Nigeria automotive industry gains momentum as investment interest grows

Vehicle production in Nigeria is gaining momentum as more carmakers are announcing investment interest in the country’s automotive industry, paving way for further development of the auto industry.

Several multinationals have begun building vehicles in Nigeria, and others are waiting in the wings. The companies are all assembling imported kits.

In a wire report, the Nigerian Automotive Design and Development Council (NADDC) in Abuja said recently that the federal government has issued licenses for the establishment of 12 new vehicle assembly plants in the country.

This will bring the current total number of automobile assembly plants in the country to 45. According to the council, there were previously 15 assembly plants in the country before the National Automotive Industry Development Plan (NAIDP) was launched in 2014 and that only three were operational.

Last week Wednesday, Reuters reported that America carmaker, Ford will start assembling its best-selling Ford Ranger pickup truck in Nigeria by the fourth quarter, as it expands in Africa and the Middle East, the U.S.

“Nigeria is a priority market for us in sub-Saharan Africa,” said Jeff Nemeth, the president and CEO of Ford Motor Company’s business in sub-Saharan Africa.

“Depending on how Nigeria develops over time … we are potentially looking at using our Nigerian plant to service West Africa,” he told Reuters.

As part of the federal government industrialization policy, it introduced the National Automotive Industry Development Plan (NAIDP) in October 2013, introducing tariffs on imports as a key instrument to make domestic production more competitive.

The ultimate aim of the policy is to create 70,000 skilled and semi-skilled jobs and create the conditions for Nigeria to eventually enter into car manufacturing.

The planned tariffs will entail a significant increase in duties and levies on fully built vehicles, from 22 per cent to 70 per cent for passenger cars and 10 per cent to 35 per cent for commercial vehicles.

To boost local assembly, there is no levy on importing materials and parts for full assembly in-country and discounted levies of 5 per cent -10 per cent for partially assembled vehicles.

The Federal government’s auto policy has led to a 20 per cent drop in the importation of vehicles into country.

The market for cars-new and used in Africa’s most populous country is estimated to be worth more than $6 billion according to available statistics.

According to analysts, the auto market in Nigeria, Africa’s largest economy has huge potential but retails only a small amount of new vehicles annually.

The country’s large population and potential for economic growth, as well as government policies aimed at encouraging industrialization, makes Nigeria an attractive market for automakers.

Nigeria is estimated to import more than half a million cars every year, with nine-tenths of those vehicles second-hand imports.

The large-scale import of ‘tokunbo’, second-hand vehicles of occasionally uncertain provenance, regularly stokes controversy in local media over quality and traffic safety concerns but is largely reflective of the willingness and ability to pay for cars in a lower-middle-income economy.

Source: BusinessDAY