Only six out of 54 auto ‘assembly plants’ running, below capacity
• Stakeholders list forex, inconsistent policies as challenges
• We have since converted our staff in assembly plants to after-sales, says CFAO DMD
Of the 28 assembly plants that began operations in 2014 out of the 54 companies licensed in Nigeria, only six are currently running, and at a very low capacity.
According to available data from operators in the sector, policy inconsistency, as witnessed in the non-signing of the Nigeria Automobile Industry Development Plan (NAIDP) bill into law, worsened by lack of incentive to those that invested billions in the automobile assembly project and non-provision of foreign exchange by the Central Bank of Nigeria (CBN) for settlement of letters of credit continue to compound the woes of the sector.
Data from the National Automotive Design and Development Council (NADDC) showed that 28 companies are currently assembling in Nigeria out of the 54 that registered for it.
NADDC was approved by the Federal Government to assemble semi knocked down (SKD) vehicles to encourage local production. This is after various auto assemblers have invested over $1billion into the assembly plants.
However, only six of these operators appear to be viable. Also, of the 408,870 units yearly capacity target, only 8,473 units (two per cent) have so far been achieved.
Similarly, data from the National Bureau of Statistics (NBS), in its Foreign Trade data in Goods Statistics report, showed that the import bill on used vehicles stood at N257.85 billion at the end of 2021.
In the first quarter of 2022, NBS data showed that Nigerians spent N72.3 billion on used vehicles using diesel or semi diesel engine, of cylinder capacity 2500cc at 1.23 per cent. The volume of import surpasses the amount spent locally on assembled vehicles.
The remaining assembly plants are running at about 50 per cent capacity, with the situation compounded by Nigeria’s dwindling purchasing power as a result of inflation, currency depreciation and stagnant income.
The auto policy was designed to discourage the importation of fully-built vehicles into the country, encourage local assemblers to maximise their potential, generate employment, boost skills and manpower, instill research and development, increase the nation’s Gross Domestic Products (GDP) and make Nigeria an automotive hub in West Africa and Africa in general. Despite these lofty goals, very little success has been recorded.
A sectoral analysis of activities in the manufacturing sector by the Manufacturers Association of Nigeria (MAN) showed that the index of the motor vehicle and miscellaneous assembly sector stood at 50.1 points in the second quarter of this year, with operators citing unfriendly operating environment as a concern.
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 recalled that in the 1970s and 1980s, government’s partnership and patronage with five auto-assembling companies contributed immensely to the economic development of the country and the non-oil revenue of the Federal Government.
He added that the economic downturn that followed encouraged massive importation of used and new vehicles, leaving the assemblers struggling for survival with no incentive scheme or policy to protect and guide them.
Jaiyesinmi, who is also the chairman of the Auto & Allied sub-Sectoral group of the Lagos Chamber of Commerceand Industry (LCCI), stated that the decision of President Muhammadu Buhari to decline assent to the NAIDP Bill passed under President Goodluck Jonathan was a setback to the industry.
He said: “When NADDC came up with the policy, we had it in phases; that is, starting with semi-knocked down, SKD1, SKD2 and SKD3. It was expected that after five years, we would have migrated to CKD (Complete Knocked Down). By 2014, we should have been in CKD, but we are still in SKD in 2022.
“We are still in SKD because there is no way we can talk of CKD without the steel industry working and other anxiliary products that have shut down. It is now more profitable to bring in Fully Built Units (FBUs) than assembling, and this is why less than six assembly plants are now in operation,” he said.
Indeed, the NAIDP has remained in the eye of the storm since it was introduced, as most stakeholders have been divided on its provisions, with some insisting that while the intentions of the document were laudable, the mode of implementation would not achieve anything meaningful. The fact that the policy exponentially hiked the price of cars by almost 200 per cent led to further criticism.
Many of the assembling facilities visited by The Guardian were unable to meet nameplate capacity due to the current realities of the economy.
Local assemblers like Coscharis Motors, Stallion Motors, Mikano Motors and Kia Motors are currently operating at minimal capacity with little or no support from the government.
Jaiyesimi said the industry is in a precarious situation and needs urgent intervention or the country would in no distant time become a market for Ghana and other more serious African countries as the African Continental Free Trade Area (AfCFTA) goes into operation.
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.
Speaking with The Guardian, Sonu Singh of the Media and Marketing, Stallion Motors, said they still assemble in Nigeria. He said: “Part of the challenges we face is the government support that we are not getting. We are assembling here but assembling here and bringing a new vehicle, there is not much difference.”
On whether people are buying vehicles produced here, he said what is happening to the foreign exchange due to scarcity of dollars is affecting the automobile business. “We assemble frequently, it is an ongoing process.”
For General Manager, Marketing and Corporate Communications, Coscharis Group, Abiona Babarinde, the group is still in the business of assembling, but is now running at a low capacity.
According to Babarinde, the group was one of the front-runners to key into local assembly with the Ford Ranger, which is still on offer till date.He said: “As of today, it is not that we have shut down, but we are running on a very low capacity compared to what we ordinarily would have loved to do, to increase.
“In our local assembly, we are doing SKD; it is as good as running a mini-manufacturing. When you are doing local assembling, you will need infrastructure. A singular element like power is important.
“When you are also talking about local assembly or manufacturing of vehicles, you power your factory 80 per cent on generators and 20 per cent on probably, the public source.
“In that instance already, it is a challenge, because when you run on generating sets for manufacturing, that is what distinguishes you from what we call the advanced economy. So, you cannot come out competitive because your running cost is already on the high side.
“Now to compound the initial challenge of running your generator, is the issue of diesel. Today, diesel is going for N800 per litre. Where does that take you? And all these, you can say constructively are what lead to whatever that comes out of your plant as your cost price, where do you compete?”
He said another challenge is that the add-ons to assemble a vehicle in Nigeria are all imported. That in a sense, according to him, takes 50 per cent of production. He said if the enabling environment had been in place for Dunlop and steel companies, local assemblage would have been better.
Babarinde further listed government’s unstable policy as a challenge. “The policy that encouraged brands like Coscharis to go into local assembly for us to convince our partners is also not the current policy that we have now. Government policies like that are to protect the industry so that if you do local production, you are protected with XYZ. When we started, we had over 52 plants licensed, so what happened now is that it has gone down to as low as six.
“Ordinarily, if the policy were protective enough, if the environment were friendly, if the infrastructure were there, the 52 would have been doubled with the multiplier effect of over 200 local plants. That means you have more employment, more local content; it means you are saving forex and also giving cheaper vehicles to Nigerians to drive.
“So, we are all talking of electric cars that are the future, that means by now, we would be saying we are looking at creating an electric assembly plant. This is a country of over 200 million people, the market is always there,” he said.
A senior lecturer at the Covenant University, Ota, and automotive communication consultant, Oscar Odiboh, said Nigerian auto assemblers are running glorified manufacturing plants, adding that most of the assembly plants set up in the country lack the standard to compete globally, and could hardly be called assembly plants.
Odiboh said: “What we have at the moment are not real assembly plants, they are glorified joineries. About 65 per cent of our assembly operations are manual, while 70 per cent of employees are casual.”