FG granting licenses to unqualified vehicle assemblers – Ex-PAN MD

In this interview with KINGSLEY JEREMIAH, former Managing Director, Peugeot Automobile Nigeria (PAN) and Vice Chairman, Nigerian Automobile Manufacturers Association (NAMA), Ibrahim Boyi discusses critical challenges and possible way forward for Nigeria’s automotive sector.

What is the state of the automotive sector and how effective has been the automotive policy in stimulating industrialisation in the country?
The automotive sector remains vital TO any economy because of its huge contribution to gross domestic product, employment, skills development and linkages to other vital sectors, such as agriculture, aeronautics, space technology, food processing and others. The Nigeria automotive policy, NAIDP, was designed with the objectives of achieving some of the benefits above. However, poor and weak implementation of the policy by key government organs has weakened its effectiveness and undermined the achievement of the set objectives.

One major problem of the implementation is the process of accreditation of bonafide manufacturers. Many auto companies, without meeting the criteria for investments and standard development of auto plants, have been granted licenses as bonafide manufacturers, enjoying concessions and incentives under the policy, to the disadvantage of companies that actually made investments and own proper auto plants. The other is the poor control on the grey imports and smuggling of used vehicles.

The Centre for Automotive Design and Development had said that nine assembly plants are currently rolling out vehicles in the country. But most Nigerians have questioned this. What is your position, especially on the number of locally made vehicles and the plants?
Nine plants rolling out vehicles are largely at the basic or semi knock down (SKD) 2 level. This level of assembly operations adds very little value to local value addition, in components or skills. It is the basic level of assembly, at which all the vehicles would have been completed abroad, but then dismantled minimally and shipped for reassembly in Nigeria. There is no room for any local component addition.

For an effective auto industry development policy, this phase ought to be disallowed, or at best allowed to operate for less than 24 months. The main value adding phases are the SKD 1 and complete knock down phases. These phases entail significant investments in tools and equipment, skills and technology transfer and local components, through a planned and organised parts deletion programme.

Unfortunately, under the NAIDP, no clear rules exist for such mandatory migration from SKD 2 to either SKD 1 or CKD. Auto companies are happy to set up SKD 2 plants and enjoy all the incentives and concessions provided, at the expense of the development and deepening of the Nigeria’s automotive sector.

Another key point is that investment in the sector will naturally be fueled by the demand or market size of new automobiles. The policy prescriptions to activate market and demand for new automobiles, such as the vehicle acquisition finance, government patronage and control of smuggled vehicles, have not been implemented. This has dampened the new vehicle market in favour of the used vehicles. Investments in SKD 1 and CKD plants are huge and must be supported by robust demand and market for new vehicles. Unless relevant agencies choose to implement that auto policy to the letter, the development of the sector will remain unchanged.

Is there any progress on spare part manufacturing in Nigeria?
The prospect of spare parts development remains high, considering the size of the automobile market in Nigeria for both used and new vehicles. Service parts such as plugs, brake pads, oils and fluids, fuel filters and pumps, tyres, batteries, and the like, are very much in demand.It is hoped that diligent implementation of the policy will attract investments in this area.

PAN (Peugeot) had not less than 50 local suppliers of parts, which made the industry boisterous and growth was tangible and evident. Why are we not seeing this level of success years after the automotive policy was launched?
In the days of the original industrial plan in the 70s and 80s, agencies of government were very strict and enforced all elements of the policies diligently. That saw the growth of the industry, with the likes of PAN, VON, and Anamco, making significant progress and contribution significantly to GDP and employment.Successive reversal of those policies by the past governments, unfortunately, helped reverse those positive developments, leading to the folding up of most of the auto plants and the many component manufacturers that supported those plants.The intention of the NAIDP is to restore such glory for the sector, but poor implementation has now impaired its effectiveness. At that phase of operations, semi knockdown, and scale of operations, the impact will be insignificant.

What will it take to grow the industry properly?
Honest and effective policy implementation by the agencies of government.

The discussion on auto finance scheme is as old as the policy. Why has it not taken effect?
As I have mentioned earlier, key elements of the policy to trigger demand and grow the new car business have not been implemented. One of such elements is the affordable vehicle acquisition finance scheme, which was intended to enable workers and first time car owners access financing and buy new vehicles. The scheme, which ought to have been launched since 2014, has remained on the drawing boards. One will imagine that inter agency discussions or disagreements in terms of the modus operandi of the scheme might have caused the delay in its implementation.