Nigeria is on track to becoming Africa’s Automotive Hub and a vehicles manufacturing country as local production increased to about 45,000 units per year, up from about 25,000.
Industry experts believe that Nigeria’s potential annual new-car market could be as high as One million. However, it currently sits at about 56,000 in a used vehicle dominated market. The National Automotive Design and Development Council (NADDC) estimates annual imports at about 400,000 vehicles (100,000 new and 300,000 used), valued at about US$4.2bn. Local production capacity is about 300,000, but utilisation has over the years dropped to about 15%. The NADDC believes the automotive industry, which currently employs around 2,600 workers, has the potential to generate 70,000 direct jobs and 210,000 indirect ones.
With the introduction of the Nigerian Automotive Industry Development Plan (NAIDP) there has been increased activity in local vehicle assembly. The National Automotive Design and Development Council (NADDC) granted over thirty five companies licenses to assemble/produce vehicles. Several OEM representatives have begun plans to set up assembly operations to take advantage of the policy. You can download the policy document here or access all information here
The new policy has attracted a number of top brands, with about 15 licensed vehicle assemblers currently operational. Also, 30 other brands have signed commitments with technical partners and obtained licenses to assemble passenger cars, sports utility vehicles(SUVs), buses and trucks in the country.
PricewaterhouseCoopers (PWC), has projected that the Nigerian auto industry is expected to produce about four million cars annually by 2050.
Dr. Innocent Chukwuma, Chairman, Innoson Vehicles Manufacturing Limited, IVM, said: “After sometime, Nigeria will manufacture cars for the whole of Africa.”
In the 1980s, about 120,000 brand new vehicles were being assembled in the country by six assembling plants made up of two car plants and four commercial vehicles plants. The industry collapsed when government embraced World Trade Organisation’s free trade policy and opened up the country’s borders to imports including second hand vehicles.
PwC in it report projected that with continued government support, the Nigeria auto industry will begin actual manufacturing with components sourced from within, potentially generating over 6 million new cars locally by 2050. Imported used vehicles popularly referred to as Tokunbo cars will become non-existent as a direct result of local production.
National Automotive Design and Development Council (NADDC) has revealed that the response to the federal government’s automotive policy by the new investors so far has exceeded all expectations. Director General NADDC, Engr. Aminu Jalal, said: “The industry is long-term in nature and requires policy continuity and consistency. This is already assured as the new government has decided to continue with the policy. Nigeria is therefore on track to becoming a vehicle manufacturing nation.”
Current Operational Automobile Assemblers / Manufacturing Companies in Nigeria
|Local Assembler||Brand||Type of Vehicle|
|Stallion Motors||Nissan, Hyundai, Volkswagen, Ashkok Leyland, Iveco||Passenger|
|Dana Motors||KIA, Renault||Passenger|
|Innosson Vehicle Manufacturing ||Innosson||Passenger, commercial|
|A.G Leventis Motors||Foton||Commercial|
|Zahav Automobile Company Nigeria||BAIC, Changan, Stallion Force, Foton||Passenger, commercial|
|Afri –Ventures Group (kewalram Chanrai)||Foton||Commercial|
|Honda Automobile Western Africa||Honda||Passenger|
|Perfection Motors ||FAW||Commercial|
|Globe Motors||Higer, Hyundai||Commercial|
|Proforce Ltd ||Proforce||Commercial|
|Iron Product Industries||Tata||Commercial|
|National Trucks Manufacturers||Sinotruck, Great Wall, NTM||Commercial|
Despite the increased number of local vehicle assemblers, production has dropped due to the current economic climate. Assemblers are forced to source foreign exchange from the parallel market to pay for Semi-knocked down (SKD) kits. Limited players in the auxiliary industry keep local component content in production low and restricted to consumables. Reduced vehicle demand has assemblers operating below capacity (10% -20%).
