Woes of Nigeria’s auto industry keep pulsating
The action has seen operatives of the agency seize ‘illegally’ imported vehicles from some auto dealers in Lagos, Katsina, Kaduna, and Sokoto states. The move, observers believe, is not just aimed at discouraging smuggling but also ensuring that dealers pay the official duty for imported vehicles and thereby shoring up the government’s revenue. Nevertheless, many Nigerians see the step as another means of worsening the poor state of the economy and foisting more hardship on the citizenry.
Recall that the government had banned the importation of vehicles through land borders and slammed a 70 per cent duty on new vehicles imported through the seaports. Meanwhile, many auto manufacturing firms in the country had either become moribund or producing far below capacity as a result of unfavourable government policies.
For instance, the operations of organisations such as RT Briscoe, Leventis, UAC, SCOA and others that started the development of the automotive sector in Nigeria in the 60s through the menial establishment of automobile assembly plants using completely knocked down (CKD) or semi-knocked down (SKD) parts have almost become skeletal. Also, in the 1970s, the Federal Government entered the business when it sealed pacts with a number of automotive plants in Europe to set up assembly plants that would build passenger cars, trucks and light commercial vehicles, using completely knocked down parts. Around 1970s -1980s, the government signed a pact with the European Original Equipment Manufacturers (OEM) and set up two cars and four-light and heavy assembly plants. The plants were assembling vehicles from Completely Knocked Down (CKD) parts.
The plants included Peugeot Nigeria Limited (PAN), Kaduna; Volkswagen Nigeria Limited (VWON), Lagos; Anambra Motor Manufacturing Company (ANAMCO), Enugu; Styer Nigeria Ltd, Bauchi; National Truck Manufacturer (NTM), Kano; and Leyland Nigeria Ltd, Ibadan. Government privatised the firms in 2007 and the result was calamitous as the firms are virtually out of business today.
Meanwhile in 1982, in a bid to give some boost to the industry, the Federal Government had signed a pact with five other international automotive concerns. The intent was to establish Isuzu plant in Maiduguri, Mazda in Umuahia, Mitsubishi in Ilorin, Nissan in Minna, and Peugeot in Gusau. But the plan was only a mirage. By the 1990s, utilisation of the assembly plants dropped to a record low of about 10 per cent. What followed was a total collapse of the sector and a shift to the importation of fairly used vehicles otherwise called tokunbo from overseas.
As of 2013, Nigeria reportedly imported vehicles, mainly fairly used, worth $6.2 billion. In 2014, passenger vehicles were the second-largest import category in Nigeria after petroleum oils or bituminous minerals. A publication by PricewaterhouseCoopers (PWC) had noted that used vehicles accounted for about 74 per cent of vehicles imported into Nigeria in 2014. This is a survey conducted by Deloitte in 2016 had noted that only two per cent of Nigeria’s population was able to afford new vehicles, adding that business owners accounted for 70 per cent of overall purchase of new vehicles.
Apparently in search of a fresh solution to the crisis in the sector, the government introduced the National Automotive Industry Development Plan (NAIDP) in 2013. Under the policy, which had the input of the Nigerian Automobile Manufacturers Association (NAMA) and other stakeholders in the industry, the government projected to create an enabling environment for manufacturing of Nigerian-made vehicles of international standards and to turn the country into an automotive hub capable of exporting vehicles to other West African countries and beyond.
The basic elements of the objective, among others, were the provision of automotive vehicles for urban and rural areas; accelerated the technological development of the Nigeria economy; increased employment opportunities; conservation of scarce foreign exchange; establishment of integrated Automotive Industry in Nigeria; and standardisation and rationalisation of the Nigeria automotive industry.
The introduction of the NAIDP had brought about increased activity in local vehicle assembly, with about 35 companies said to have been granted licenses to assemble/produce vehicles in the country. However, a few years on, the increased number of local vehicle assemblers has yet to translate to meaningful results on the road, national economy, employment, as well as industry development. This is despite the fact that in a bid to make the policy work, the government hiked tariff for the importation of fully built new vehicles, as well as fairly used vehicles and granted waivers for locally assembled vehicles. It also banned the importation of fairly used vehicles through land borders.
Currently, there is import tax (duty and levy) of 70 per cent on new vehicles, import tax (duty and levy) of 35 per cent on commercial vehicles while that of used cars 35 per cent. The result was an increase in the price of vehicles by almost 200 per cent, which consequently forced some unscrupulous importers to resort to smuggling and/or colluding with personnel of the Customs Services to evade paying the correct duty on imported vehicles. From every indication, the Service now appears ready to stop such practices, hence the clampdown.
But car dealers and stakeholders have continued to bemoan the action.
