No visible shift in gear for the auto industry

Nigeria’s fx liquidity challenges have led to a visible reduction in imported goods.  Based on data released on the country’s automotive industry, the importation of brand new cars plummeted by 67% last year. The FGN recently disclosed that there will be no reversal of the National Automotive policy developed by the past administration. The plan is to build upon specific areas of the policy as well as provide incentives to drive the policy. These include tax breaks for auto manufacturers as well as partnering with technical partners to improve the auto assembly skill set in the country amongst others.
Local assembling appears to have picked up. Prior to the Nigerian Automotive Industry Development Plan (NAIDP), only three assembly plants were operational in the country. However the FGN has granted licenses to over 30 new assembly plants.

The latest national accounts (Q1 2016) provided by the National Bureau of Statistics (NBS) show that the motor vehicles & assembly segment of the manufacturing sector contracted by -19.2% y/y, compared with 2.2% growth recorded in the corresponding period in 2015.

No visible shift in gear for the auto industry

In the past few months, power supply has dropped significantly. In addition to this, the official pump price of fuel (which is also used for generators as an alternative source of power) is now 67% higher at N145 per litre. This suggests that operational costs for assembly plants have increased, threatening profit margins.

The country’s macro challenges are mainly due to its heavy dependence on the oil sector. The FGN has reiterated at several occasions that diversifying the economy is a top priority. The auto industry can play a catalytic role in this diversification by developing SMEs, boosting employment and assisting in curbing the country’s import bill.

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