Aliko Dangote


Nigeria’s automotive industry received a boost last week as Dangote Peugeot Automobiles Nigeria Limited (DPAN) started assembling vehicles in Nigeria, beginning with the Land Trek, 3008, 5008 and the new 508.
This is coming almost four years after Dangote Group entered a joint venture with PSA Peugeot Citroen, along with five northern state governments to re-start assembling of cars in the Kaduna plant by the first quarter of 2019.

The Dangote’s newly built Green Field Assembly Plant in Kaduna can assemble 120 vehicles per day across two shifts, a significant boost to an industry that currently produces less than 10 percent of the vehicles used in the country, with the parts imported as completely knock-down and not produced locally.

It is widely believed that the automotive industry in Nigeria is one of the most poorly regulated sectors in the country, hence the surge in the use of second hand vehicles known as Tokunbo.

In the early 1970s Nigeria had six flourishing auto plants, which supplied automobile needs of the country. This included Anambra Motor Manufacturing Company Limited, (ANAMMCO), Peugeot Automotive Nigeria Limited (PAN), Leyland Nigeria Limited, National Trucks Manufacturers Limited, Steyr Nigeria Limited, and Volkswagen Nigeria Limited (VWON).

Unfortunately, irregular policies conspired with increasingly harsh economic environment to make most of these companies shut down operations.

Changing The Narrative

However, in 2013, the Goodluck Jonathan’s Administration introduced another policy: the Nigerian Automotive Industry Development Plan (NAIDP), in a bid to provide a framework that will support automobile companies, boost local content and establish a vehicle financing scheme that would provide funds for citizens to buy new cars.

As part of the implementation of the automotive policy, the National Automotive Design and Development Council (NADDC) increased tariff on importation of new vehicles to 70 per cent as a way to discourage Nigerians from buying vehicles from outside the country.
Our investigation, however, revealed that the implementation of the automotive policy has been a challenge while the pioneer companies under the programme struggle.

Another attractive aspect of the policy was government’s promise to unveil a vehicle financing scheme that would afford Nigerians the opportunity to purchase vehicles with only 10 per cent of the market price and window of many years to pay the balance at an interest rate of six-eight per cent. But the scheme is yet to take off after many years.

Again, government through NADDC had promised to establish three automotive industrial parks and three automotive testing centres in Zaria, Enugu and Lagos. But these are also yet to be seen.

The Director-General of NADDC, Jelani Aliyu had in April, 2019 acknowledged that the Automotive Bill before the National Assembly would eliminate the bottlenecks that are hindering smooth implementation of the auto policy in the country.

Aliyu had acknowledged that, “in other nations, when you want to buy a vehicle, you go and you put down 10 per cent to 15 per cent, you drive off with the vehicle and you pay for it for a number of years at just six per cent interest rate, but that is non-existent in Nigeria.”

He faulted the existing financing scheme in the country, adding that the Council had concluded plans with three indigenous banks to enable access to vehicle financing at low interest rate.
“We have funding, we are going to be working with these three banks, and we will soon be rolling out what we call the Automotive Vehicle Finance Scheme,” Jelani had assured.

In anticipation of better days ahead, International brands like Nissan and Hyundai have established mini assembly plants, and indigenous brands like Innoson Vehicle Manufacturing and Coscharis makers of Renault, BMW brands etc have been making significant strides in building trust.

Although the NADDC claimed that the country attracted $1 billion (₦381 billion) in 12 months in January 2020, available data show that in 2019, Nigeria imported an estimated 1.3 million vehicles, 56% more than 734,000 in 2017.

However, authorities say because of the high rate of smuggling, it is difficult to get the exact figures for vehicle imports in Nigeria.
“The country is not receiving good patronage because they cars assembled here are relatively expensive because the cost of production is high, so there is no wide difference between the cost of cars assembled in Nigeria and those imported which defeats the aim of the policy put in place to make available new and affordable vehicles in the country,” an official of the Stallion Motors recently told News Agency of Nigeria under the condition of anonymity.

