Why Nigeria’s auto sector is in steady decline – Oseme
Former Chairman of the Auto and Allied sector group of the Lagos Chamber of Commerce and Industry (LCCI), Dr. Oseme Oigiagbe is a leading stakeholder in the automotive sector. In this interview with KINGSLEY JEREMIAH, he compared the progress in the nation’s automotive industry to a motion without movement.
What is your opinion on the automotive sector?
The industry is slow. This is because of the lack of investment, as well as access to new products. The economy has affected the sector negatively. There is a direct relationship between the health of the nation’s economy and the auto industry. Indeed, the auto industry reflects the health of the economy and the capacity of people. Once the economy is affected, the automotive sector will be affected. There is slow investment and buying power. The industry is measured in the amount of registered brand new vehicles on the road. That has been on a steady decline. In the last one year, the total number of the new vehicle that has come to the country or recorded on the road has gone down by 20 per cent. That arguably means the industry is currently not experiencing its best days.
What do you think are the other challenges affecting the automotive policy, which was introduced in 2013?
In terms of intention, the policy is very good but proper implementation is needed. There is a need for series of coordinated efforts and political will on the part of the government. There seems not to be a direction. The leaders are not showing the desired decisive move in ensuring that we have robust local automotive industry, which would help the country move from a comparative advantage to a competitive advantage. The natural resources of this country that makes up a body component of the automotive industry are available but there has not been heavy strategic effect to ensure that we move the country from a comparative advantage to a competitive advantage. The policy has been bedeviled by series of options, which has not put the industry in the right direction.
The auto sector is critical. In a sector of the economy, once there is no opportunity to move goods and services from the farm to cities and for people to move from point to point, it becomes a problem. Rail development takes a longer time. For an airport, you need to have a plane, for a ship you need water, the only automotive product you can help move goods and services from point A to B easily is a vehicle. It is a very important industry to the generations today and tomorrow, so if it’s not properly designed and implemented, there would be challenges in the activities of other sectors of the economy.
In the good days of PAN, there were almost 50 parts manufacturers in Nigeria. Can you compare the success of PAN of old to what is playing out today?
There are misconceptions and disconnection. The story and the history of PAN is not all about local suppliers, it was only by deliberate backward integration that PAN had the opportunity of developing local suppliers. We had local substitution, access to raw materials, plans were developed, the numbers did not develop because of PAN alone. As at that time, there were two automotive plants, two-car plants and four truck plants and then we had a clear position about what kind of products we produced in the country. We had people making glasses, tyre etc. However, there has to be a linkage between the capacity to manufacture and capacity for the plants to take. There has to be a linkage, you cannot manufacture those parts and the factory does not take them and you must also be sure that as they were introduced, technology was also getting outdated, new products were coming in, innovations were coming in and if you do not invent you would not be able to renovate or improve on products. The auto industry is very dynamic in terms of technological diffusion, new products were coming in every year and as they were coming in you need to move around, but the plants they were having then were fixated plants.
There were no modes to make a new model and because of the new models and brands coming, the plants were not designed to have flexibility and capacity.
Flexibility talks about the ability to move to the new trend while capacity is the minimum production that would make a plant viable and then you have to produce and you cannot be producing for only one plant in Nigeria. You have to look at how many of those plants are existing in Nigeria, West Africa and other places so that there can be a market for fits of their production. So there is no understanding, the production mix for local suppliers and plants is not one-off, it has to be carefully and articulately tailored towards the concise understanding of what number of CKD and SKD that would be needed by plants for it to make fully built vehicles.
Do you support a downward review of the current tariff in the sector?
That is a very critical issue. Whichever way you go is either not good or very good. Tariff all over the world has been a measure in ensuring that local plant develops, but the government must use it properly. There must be plans. There is a need for a healthy environment to support local production. Tariff measures are used when you want to encourage local manufacturing. There is a need for a proper plan and vision before the tariff. Tariff does not just come. It is coming up because there is a sensational reason to ensure that the industry grows at a particular level and it must also be part of the fact that this is only for a short period before the user becomes more competitive.
What is the way forward for the sector?
The way forward is a long process. There has to be a complete understanding, we need to understand where we stand. We seem to be chewing many things at the same time. We need to focus on a segment and do it properly. We should assemble only buses or cars. We need to plan properly. Rather than focusing on different lines of production, we should streamline. We are putting a lot of nuts on fire and all the nuts are getting burnt without getting the right products out of the nuts. That is our present situation.
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