As the year 2021 winds down today, stakeholders conclude that the automotive industry in the outgoing year remains stagnant thanks to the uncertainty surrounding the passage of the National Automotive Industry Development Plan (NAIDP) Bill known as auto policy bill. This, they say, remains a setback for the industry and the reason why used vehicles litter the country.
At a time the world is shifting away from fossil fuel powered vehicles for gas-powered or electric vehicles in order to reduce carbon emission and mitigate its impact on climate change, Nigeria still thrives on importation of used vehicles popularly called Tokunbo.
Available statistics from the Nigeria Customs Service (NCS) indicates that used vehicles account for 90 per cent of the entire vehicle imports annually and worst still in 2021 the depreciation in naira against the dollars made acquisition of vehicles whether new or used vehicles difficult for Nigerians as the purchasing powers dropped drastically.
And with the exchange rate going above the ceiling (N565/$ as at yesterday in the parallel market), the used vehicles which ordinarily is not the desire of any auto enthusiast, become even more expensive.
Findings by Daily Trust indicate that the Toyota models – from 1999 to 2010 – are the priciest in the segment of the used vehicles. Those being used for the ride hailing services have even become hot cake in the second hand vehicle market.
Stakeholders in the automotive sector say investment in the industry is being stymied by the absence of an auto policy which the government has dilly-dallied about for years. It is believed that with investment in the sector made possible by the legal framework which the NAIDP guarantees, original equipment manufacturers (OEMs) would be encouraged to set up plants. This will not only create jobs for the local technicians and auto engineers, it will also encourage mass production of automobiles while at the same time reducing the price of brand new cars.
The auto policy is also expected to ease vehicle acquisition through flexible payment methods as obtained in the developed world.
However, the all-important auto policy bill has dragged on for too long according to observers and stakeholders in the sector.
President Muhammadu Buhari had in 2019 declined assent to the National Automotive Industry Development Plan (NAIDP) Bill passed into law by the 8th Senate in 2017.
However, the rejection of the bill angered stakeholders who described the development as a setback to the NAIDP and a disincentive to investors.
But in January, the Minister of Industry, Trade and Investment, Otunba Niyi Adebayo said the draft bill is ready and being fine-tuned in the ministry while it would be sent to auto stakeholders for their inputs before being presented to the National Assembly.
He said the government has already invited original equipment manufacturers (OEMs) like Toyota, Honda, among others to make Nigeria a manufacturing hub, noting that the bill would give them the confidence to invest in Nigeria.
The minister said, “It makes sense for anybody who is in this sector to use Nigeria as a manufacturing hub.
“So we are putting in place that policy which would give them (the OEMs) that confidence to know that we have a law that guarantees their investment here in Nigeria.
“We are looking at a situation whereby there will be a multiplier effect. This policy is supposed to bring a multiplier effect with regards to manufacturing within the Nigerian Ecosystem that’s the whole essence of having this policy.
“It’s not just for the auto manufacturers but also a spill-over of what motor manufacturing will do for the manufacturing sector in Nigeria.”
The comment from the minister came as a relief to stakeholders who look forward to the bill being operational while galvanizing the much expected investment in the sector. Now 12 months after and as the New Year begins, the bill is yet to be sent to the National Assembly.
Instead the government introduced the Finance Act 2020 which experts say was an anti-climax to the efforts to encourage local manufacturers through the several assembly plants that have been installed by the indigenous vehicle manufactures.
Under section 38 of the Finance Act 2020 which is now operational, the federal government approved five per cent duty on importation of Fully Built Vehicle from 35 percent while import duty for Semi Knocked Down (SKD) remains at 10%. The outcries from stakeholders who argued that the policy has jeopardized multibillion naira investment in assembly plants did not stop the implementation of the Act.
While the implementation of the Finance Act continues, the auto policy continues to suffer amidst several failed promises that it would be sent to the National Assembly again as executive bill.
Speaking on the development which stakeholders say has stunted the growth of the industry in the outgoing year, the Executive Director, Nigerian Automotive Manufacturers Association (NAMA), Mr Remi Olaofe said some cartels are frustrating the auto policy Bill.