Speaking with The Guardian, the Dean, School of Transport, Lagos State University (LASU), Prof. Samuel Odewumi, expressed misgiving about the development. “Nigeria as a country never ceases to amaze me. We are just fixated on disjointed and uncoordinated policy formulation and implementation. And as long as we continue this way, we are going nowhere. We are just moving in circles,” he said.
According to him, the Federal Government had always introduced ill-conceived policies without any strategic plan for a long term programme of action. “The total sum is that the actions are cancelling themselves out. There is one step forward for the indigenous manufacturer and two steps backward, another step sideways like aimless crab walk. Recently, they were making case for reduction in duty rates for imported cars and now harassing car dealers. It’s hopeless.
“The lawmakers could not even hide their lack of patriotism by buying locally made or at least locally assembled cars. The Federal Executive could not persuade them or demonstrate their belief in their slogan to buy made-in-Nigeria. Anytime one reflects on these things, there is no other logical conclusion than that maybe we are cursed,” he added.
Head of Marketing, Stallion Group, Arpita Roy Luthra, however, commended the bold step taken by Customs to curb unauthorised entry of new and used vehicles into the country. But he noted that the delay in concluding the exercise was hurting the industry.
Luthra said the continued shut down of the businesses of dealers for over three weeks was a huge setback for the industry. She, therefore, urged the Service to fast track the processes of dealing with the issue.
Managing Director, Fumba Resources Limited, Olubunmi Ajayi, decried putting many car shops under lock and key. He condemned threat by the Service that dealers should not open their shops.
Ajayi said: “Why can’t Customs ask people to bring their papers for validation before the clampdown. We are not being employed by the government; we don’t have any subsidy. Nobody is giving us anything. We are the ones that started this business and they are trying to ruin the whole business for people. We have not been able to do business since the clampdown. We have been visiting the Customs office in Ikeja and we are still going there today again.
“This business is the only source of our livelihood. We don’t have any other work that we are doing. I have been in this business for 20 years. We have staff that we are paying; whether the shop is closed or not, we have to pay salaries at the end of the month.”
Amid the lamentations, The Guardian visited some of the foremost assembly plants in the country to ascertain the state of affairs there. The findings are contained in the reports below.
ANAMMCO: Hope Rising As Chinese Firm Invests In Company
…Absence Of Legal Backing
Bogs Peace Assembly Plant
From Lawrence Njoku, Enugu
THE Anambra Motor Manufacturing Company (ANAMMCO) is gradually bouncing back to life. The premises of the Motor assembly/manufacturing plant used to be a beehive of activities in the years past when it was assembling Mercedes trucks but went into oblivion soon after its technical partner, Daimler Chrysler AG of Germany pulled out over alleged unfavourable market.
It was gathered that the agreement it had with Daimler Chrysler was for the production and marketing of Mercedes benz brand of trucks and buses of varying models and capacities. But the company could not fit into the competition with several motor assembly plants which opened offices in the country, with products that were more affordable than those provided by the joint venture partnership of ANAMMCO and Daimler Chrysler.
The disengagement of the technical partners and the workers unrest that followed over the alleged inability of management to meet with their welfare demands compounded the woes of ANAMMCO. For several years, activities were stood down while the company’s premises remained under lock and key as owners of the company began a new search on the way forward.
This paid off when it discovered a Chinese firm, Dongfeng Motor Corporation, with which it signed an exclusive production and distribution pact to assemble and distribute its products in Nigeria. It was gathered that the arrangement gave ANAMMCO, which was founded in 1977 a product range that covers heavy and medium-duty trucks for demanding operations in long haul, regional and local distribution for mining, construction, general goods haulage, oil, and gas.
Sources stated that the reactivation of the company came with the Federal Government’s patronage of using its Training School as one of the centres for its N-Power programme.
When The Guardian visited the company in Emene, Enugu State, recently, it discovered that the company has engaged several workers in its engineering, technical and welding sections to drive home the new challenge. Already, some of the sections have started functioning. But some sections, especially with heavy production machines, needed to be rehabilitated as the machines were said to have either developed faults or out of tune with modern technologies in auto manufacturing. It was gathered that the company would require more patronage from the government in order to fully bounce back to its former status.
It was also observed that some of the buildings would need rehabilitation, even as some areas in the premises were overgrown and needed to be cleared. Few visitors were seen either making inquiries about purchases or bringing in materials into the company. The administration and accounts sections were also functional, just as the enrollees into the N-Power programme were seen undergoing training.
The N-Power enrollees were said to be 100 in number. It was gathered that after their 12 months of training, they would be given tool kits and issued with a certificate from the NABTEB. They may either be engaged as staff of the company or be allowed to establish on their own.
