A policy designed to develop local capacity in vehicle
manufacturing impacts stakeholders differently, writes OBODO EJIRO.
“This government has made business bad for us,” says Billy
Kanayo, a used-car dealer at the Berger area of Lagos State. “Tell me, where
are the cars government claims are being assembled in Nigeria?”
“Does Olusegun Agangan, Minister of Trade and Investment,
drive in such cars,” another dealer who pleaded anonymity asks, as he laments
the impact of the new National Automotive Policy (NAP) of the Federal
Government on his business.
The used-car dealers of Berger are not alone, as this is the
standard response of dealers across the country to the new automotive policy
which is being implemented to revamp vehicle manufacturing in Nigeria.
The policy imposed a new import duty on fully build units
passenger cars of between 20 and 35 per cent while a 10 per cent flat rate was
imposed on commercial vehicles but this was jacked up to 70 per cent and 30 per
cent for passenger vehicles and commercial vehicles respectively. This has
imposed higher prices on imported cars and decline in business for dealers.
But few know that the policy is not a direct child of the
Goodluck Jonathan administration. It was initially considered (and
implementation started) in the 1990s.
Back to the future
“Government recognized the importance and basic role of the
automotive industry in the industrial development of Nigeria. [It therefore
started the process of revamping the automobile industry] by resuscitating the
Standing Technical Committee (STC) on National Automotive industry (NAI)” in
1990,” states the National Automotive Council of Nigeria (NAC), a parastatal of
the Ministry of Trade and Investment, on its website.
The Standing Technical Committee (STC) on National
Automotive Industry (NAI) with inputs from the Nigerian Automobile
Manufacturers Association (NAMA), and other organizations involved with the
industry drafted the new automotive policy for Nigeria.
Presidential approval was given in 1992. The policy was also
endorsed by the transitional council of 1993. The policy provided for the
establishment of the National Automotive Council of Nigeria (NAC) as a
parastatal of the Federal Ministry of Industry and Act No. 84 of August, 1993
backed the establishment of the NAC.
Motivated by what changes in fiscal policy achieved in local
cement and sugar production, the federal government decided to replicate that
success by implementing policies that it believed would boost local vehicle
manufacturing.
The stated target of the National Automotive Policy is to
develop industrial infrastructure and local skills/capability in vehicle
manufacturing, promote investment promotion and establish a national vehicle
purchase scheme that would empower ordinary Nigerians to buy the made in
Nigeria vehicles. Steps have been taking to achieve these goals.
Some of the existing auto-clusters are already being
revamped and plans to construct new ones are being finalized. The plan is that
the three existing auto-clusters in Nigeria, Lagos-Ogun-Oyo, Kaduna-Kano and
Enugu-Anambra, will serve as established zones around which NAC will facilitate
more investments by international Original Equipment Manufacturers (OEMs). The NAC is in discussions with some state
governments to facilitate other auto clusters.
To develop skills and local capacity, the Industrial
Training Fund (ITF) is working with SENAI of Brazil to design auto training
centres similar to what exists in Brazil. These will operate in existing auto
clusters. They will not only train Nigerians to maintain and service vehicles,
but also teach them to manufacture spare parts.
On the demand side, there are plans to set up an asset
management company that will provide loans and finance for Nigerians so they
can buy the vehicles.
Mr. Aganga believes that Nigeria is on the right track.
“Nigeria spends $6bn yearly importing cars,” he declares and “this policy will
help to save some of those funds as well as create higher quality jobs for
locals, better than just selling used cars.” Apart from this, he says that the
vehicle finance scheme will guarantee a four-year car loans at moderate interest
rates.
At a meeting with vehicle manufacturers, dealers and
licensed customs agents recently, he told participants that ten more auto
plants have finalized plans to begin operations in Nigeria before year end,
2015. While Mr. Aminu Jalal, Director-General, National Automobile Council says
“at least 12 automobile manufacturing firms have indicated interest in setting
up vehicle assembly plants in Nigeria.
For a start, the old assembly plants such as those of
Leyland and Leventis Motors are being revived. But Nissan has commenced the
roll-out of the Patrol sport utility vehicle in Lagos. Three new auto assembly
plants, including Hyundai have commenced operation. In spite of this, there are
deep concerns about the chances of success of the new policy.