While Nigerians awaited the vehicle financing scheme, the Nigerian Customs Service (NCS) in 2021 reduced duties on imported vehicles from 35 per cent to 10 per cent as a way of easing transportation cost.

The Comptroller General of the Service, Hameed Ali said the tariff reduction, as contained in the 2020 Finance Act, was initiated by the NCS to ease the cost of transportation in Nigeria.

“We are the proponents of the new tariff. I’ve been torn apart by many people criticising it, saying I used my connection to get it done. But it is in the overall interest of Nigeria,” he stated.

Between Nigerians and Players

While this may be good news for an average Nigerian who cares less about driving a new car, it further throws more challenges to companies that are assembling in the country and the automotive policy.

At the 2020 Nigerian Economic Summit Group (NESG) conference, Chidi Ajaere, CEO of GIG Group, parent of GIG Mobility and GIG Logistics had voiced his concerns on how the policy (reduction of import duties on imported vehicles) would affect investors who had put billions of naira into the local production of vehicles.

“We have invested all that money. What is going to happen to us (the investors in that vehicle assembly plant) now with the policy somersault? Will the federal government come to our aid with incentives for the monies already sunk into the investment?”

Like the NCS boss, the Vice President, Prof. Yemi Osinbajo, in his response, explained that the decision to slash the import duties on vehicles was made to reduce the cost of vehicles and, by extension, cut down on the cost of transportation in Nigeria.

He stated that the (then) removal of fuel subsidies had increased the cost of transportation across the country, and the reduction of import duties would cause deflation in prices.

Osinbajo explained that the idea behind the previous policy was that if duties and levies were increased on imported vehicles, local production would kick into high gear. But this, he said, did not lead to a boost in local production, as vehicles had increasingly become expensive.

According to the Vice President, owing to Nigeria’s annual vehicle demands of 720,000, the local production, which, he said, stood at 14,000, barely met the need, hence the decision to reduce import duties.

In a chat with the Nigeria Motoring Press, the Executive Director, Nigeria Automotive Manufacturers Association (NAMA), Mr Remi Olaofe, regretted that government is unable to give a legal backing to the nation’s auto policy as it does not see it as a thing of priority.
He said: “The only thing that is delaying the real auto policy is lack of political will.

“There must be a commitment by the government. The commitment will only be derived from their appreciation of what the policy seeks to achieve. It does not augur well if we say we are having an auto policy and all we are doing is just on paper.”

Poised for the Storm

Interestingly, DPAN in a statement said it is not unmindful of the reality that it is re-launching the Peugeot brand amidst socio-economic challenges, steep competition, cheaper Asian models as well as COVID-19 realities.

The management, however, assured that it is confident that the popularity and reputation of being reliable which the older generations of the vehicles earned across Nigeria over the past decades with 404, 504, 505, 406, 306 and others, will drive the new generation of vehicles now being assembled at the DPAN plant in Kaduna, to the top of the market.

Stakeholders believe the DPAN would be a veritable value addition to the indigenous auto industry and a commitment of the Dangote Group to drive industrialization and massive job creation which the auto assembling activities afford.

Former Acting Director-General of the NADDC, Mr. Luqman Mamudu, in a chat with our correspondent, however, observed that indigenous operators would have made more headway had the federal government not slash the duty on imported vehicles as provided in Section 38 of the 2020 Finance Act.

Mamudu, who is the Managing Partner, Transtech Industrial Consulting, said the government needs to protect the local players in order to break even.

He said, “The fact is that most of the inputs to our assembly plants are still imported in the form of knocked-down kits due to policy constraints. Assembly still remains a critical foundation for local content development.

“If the government can protect the local market for existing assemblers including DPAN, assembly capacity will certainly reach a critical volume attractive enough for parts manufacturers abroad from whom kits are imported presently to locate in Nigeria.”

News continues after this Advertisement


Please enter your comment!
Please enter your name here