One of the students who identified himself as Ebuka said they were the third batch to pass through the training at the centre since it was started by the Federal Government. He added that the government provided his uniforms, booths and other learning tools.
Besides the training, the assembly section of the company was also busy. About 250 truck engines reportedly delivered to the company from China were being assembled. Workers said they were expecting another batch of 600 engines in the next couple of weeks, adding that it had been a busy moment at the company of late.
A security man at the entry gate said the company was gradually bouncing back, stressing that there was no dull moment in the place for now.
He said that each staff was expected to sign in at 8.00 a.m daily, observe a break period in between work and return to work again to close at 5.00 p.m.
“If you check now, you will see there is nobody outside again. Everybody has gone inside to face his work and that is the way it was before. Now that the break is over, no staff is allowed to cross this gate again until work is over. That is the way it is,” he said.
Another staff told The Guardian on condition of anonymity that a major challenge facing the company at the moment was low patronage from the various levels of government in the country.
He stated that the production line of the company was still functional, adding that it has the capacity to produce in single shift 7,500 units of trucks and 1,000 units of buses.
“If the government can give us the contract to build buses for mass transit, you can imagine the kind of employment it will generate directly and indirectly,” he added.
He said that the years of inactivity did not diminish the expertise of the workers and the quality of the company’s products.
The Guardian also visited the Peace Auto Assembly Plant in Enugu, which came into being in 2016. The plant was established to assemble engines and parts for SKD buses for use by its affiliate transport company, Peace Mass Transit Ltd.
During a tour of the factory’s premises in Emene, Enugu, it was discovered that the company had not gone beyond assembling engines and parts of buses used by its affiliate company. Although its brand of buses, ‘Ugama Bus’, are prominently displayed in the factory, they seemed to be the last set of buses available in the company.
Chairman of the company, Dr Samuel Onyishi, lamented the absence of legal backing for auto assembling in Nigeria, stressing that the idea behind the company was to assemble SKD1, SKD 2 and SKD 3 buses for the transport company and public use.
He stated that the company was confined to SKD 1 because of the 10 per cent duty allowable by Customs, stressing that duties were not allowed on other categories of buses.
Although he hailed the policy of the Federal Government in encouraging auto assembly locally, he stated however that without a backup, investing in the business was a huge risk.
“It is risky to continue to operate fully when there is no policy backing what you are doing. There is the auto bill, which the president has not assented to and unless such is passed, we cannot invest here. This is because they can wake up one day and ask you to close the shop. So, the thing is creating fears in us and we don’t have the intention of investing more money in the business,” he said.
He stated that he decided to go into the business for the sake of quality, saying that Ugama buses “are of high quality and not like any other type of bus that is imported into the country.”
He added: “But what is not encouraging is the fact that even though I have facilities, I cannot, for instance, paint these buses on my own. I think there should be total encouragement in what we are doing. If they say they want to encourage local production, they should do it wholly such that Nigerians will be encouraged to start vehicle assembly plants. It will not only help us; it will improve our economy.
“What we are doing here is that the vehicles we put on the record in the fleet of Peace Mass are assembled here. The quality is different from what you see elsewhere and that is the beauty of it all. So, let the law be passed and let the industry be free.”
Steyr Motors: Factory Rots Away In Bauchi
From Rauf Oyewole, Bauchi
STEYR Motors Nigeria Limited, Bauchi, started assembling trucks, tractor and buses in the country in 1979. Forty years after, the Austria automobile company, has gone moribund. According to an employee of the company who pleaded anonymity, operations have been grounded since 2007.
The source, who had worked with the company since 1980, told The Guardian that during its rosy days, Steyr Motors assembled 5,000 tractors, 2,000 trucks and 2,000 buses per year for the Nigerian market.
He said the Federal Government’s harsh policies were responsible for the company’s moribund status. He said the government withdrew its shares in the company during the administration of former President Olusegun Obasanjo and later sold it to individuals that failed to sustain production.
According to him, as of 2007, the company had over 2,000 employees. He added: “Well, nobody sacked us and no one saved us. We have spent over five years and nine months without salary. In fact, three years ago, we had to resort to litigation against the company; we have taken them to court.”
Another employee faulted the Federal Government’s closure of borders against the importation of automobiles. He said: “The same government killed local production plants and it is stopping importation. It is so paradoxical.”
When The Guardian visited the company’s factory, weeds had taken over the premises. Though some cleaners and security guards were seen on duty, the road leading to the factory has become platforms for drying farm produce.
Some of the staff, however, said the company could still be revived if the government takes over the facility and invites capable expatriates to manage it.
“If the government is serious about local production, they should revive all these local automobile companies–which I believe will contribute to the growth of our economy,” one of the staff said.