Policy inconsistency, forex crisis kill assembly plants
Assembly plant

Adebayo Obajemu

With the declining population of Nigerian middle class over the past few years, the prospect of many to own a car in their life time is fast disappearing, as the automotive industry is facing serious challenges ranging from forex crisis to inconsistent policies, which have taken the cost out of their reach.

Only recently CFAO, a multinational firm, announced that the company had converted their staff in assembly plants to after-sales services, having realized that they could no longer assemble vehicles.

In spite of the laudable auto policy of the Goodluck Jonathan administration, which out of concern for the need to manufacture cars in Nigeria, which in 2014 led to the licensing of 54 companies, and the sprouting of 28 assembly plants, only six are at present running, and they are doing that at low capacity, Business Hallmark’s investigations have revealed.

Dr. Adeyanju Fasina formerly of the Nigeria Institute of Transport Technology, Zaria told Business Hallmark that “A lot of factors are responsible for the comatose state of the assembly plants ranging from policy inconsistency, which is glaringly evident in the non-signing of the Nigeria Automobile Industry Development Plan (NAIDP) bill into law.

“Of course, we can say that the National Assembly has not been alive to its responsibility in this regard. There’s this current government’s disinterest as shown in lack of incentive to those that invested billions in the automobile assembly project.

“This is further compounded by unavailability of foreign exchange from the Central Bank of Nigeria (CBN) for settlement of letters of credit, which continue to worsen the woes of the sector.” Few can afford a car made in Nigeria with forex bought from the parallel market,” he added.

Fasina blamed policy inconsistency for this parlous state in the transport sector, saying the President Buhari administration ought to have continued with the same zeal displayed by the Jonathan administration.

“Look at Innoson Motors, does it appear the man is getting necessary encouragement from the federal and state governments? The answer is no!”

Business Hallmark’s findings from the data released by the National Automotive Design and Development Council (NADDC) revealed that 28 companies are currently assembling in Nigeria out of the 54 that registered for it, but of the lot only six can be said to be active.

Recall that NADDC was given a nod by the federal government to put together semi knocked down (SKD) vehicles to encourage local production. This came after several auto assemblers have allegedly put in over $1billion into the assembly plants.

Fasina stated that even of the 28, which claim to be in operation, only six of these operators appear to be viable. Also, of the 408,870 units yearly capacity target, only 8,473 units (two per cent) have so far been achieved.

According to information from the National Bureau of Statistics (NBS), in its Foreign Trade data in Goods Statistics segment report, the import bill on used vehicles as at the end of 2021 was put at N257.85 billion.

In the NBS data report for the first quarter of 2022, Nigerians expended N72.3 billion on used vehicles using diesel or semi diesel engine, of cylinder capacity 2500cc at 1.23 per cent. In the said data, the volume of import is more than the amount expended locally on assembled vehicles.

Further findings from various sources, including NBS has shown that the remaining assembly plants are currently working at about 50 per cent capacity. This depressing statistic is made worse by the country’s low purchasing power triggered by inflation, currency depreciation and stagnant income.

The Jonathan administration auto policy was put together out of patriotic zeal to create disincentive for the importation of fully-built vehicles into the country, while motivating local assembly plants to maximize their potential, drive growth and employment, propel skills acquisition and manpower and encourage research and development, all this to boost the nation’s Gross Domestic Products (GDP) and make Nigeria an automotive hub in the region.

Fasina stated that the sectoral overview of activities in the manufacturing sector has revealed a shocking penumbra as the index of the motor vehicle and miscellaneous assembly sector perched dismally at 50.1 points in the second quarter of 2022. The fall guy for this situation, he said, was show me where is it only the best you can grind put it back and try to get it again unfriendly operating environment.
Fasina’s thesis has found support as only recently in an interview, the Deputy Managing Director of CFAO Motors, Kunle Jaiyesimi, attributed the poor performance in the automotive sector to policy inconsistency on the part of the government.

He went the memory lane, saying the golden age of automotive nirvana in the country was in the 1970s and 1980s, when, according to him, government’s collaboration with five auto-assembling companies led to the economic development of the country and the non-oil revenue of the federal government.

For the transition from the boom of the 70s and 80s to massive economic meltdown that came with the Babangida administration in the early 90s, leading to structural adjustment program, came the reality of importation of used and new vehicles, leaving the assemblers struggling for survival with no incentive scheme or policy to protect and guide them.

According to Jaiyesinmi, the unwillingness of President Buhari to give assent to the NAIDP Bill passed under President Jonathan was a major challenge to the industry.

“When NADDC came up with the policy, we had it in phases; that is, starting with semi-knocked down, SKD1, SKD2 and SKD3. It was expected that after five years, we would have migrated to CKD (Complete Knocked Down). By 2014, we should have been in CKD, but we are still in SKD in 2022.

“We are still in SKD because there is no way we can talk of CKD without the steel industry working and other ancillary products that have shut down. It is now more profitable to bring in Fully Built Units (FBUs) than assembling, and this is why less than six assembly plants are now in operation.

A senior lecturer at the Covenant University, Ota, and automotive communication consultant, Oscar Odiboh, in an interview with a news daily emphatically pointed out that in Nigeria today “auto assemblers are running glorified manufacturing plants.”

Odiboh averred that, “What we have at the moment are not real assembly plants, they are glorified joineries. About 65 per cent of our assembly operations are manual, while 70 per cent of employees are casual.”

News continues after this Advertisement


Please enter your comment!
Please enter your name here