Echoes of a bleak
past
This is not the first time Nigeria has poured out maps which
were designed to lead to a vehicle manufacturing Eldorado. In the 1970s, a
partnership between the Nigerian government and foreign companies led to the
establishment of six assembly plants scattered across the country: Peugeot
Automobile Nigeria Limited (PAN) in Kaduna, Volkswagen of Nigeria Limited
(VWON) in Lagos, Anambra Motor Manufacturing Limited (ANAMCO) in Emene, Enugu,
Steyr Nigeria Limited in Bauchi, National Truck Manufacturing Limited in Kano
for Fiat, and Leyland Nigeria Limited in Ibadan.
All of them collapsed for reasons ranging from lack of
effective demand and raw materials and inability to keep up with changing
technology. Those who criticize the new policy wonder what has changed between
then and now.
A group which has posted anonymous advertorials in national
dallies has identified such problems as the poor state of electric supply in
the country, low level of technological knowhow among locals, poverty, and the
speed with which automobile technology has evolved in the last decade as
possible factors that will inevitably torpedo the new policy.
The group is not alone in its criticism, the National
President of the Association of Nigerian Licensed Customs Agents (ANLCA),
Prince Olayiwola Shittu, says the policy is negatively affecting members of his
association. His members have had fewer cars to clear and this has adversely
affected their income.
“We have always been critical of this automotive policy and
we have not changed our position.
By the time April comes and the 35 percent levy is added, it
will be a problem because there will be no cargo through here, our people will
lose jobs and we will lose the whole revenue he said.
But those pushing the policy are not deterred. They have
gone ahead to implement fiscal measures to support it, vowed to check
smuggling, made commitment to policy consistency and are promoting investment
activities.
Many believe that if the government does the right things,
the policy may well be a step in the right direction.
The benefit of doubt
“The new policy will open a window of opportunities for
leasing to increase its penetration and significance in the automotive
industry…” the Equipment Leasing Association of Nigeria (ELAN) says in a
communiqué released after a session held to discuss the impact of the new
policy on its business. ELAN adds that “[though the policy] may as well present
some challenges; the automotive industry is of immense strategic importance to
the economy, creating employment and overall development.”
Also, while speaking to BusinessDay on a different subject,
the Managing Director of Nigeria Fonderies Limited, Vassily Barberopoulos,
remarked that “if the policy is taken seriously by all stakeholders, it could
work. It’s great that they have started by bringing in knocked down part for
reassembling, who knows, with time, they may begin to manufacture small part
locally”. He however cautioned that no significant progress can be made if the
steel industry is not developed.
The sequence of implementation of the whole gamut of changes
(which are to guarantee the success of the policy) will span a period of 11
years.
Between 2013 and 2015 the plan is to create an environment
to allow existing assembly plants to survive and attract other OEMs like
Nissan, Renault, GM and Toyota who expressed interest in Nigeria.
Between 2016 and 2016, the government plans to enhance the
operating environment for vehicle manufactures so as to allow existing assembly
plants grow and continue to attract other OEMs. In particular, local content
suppliers will be encouraged within the period. While between 2019 and 2024,
more incentives will be given to institutes to deepen local content.
The negative impact on small businesses of the
implementation of the first stage of the policy was instantaneous. Vehicle
prices went out the roof, the number of cars imported was “reduced by half,”
(according Mr. Asconio Rosso, Managing Director of Port and Terminal
Multiservices Limited in Lagos). That is what affected the businesses of used
car dealers like Mr. Kanayo and his colleagues at Berger.
“In the past one year,” says Mr. Kanayo, who has been in business
for 18 years, “the number of cars we have sold reduced compared to other years,
and we now need more capital to run our businesses. These days, customers
prefer to buy from Benin Republic just to cut cost, it’s President Jonathan’s
fault,” he concludes.
But the logic that underlies the policy assumes that in the
long run jobs of higher quality and skills will be generated through the new
policy. Therefore the immediate impact
of the changes in tariffs would be more than compensated by the manufacturing
environment which the policy will inevitably create.
It has been estimated that at full capacity, the Nigerian
automotive industry has the potential to create 70,000 skilled and semi skilled
jobs along with 210,000 indirect jobs in the SMEs that will supply the assembly
plants, 490, 000 other jobs would also be created in the raw materials supply
industries.
Considering the high number of vehicles brought into the
country annually, if locals stick to what is made locally, made in Nigerian
vehicles will not lack patronage. In the nine months between January and
September 2012, the Nigerian Automobile Manufacturers Association announced
that Nigerians imported 96,629 vehicles, 22,192 of which new while 74,437
vehicles were used.
Undoubtedly, Nigeria is the biggest market for used and new
automobiles in Africa. But recent data show that the number of vehicle brought
into the country reduced by 20% in early, 2015. But the other major effects of
the new vehicle policy may not be known in the interim.
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