotive Manufacturers’ Association (NAMA), Remi Olaofe, described as “painful” the delay in the passage of the auto policy bill. He said the delay in the last eight years has cost the nation unquantifiable losses.
He said it would be in the overall interest of the country if the government was able to achieve auto policy before the administration winds down. Olaofe said: “We can’t put a figure to the delay in having this auto policy. Even from the social side, the number of people that have been thrown out of jobs, people that were gainfully employed, trained, money spent to train them; where are those people?
“At the macro level, the government is supposed to be deriving a lot of benefits in the area of trade and we should be moving towards a CKD arrangement but we are going back to where we started; many factories have shut down. Everybody has gone back to import.” He noted that Ghana has become a hub in the West African automotive market by implementing the auto policy.