Small shift in gear for the auto industry

In recent years there has been a significant decline in imported vehicles into Nigeria. Aside from the squeeze in purchasing power which resulted from the fx liquidity strain in 2015, the FGN’s full implementation of a 70% tariff (35% duty and another 35% levy) on imported vehicles also contributed to the high cost of vehicle imports. Nigeria’s annual import bill for vehicles was estimated at N600bn in both 2015 and 2016. However, based on statistics from the Nigerian Ports Authority, last year only 73,000 vehicles were imported at a cost of N110bn (US$360m). Therefore, for several reasons an opportunity has been created for local vehicle assembly.

                                                                                                                  

  • During a press briefing, the managing director of Toyota Nigeria (arguably the favored imported vehicle brand domestically) disclosed that just 2,000 vehicles were sold in Q1 2017, compared with 5,500 units in the corresponding period of the previous year.

  • Local assembly appears to have picked up. Prior to the National Automotive Industry Development Plan, only three assembly plants were operational in the country. However, the FGN has granted licenses to 54 assembly plants, of which 29 are operational at different stages. .

  • There have been recent investments within the segment. One is Dangote Sinotruk West Africa, a joint venture with total investment of US$100m and focused on truck assembling. Its installed capacity is 10,000 trucks per annum.

  • Furthermore, through the National Automotive Design and Development Council, the FGN plans to inject N300bn (US$980m) into the auto industry. This will support the vehicle production finance scheme which currently has funds of up to N11bn. The finance scheme was set up to boost assembly operations at completely knocked down (CKD) level.

  • The investment efforts so far are laudable. However, a deeper inward approach to bolster assembly may accelerate the desired results. To put this in context, Nigeria’s steel, glass and rubber industries are somewhat moribund. A renewed focus on reviving these ancillary industries should reduce the cost of inputs for assembly and boost output.

  • The latest national accounts (Q1 2018) provided by the National Bureau of Statistics show that the motor vehicles & assembly segment of the manufacturing sector grew by 2.3% y/y, compared with 0.2% recorded in the previous quarter.

  • The macro benefits associated with a thriving local auto industry include technology transfer, job creation, economic growth and a further easing in the pressure on the country’s fx import bill.

Our site uses cookies to enhance your experience. By continuing to browse, you agree to our Privacy Policy