Oando Marketing supports Nigerian automobile policy

When President Goodluck Jonathan announced the new automotive industry policy on October 2, 2013, he breathed new life into a vital sector of Nigeria’s economy that had been comatose for several years.

Clearly, Nigeria has a worrisome problem of over dependence on foreign goods and services coupled with the unemployment issue. In 2012 alone, according to data from the Nigerian Automotive Manufacturers Association (NAMA), the Nigerian Bureau of Statistics (NBS) and United Nations Conference on Trade and Development, Nigeria spent in excess of N550 billion ($3.5bn) on the importation of about 400,000 cars (over 60% of which were used cars). Although vehicle importation appears to meet the immediate need of Nigerians to drive and own cars, it erodes the merits and gains associated with automotive industries in other countries of the world.

Across the globe, and especially in Africa, the automotive industry plays a huge role in economic development, job creations and technological advancement. For example, the automotive industry in South Africa, which has been Africa’s automotive leader over the years, contributes 7 percent of the GDP and 12 percent of exports, and it is the second largest employer of labour after agriculture.

Nigeria, with the largest economy in Africa today, a population of over 170 million, a growing middle- class and an estimated demand of approximately 1,000,000 cars annually, still relies on vehicle importation. Although Nigeria has all it takes to be among the greatest beneficiary of the global automotive industry success, this will only become a reality if the industry is given the necessary support and enabling environment, which it once had when the government first got involved in the automotive industry.

Efforts made at developing a national automobile sector dates back to early 1960s, when private companies like UAC, Leventis, SCOA, BEWAC and R.T. Briscoe pioneered the establishment of Auto Assembly Plants using Completely Knocked Down (CKD) or Semi-Knocked Down (SKD) parts

In the 70s, the Nigerian government went into partnerships with governments of some developed countries such as France, Germany and America to establish automobile assembling plants in Nigeria. This lofty vision led to the establishment of six main automobile plants, namely: Peugeot Automobile Nigeria Limited (PAN), Volkswagen of Nigeria Limited (VWON), Steyr Nigeria Limited, Anambra Motor Manufacturing Limited (ANAMMCO), Leyland Nigeria Limited Ibadan (LNL), and National Truck Manufacturing (NTM).

The recorded successes were unprecedented and remarkable. These companies went on to make affordable, built for Nigerian road cars that were largely accepted by the Nigerian Populace and some of these cars even became the status symbols of the day. PAN’s famous brands included the 504, 505 and 607 series (many of which were used as official vehicles by government officials), and who can forget the Volkswagen Beetle and Igala made by VWON. The story follows the same Pattern for ANAMCO, Steyr, NTM and Leyland which made commercial vehicles.

What was more exciting was that beyond the production of cars accepted by the Nigerian people, these companies contributed significantly to the environment where they operated and the overall economy of Nigeria. PAN for example in the 1970s/1980s while in full operation hired over 4,000 Nigerians, built a school and staff club in Kaduna and organized various sporting competitions in the nation.

However over the years, a combination of wrong policies, government neglect and dilapidation of infrastructure have led to the decay of this industry and the disappearance of its attendant benefits.

The average middle class Nigerian who in those days could easily afford a brand new car from the assembly line of these companies, now gives testimonies when they purchase used “Tokunbo” cars.

It is this sense of history and nostalgia, coupled with the successes currently being witnessed in other emerging economies like Brazil, Egypt, Malaysia, and India that made many patriotic Nigerians and corporations commend the efforts of the minister of trade and investment – Olusegun Aganga and the president, for the development of the Nigerian Automotive Industry Development Plan (NAIDP).

In broad terms, the NAIDP developed by the Federal Ministry of Industry, Trade and Investments aims to transform the Nigerian automotive industry and attract investment into the sector. It also aims to diversify Nigeria’s economy and revenues through industry and to increase manufacturing’s contribution to GDP from 4 percent today, to 6 percent by 2015, and finally above 10 pecent by 2017.

According to the minster, the NAIDP which will kick off in October 2014, and subsists for a number of decades aims to curtail Nigeria’s dependence on imports and to meet a significant proportion of its demand through domestic production. Other benefits of this plan will include industrial infrastructure, improvement of manufacturing standards, job creation, Investment promotions, skills development and vehicle purchase scheme.