In an interview with Nigeria Auto Journal’s team, he said, “For every decision taken, there will always be pro and those against it. It favours some and it does not favour others. Some people don’t like it. I will say to you point blank that it is easier to trade than to manufacture. When you bring in your vehicle fully built, all you need is your showroom. You know the cost from the beginning in terms of clearing, duty, keeping it and the profit margin.
“You can’t do that in manufacturing because there, you have many things to contend with. For example, the personnel issue, raw materials, capital outlay, infrastructure and others. All these will go into assembling a vehicle. But a vehicle that has already been assembled that you are just bringing in is different. So, will those people be happy with auto policy? The answer is capital no.
“Interestingly, these people are very strong; they have the wherewithal. Don’t forget that the people importing vehicles before are largely the ones going into vehicle assembly. So when they are having seven, eight, nine, ten lines of vehicles that they import, they are just using one line for the purpose of auto policy to assemble. And the assembly they are doing here is not the high-end of their products. It is the one that requires minimal resources to just test because nobody brings in money to any economy without being sure of the policy that supports and protects their investment. There is bound to be a cartel and we know the role they are playing.
“The cartel we are talking about are not just those bringing in FBU. There is a different market, which is difficult to appraise. They are called the dealers of “Tokunbo” cars but when you see some so called Grade A Tokunbo, there is no difference between them and a brand new car; maybe because they have just done about 50 miles or 100 miles in America and they ship them to the country under various platforms.
“When those vehicles arrive in this country and when you open their bonnet, everything is intact. Nothing has been touched and some still have the nylon inside. These vehicles are classified as Tokunbo cars but they are not. They are brand new vehicles. And that is the most difficult market. These people have guidelines that new vehicles must come into the country through company X. Now what they do in the US is that when they buy a new car, you drive it around to achieve a particular mileage.”
On his part, a former acting Director-General of the National Automotive Design and Development Council (NADDC), Mr Luqman Mamudu said the Finance Act signed in 2020 killed the automotive industry.
Mamudu who is the Managing Partner, Transtech Industrial Consulting insisted that the industry performed poorly in 2021.
In a chat with Daily Trust, he said, “The Nigeria automotive industry until 2014 had less than 70,000 installed capacity for the assembly of cars and commercial vehicles including CKD/SKD capability, almost zero components and parts capacity. However only about 1,600 units were assembled annually, largely dominated by Peugeot products. This was between PAN Nigeria (Peugeot), NTM, Kano (Sino-truck), Styre Bauchi (Agricultural Tractors), ANNAMCO Enugu( Mercedes Trucks), Leyland Ibadan (BUSAN Commercial Vehicles) and Innoson Motors Manufacturing (Buses, SUVs and Cars).
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“There were considerable local activities in commercial vehicle body building, especially Tanks for lifting wet products and open Trailer Buckets for construction materials movement /general goods. Then very extensive capacity for wet cargo tanks. Companies like IPI (Lagos), Arewa Metals Kaduna, Gorgeous Metals (Kaduna). Proforce (armored), all other assembly plants active in Nigeria before then had completely shut down with equipment stripped in some cases.
“Once the National Automotive Industry Development Plan was launched in 2013/14, activities with new entrants gradually ramped up to about 500,000 installed capacity or 700 % jump but capacity utilization remained low at less than 4% or 15,000 vehicles per annum. Meanwhile Nigeria import averaged 400,000 vehicles annually from official customs statistics but smuggling activities were prevalent.
“All vehicles destined for Nigeria were shipped to Cotonou and neighboring Countries and gradually smuggled in. This remained the case between 2017 to 2020 as assembly activities and potential to increase capacity utilization remained undermined by increased importation of USED vehicles from scrap yards of Europe, North America etc.
“There was hardly any positive change in 2021 except that some significant Global Motor Companies like Gilly, XCMG and new Local brands joined the ranks of local assemblers. The industry suffered a significant setback with the passage of the 2020 Finance Act which completely shut down assembly activities in commercial vehicles assembly and vehicle body building.”
Read the original article on Daily Trust.
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