Hindrances to full capacity utilisations
Existing plants owners are being hindered to fully utilize their production capacities now due to some bottlenecks. Engr. Luqman Mamudu, Director, Policy and Planning at NADDC, listed some of the problems:
“Logistics: To order your SemiKnocked Down, SKD, and Completely Knocked Down, CKD, from the sources take quite a while, and the bureaucracy is strangulating, so you find that most of the operators are not able to get their inputs, that is the kits, into their plants as at when due.”
“Influx of second-hand vehicles: We also have the problem of second hand vehicles. Something needs to be done about this influx of second-hand vehicles, because second-hand vehicles reduce the market that is available to local investors.”
However, a PWC report presented by a Partner at the firm, Mr. Andrew Nevin, explained that the projected growth requires sustained and effective investments in the auto industry made only possible by the government implementing political, economic and legal policies that create a suitable environment for such investments.
Nevin who did the official presentation of the PWC auto industry report, during a seminar organised by the automobile and allied product group of the Lagos Chamber of Commerce and Industry (LCCI), recently, said “We created three scenarios in this case depending on growth rate and the government support to the auto industry, By 2050, production in this country will hit almost seven million vehicles and imported used vehicles popularly referred to as ‘Tokunbo’ cars will become non-existent by 2034 as a direct result of local production. “We believe that by 2050, Nigeria should produce over 4 million vehicles. We have also created a pessimistic scenario, which is the third scenario because the world might not turn out the way we think, but even with the pessimistic scenario, Nigeria will be producing about two million vehicles.
Essentially, PWC is saying that by 2050, Nigeria is going to be a market that makes at least four million new vehicles a year and would also stop importation of used vehicles. Importation of used vehicles “There is also going to be the need for experienced car people, Nigeria can achieve its potential to produce over seven million cars by building and working with people that really understand the industry. We believe that the Nigerian auto industry in 2050 would be producing up to four to seven million cars, but it needs the support of the government policies and the industry to do the right things,” he said.
What needs to happen to Make Nigeria Africa’s Automotive Hub?
According to PwC report In order for Nigeria to fully accomplish its potential of becoming Africa’s automotive hub the following key areas have to be addressed. The government through the National Automotive Design and Development Council (NADDC) has realised the importance of these areas and included plans to address them in the auto policy.
Improve the chances of owning a car
Available vehicle financing options is very important to encourage patronage of locally assembled cars. Research indicates that 63% of Nigerians cannot afford to own a car without some form of support.
Tighten the borders
Nigeria’s borders are porous and known to be loosely patrolled. Cars are the most smuggled
goods after food (and particularly rice), between the Lagos and Seme border. Grey market imports are thought to account for half of new vehicle sales in the country.
Protecting the drivers
With OEMs setting up operations in the country, it is imperative that similar quality control attained in other developed markets is adhered to locally. The perception of lower quality control could reduce consumer confidence in Nigerian cars.
Continued policy support
It is essential that government continues to implement and enforce protectionist policies to enable the growth of the industry. The current administration has indicated interest in promoting a sustainable and stable environment in support of local auto manufacturing.
Setting up auxillary industries
The difficulty of getting forex and the depreciating currency are challenges currently faced by assemblers. An existing auxillary industry with the capacity to generate parts such as batteries, belts, windscreens and tyres etc. will serve as a hedge against foreign exchange fluctuations. Currently, there are no major component manufacturers locally.
Building Human Capital
It is essential that Nigeria is able to provide the manpower needed to fill operational roles which require in-depth technical expertise. The NADDC plans to drive local content within the industry, set-up skill acquisition centres and make inputs into the curriculum for engineering in tertiary institutions. By indication, technical roles in auto assembly are currently filled by local staff.
Investment incentives in Nigeria Auto Industry
Under the new automotive industry policy, the federal government has put on the table, the following incentives, among others:
– Import duty for CKD for vehicle assembly is zero per cent while that of fully built up units is 35 per cent;
– Import duty for SKD assembly is 10 per cent;
– Import duty for automotive assembly operation equipment is zero per cent.
Also, the Nigerian government has mandated all its ministries, agencies and parastatals to patronise the products of local automotive assembly plants.