If the plan is executed accordingly, and many Nigerians are optimistic it will, the vehicle manufacturing industry is expected to create 70,000 skilled and semi-skilled jobs along with 210,000 indirect jobs in small and medium sized enterprises (SMEs) that will supply the assembly plants. Nigeria will also become a major exporting hub to other parts of Africa and even more exciting for the Nigerian people is that in the nearest future the average middle class Nigerian (current population of about 38m) will once again have access to brand new cars at affordable prices and convenient payment options.

Although the benefits of the policy and its multiplier effects on the economy are glaring, there are three main groups of people who have raised serious concerns against it. These concerns cannot be ignored if we must record the level of success seen in other parts of the world.

As expected, the first group to rise against the policy are those in the vehicle importation business, who opined that the policy will make it more expensive to import vehicles, and will ultimately reduce their market size and profitability. The policy however takes care of this group, allowing companies who have keyed into the policy through investments in the establishment of assembly plants in Nigeria, a buffer period of five years when they can still import the difference of what they cannot produce at 35 percent duty.

However, companies who are not willing to invest in assembly plants can still import cars, but at 70 percent duty.

The second group of people are the potential used vehicle owners who are worried that the high tariffs placed on used cars will make it difficult to purchase used cars before the Local plants can ramp up production. This concern is one that the ministry of trade and investments takes seriously as they are aware that it can potentially mobilize the populace against the policy, along with its expected benefits. To this end, the Minister has given assurances that as Nigerians embrace change and allow development, in no distant time it will be cheaper and better to buy a brand new made-in-Nigeria car than to buy a “Tokunbo” car. As part of the automotive policy is also the “Vehicle credit purchase scheme”, which will serve as a cushion for existing vehicle owners to trade in their vehicles for new ones while new applicants can immediately acquire new vehicles from local Assemblers at a credit rate not higher than 10 percent.

The third group that have raised concerns about the NAIDP, are Nigerians who are asking if government has created the enabling environment to sustain this plan. They ask – Does Nigeria have the critical infrastructure such as power, roads and ports facilities, which are all critical to an emerging automobile industry? Another concern of grave importance to this group is, do we have the required skill sets for not just manufacturing/assembling but servicing of these sophisticated electronic vehicles after they have been produced?

This question is particularly imperative as most of the vehicles produced today are highly sophisticated and have been described by many as “computers on wheels.” On the other hand the average auto-technician/ mechanic in Nigeria, was trained as an apprentice using manual “trial and error” methods. Faced with modern vehicles, they become completely handicap leaving vehicle owners at the mercy of garages run by the auto dealers who often tend to be too pricey and sometimes downright exploitative for the average Nigerian.

While we must acknowledge that all the above concerns are daunting, and that the government has a huge role to play, we must first draw strength from the fact that similar novel policies in the railway, fertiliser and sugar industry which also had their share of grim challenges are yielding positive results today.

More importantly, it is important to note that the government cannot singlehandedly surmount these challenges. The private sector must be encouraged to work hard, be responsible and play their part in helping Nigeria scale the huddles standing between her and a brighter tomorrow. The private sector must be encouraged to collaborate more in the provision of infrastructure and in the empowerment and elevation of the current skill sets of the Nigerian worker- especially the blue collar workers.

It is this sense of appreciation of the need for partnership in ensuring the success of the NAIDP and overall development of our economy that is generating a call to action from the private sector.

Recently, Oando Marketing plc, Nigeria’s leading petroleum products retailer, undertook a project to train 5,000 auto technicians and mechanics over the next five years. With the first 100 already selected and billed to commence training in September 2014.

The project is aimed at lifting the level of sophistication of auto technicians in Nigeria. They will be trained on subject such as auto diagnosis, electromotive and workshop management. At the end of this training – being facilitated by some of the best-in-class facilitators, the mechanics will be able to stand shoulder to shoulder with their counterparts in many parts of the world.

We therefore, see a bright future for the automotive industry. A future where in no distant time we will transcend from having assembling plants to full manufacturing plants. A future where we will not only meet Nigeria’s local demand but we will become the exporting hub for the African continent and beyond.

Oando is proud to be part of the future, and we affirm our commitment to be a bigger part. We are confident in the ability of the current leadership of the Federal Ministry of Trade and Investment to revamp the automotive industry and we therefore encourage more private sector stakeholders to work hand in hand with the government to actualize these lofty dreams.

We believe as we like to say at Oando – The future is here.

Olukunle Tokunboh is of the corporate development department of Oando Marketing