Automotive industry

There is little investment in the Nigerian auto industry due to the political tumble – Managing Partner, Transtech

In 2013, Nigeria unveiled the National Automobile Policy to boost local vehicle assembly and make the industry competitive. Eight years later, politics have been a mixture of successes and failures. LUQMAN Mamudu is one of the experts who handled the policy in its early days. He is a former director of policy and planning at the National Automotive Design and Development Council (NADDC). He is the current Managing Partner of Transtech Industrial Consulting, with extensive experience in policy formulation in the automotive sector. In this interview with HARRISON EDEH, he explains that Nigeria can leverage policy coherence to become an automotive hub, explaining that many automakers are waiting to invest in the country but the business environment is always unfavorable. Extract:

You are a member of the committee set up by the National Privatization Council (NCP) to review automotive policy. As a key member of the committee, could you speak to the issues and concerns about the auto policy review?

The committee’s mandate was to examine the circumstances limiting the prospects of the six struggling auto assembly plants long privatized by the government. They are Styre, Bauchi; VWON, Lagos; Leyland, Ibadan; Mercedes Truck (ANAMMCO), Enugu; National Truck Manufacturing Company (FIAT), Kano; and PAN Nigeria, Kaduna.

The committee has since completed its mission in recent months and submitted a far-reaching report for consideration by the NCP chaired by the vice-chair. I am not a member of the industry-wide committee for the National Automobile Industry Development Plan (NAIDP), if indeed such a committee exists. I know the NAIDP review is still ongoing with the Minister of Industry, Trade and Investment. I had the opportunity to share my point of view with the minister’s office over four months ago. It was intended that the so-called NAIDP draft review report would be shared with all stakeholders, including the Nigeria Automotive Manufacturers Association (NAMA) and the National Tariff Review Board for a balanced input prior to its submission to the National Assembly for legislation. It has been dragging on for too long, so there is a lot of confusion in the industry. Act is urgent.

In addition to the current review, Nigeria’s 2013 auto policy raised the particular challenge of policy inconsistency. How do you think this affects investor confidence in the sector?

I consult in tThe industry and I can tell you that there is very little new investment and a worrying level of divestment going on in the industry. For example, most of those who planned to move quickly to fully dismantled operations (CKD) in commercial vehicle assembly either closed their assembly operations and returned to import, or simply stayed at the semi level. -disassembled (SKD), starting block of operations. . You see, the 2020 finance law reduced the tariffs on imported fully built commercial vehicles (FBUs) to 10%. Same as the imported SKD.

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There is therefore no longer an incentive, except for those who have already reached the CKD operating level with a marginal tariff differential of only 10 percent. This does not make sense because some countries exporting FBUs to Nigeria have export subsidies of over 17 percent. Yes, this is clearly a case of political show jumping that weakens investor confidence. The Honorable Minister of Industry should accelerate the necessary measures regarding the new NAIDP to prevent the total collapse of the industry.

What is your overall assessment of the potential of the Nigerian automotive sector?

Nigeria has considerable potential to become, on the one hand, an auto-producing nation and on the other hand a major hub in Africa. He has all the credentials at the moment. Nigeria has a growing domestic market which can comfortably support the industry, unlike South Africa which relies mainly on exports.

Nigeria already has a long culture and a long history of automotive assembly. At present, Nigeria has an installed capacity to assemble 500,000 automobiles per year and even a potential for manufacturing components. It doesn’t matter that the assembly capacity is mainly at SKD level. Nigeria has a huge replacement market which provides an additional incentive to manufacture spare and service parts. Right now, we’re just importing everything. Leading automotive original equipment manufacturing (OEM) companies have opened investment channels in Nigeria through technical collaboration with local entrepreneurs. These include Nissan, Ford, Peugeot, KIA, Geely, Hyundai, MAN Trucks, Leyland, TATA, Sinotruck, FAW, XCMG and Shackman. Others wait to come once the investment environment is right. Indigenous brands, led by Innoson Motor Manufacturing, Jet Motors by GIG, Proforce, and bodybuilding companies like IPI, are plentiful. Nigeria has a harvest of trained and trainable human capital resources to feed the industry.

What we don’t do is just implement the NAIDP or its variant. The problem with us most of the time is that we condemn political plans that we fail to implement. Any semblance of NAIDP monitoring and evaluation (M&E) has been seized since 2017. Yet this is essential to any implementation process. particularly in a delicate and economically sensitive industry such as the automotive sector. This is why the powerful lobby against her seems to have the upper hand. For example, the NAIDP committees for industry and the committee for relevant government agencies have not met since 2017 to review monitoring and evaluation reports. Yet these are the two most critical implementation committees. These committees should be revived and called to action. Hope is not lost.

There were concerns about the president withdrawing his assent to the auto bill earlier. Are these concerns really taken into account in the current review?

I think the president is passionate about growing the real sector, including the auto industry. The problem is that those who just want to import vehicles, especially expensive SUVs and used vehicles, are lobbying hard. Therefore, whatever new plan it submits for consideration, it must involve and be seen to involve all stakeholders and the public. If that is done, I am sure he will sign. Nigeria needs activities that add value to what we consume. There will be less pressure on our currencies if this is done.

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With the African Continental Free Trade Area (AfCFTA) Agreement, do you see Nigerian becoming a continental hub for vehicles?

Absoutely. The NAIDP is designed to gradually shift Nigeria’s automotive assembly from simple SKD operations to CKD and eventually increase local content and manufacturing. It was because of the need to build volume quickly that the NAIDP allowed investors to start at the SKD level and even outsource assembly. The strategy was to quickly develop sufficient assembly capacity to encourage component manufacturers that Nigeria was sourcing from to locate factories near their homes. That is why it has also planned three large fleets of automotive suppliers for which more than 600 million naira has been spent.

Sadly, most of those who lobbied against the policy, including some large existing assembly plants, cited the SKD as a basis to condemn the whole plan. They flatly refused to admit that SKD was not meant to be in perpetuity or tariff deadlines. It is pure impatience and mischief on the part of those who want to import assembled vehicles on a large scale. The assembly of SKD is extremely difficult and with very few profit margins, that is why there was an incentive mechanism for concessional importation by those who invest locally even if it is SKD. However, this could have been properly managed by the implementing institutions. Once Nigeria can significantly seek increased local content in the automotive industry, the AfCFTA presents a huge opportunity.

What should Nigeria do differently to make the country an automotive hub given the size of its market?

Provide an enabling environment and legislate politically to avoid future somersaults. The policy and all the programs within it must be fully implemented. Fortunately, the NAIDP has a built-in supply of resources to develop the programs. These include the levies on imported fully built automobiles which have all but been phased out under the 2020 Finance Law, Article 38. This should be reinstated and properly managed with whatever has been accumulated over the years. Let these resources not be wasted on senseless ends aimed at giving the impression that the industry’s concern is being addressed. For now, the industry is in a state of suspended animation.