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National automotive policy still under review, a year after

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A car assembling plant


•Mixed reactions trail process

The National Automotive Industry Development Plan (NAIDP), currently undergoing review by the present administration has continued to attract mixed reactions.

The Minister of Industry, Trade and Investment, Adeniyi Adebayo, had last year announced a fresh start for the auto policy at the Lagos Chamber of Commerce and Industry (LCCI) 2019 Presidential Policy Dialogue.

According to the Minister, the bill prepared by the former administration was not received at the National Assembly; hence the plan to engage all stakeholders in the industry to get it right this time around.

The NAIDP Bill, popularly known as Auto Policy is central to the development of the automotive industry, which is said to be currently underperforming.
The NAIDP represents the Federal Government’s boldest step at reviving local car assembly in over three decades. The policy, which was introduced in 2014, seeks to encourage local manufacture of vehicles while phasing out the importation of used vehicles.

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Other motives of the policy include job creation, stimulation of the value chain, diversification of the economy, provision of affordable vehicles for the average Nigerian, as well as boosting foreign direct investment into the country.

In a report by Deloitte titled, ‘Nigeria’s automotive industry plans: What exactly are the expectations’, the local assembly of cars in Nigeria could also lead to significant savings in the foreign reserves. In 2012, Nigeria spent about $3.5 billion on car importation.

Data obtained from the National Bureau of Statistics (NBS) shows that Nigeria spent a whooping sum of N1.08 trillion to import used cars (popularly called Tokunbo) and motorcycles (Okada) in one year (October 2018 – September 2019).

According to the various NBS reports gathered, used cars and motorcycle importation into Nigeria rose from N252.3 billion in the fourth quarter (Q4) 2018 to N301.8 billion in Q3 2019.

In the light of these objectives, the introduction of the NAIDP would inevitably appear to be a step in the right direction for Nigeria’s automotive industry.

A converse announcement by the Federal Government that “the policy will not result in banning the importation of vehicles in Nigeria, but will focus on promoting investments in affordable made-in-Nigeria vehicles” has potentially dampened the spirit.

The high tariff structure introduced by the policy on imported second-hand vehicles at 70 per cent levy and duty- was not aimed at boosting government’s revenue, but at discouraging importation and attracting more investments in local production.

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Also, an accommodating tariff of 35 per cent was imposed on cars imported by companies who have expressed interest, and met investment milestones for local assembly.

Year in, year out, the purchasing power of Nigerians for brand new vehicle has continued to weaken due to a number of factors, including high exchange, interest and inflation rates, even as prices of new vehicles have skyrocketed.

However, stakeholders said the current dismal performance of the industry was traceable to the absence of a legal framework to attract Original Equipment Manufacturers (OEMs) into the country.

According to them, the resounding echoes to review the policy to satisfy short-term aspirations will ultimately lead to policy somersaults and erode the investments in the industry, if not properly handled.

To ensure a backward integration in the auto industry, they stressed the need for the domestication of car manufacturing in Nigeria. Besides, they said the policy formulation was well thought out, and in line with stakeholders yearning for the development of the industry through industrialisation.

Some of the players, who spoke to The Guardian, noted that the auto policy addressed the shortfall of the new tariff regime, adding that for it to materialise, the importation of cars through land borders should be banned.

Deputy Managing Director of Massilia Motors, Kunle Jaiyesimi, said if there is sincerity of purpose, definitely things will work in Nigeria, noting that the way the policy was previously fashioned; it continued to fail because industry players were not involved.

Jaiyesimi said the policy was put together by civil servants and they were not the main drivers of the sector. “They don’t have the technical know-how of how the policy will operate, which brought about the government’s decision to revisit the bill. For now, we have a huge opportunity to correct all the wrongs. We believe the minister will face more to the side of the industry players and operators,” Jaiyesimi said.

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Chief Executive Officer, African Association of Automotive Manufacturers (AAAM), Dave Coffey, in a recent interview with The Guardian, said it is important that NAIDP is included in the law to restore investors’ confidence.

Coffey said AAAM had gone through the bill; and supports that a high volume production of automotive components be made locally. When asked if there has been any development in the sector since the Association’s last visit to Nigeria in 2017, he said there has not been any development yet, adding that one of the challenges is that the NAIDP has not been passed into legislation.

According to him, it is very important that the bill is passed into law, because it is stalling progress. No global original Equipment Manufacturers (OEM) have come into Nigeria yet to invest, but they are very interested.

“As mentioned, imported second-hand cars must be roadworthy, and we believe that the potential in Nigeria is a substantial one. Take South Africa as an example; with a population of 58 million people, about 530,000 new vehicles were sold last year in South Africa. But take the population of 200 million people with the right ecosystem; the market potential of new vehicles in Nigeria would be over a million vehicles a year. Nigeria needs to become a hub in West Africa like Ghana,” he said.

Chief Operating Officer, Automedics Limited, Gbola Oba, urged the government to ensure the policy review is intensified to allow human capital development, skilled employment for the new industry that will reward workers better, and also find a way of using the policy to interface with the necessary skills upgrade for the roadside mechanics.

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Oba said the roadside mechanics are largely still functioning in a manner that is contrary to international best practices in the automotive industry, because modern vehicles are computers on wheels, as most of these technicians are still used to their old ways.

According to him, the last administration initiated the National Automotive Policy, and when this government came in; it invited experts to review it, and the process is still ongoing.

Oba continued: “In view of the fact that the National Automotive Policy has being considered for adoption, it is incumbent of the government to make sure that the major policy plan in the document in terms of training a number of tertiary institutions, especially universities in the six geopolitical zones, as designated as automotive mechatronics centres of excellence is achieved.

“The National Automotive Design and Development Council has also broken the regions to centres of excellence. The National Automotive Council is building a state-of-the-art laboratory in Ikorodu, the materials and other equipment is in Enugu for human capital development, to incentivising private sector investors, in going full steam into assemblage in Nigeria, such that we get to hear of Innoson.”

He recalled that the facility of Volkswagen in Nigeria at a point became a vegetable plantation and rice storage facility for some people. “As we speak, Nissan is now assembling in Nigeria. Former President Jonathan drove in one of the SUVs made in Nigeria. PAN has been bought over by a new investor and in touch with Automedics for collaboration,” he said.

Dean, School of Transport, Lagos State University (LASU), Prof. Samuel Odewumi, said some of the ideas embedded in the policy were not well thought-out and partly self-contradictory.

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Odewumi argued that if the policy was worth the paper on which it was written, the massive importation of special purpose vehicles (SUVs) by the National Assembly and various arms of the executive would have been an anathema.

The university don said the National Transportation Policy remains incipient and a mere draft more than two years after holding a national summit on it.
“The question is: was the original policy fully implemented not to talk of review? Moreover there is the issue of the absence of political will to drive the policy thrust of the very government that articulates it,” he said.

The Marketing Manager, Kia Motors Nigeria, Olawale Jimoh, said it will be a disservice to the country if one shies away from the sharp practices by some purported assemblers, taking advantage of the incentives and exploiting the loopholes in the implementation of the policy.

He added that regardless of how great the policy is, some economic usurpers will always exploit the loopholes in its implementation.Jimoh said it therefore behoves the law enforcement agencies and regulatory bodies to implement the policy, and weed out its serial abusers.

“We have got to make a choice; one with short term gain by incentivising importers of FBUs at the expense of the local assemblers or a long-term gain that helps with the production of made-in-Nigeria vehicles by implementing the policy and further incentivising the local assemblers to help them improve the country’s backward integration of the economy,” Jimoh said.

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