Thursday, October 22, 2020 / 12:27
PM / by CSL Research / Header Image Credit: LeadershipNG
A Punch report says NESBITT Investment Nigeria Limited has acquired Peugeot Automobile Nigeria (PAN) and plans to inject US$150m into the company in the next three years to revamp the automobile firm. According to the new owners, the fund to be invested would be spent on retooling and upgrading the automobile company's assembly line as well as in supporting infrastructure and working capital. The new Chairman, Ahmed Wadada-Aliyu noted that, in 2019, Nigeria imported not less than 400,000 used cars compared with 68,000 imported brand new vehicles and assured that the company would soon be rolling out cheap and affordable brand new vehicles for Nigerians.
PAN, is a household name in Nigeria's automobile industry. PAN Nigeria Limited, which started as a joint venture between the Federal Government and AP France, was incorporated on December 15, 1972 and the Kaduna based plant was commissioned on March 11, 1975. In November 2006, PAN was privatized and ASD Motors, the core investor took over management of the company in January 2007 with the hope of turning around the fortunes of the company. With continued poor performance and high indebtedness to banks, in October 2012, the Asset Management Company of Nigeria (AMCON) acquired the debts of the company and converted a portion to equity.
To resuscitate Nigeria's moribund automobile industry, the Nigerian automotive policy was introduced in November 2013. The policy allows local assembly plants to import completely-knocked-down vehicles at 0% duty, and semi-knocked-down vehicles at 5% duty, while importers pay a 70% duty on new and previously-owned vehicles. About 54 licenses have been granted. Following calls from stakeholders in the automotive industry for strict regulation of the importation of vehicles as influx of vehicles, particularly used vehicles were affecting sales, the Nigerian Customs Service (NCS) placed a ban on the importation of vehicles through land borders effective January 1, 2017.
The economic recession in which the country slumped into shortly after the automotive policy was introduced did not bode well for the resuscitation of the industry. The weakened exchange rate sent the prices of new cars far above the reach of Nigeria's shrinking middle class. Automobile dealers saw a significant fall in sales volumes and even locally-assembled vehicles, for which the policy was enacted, experienced significant price increases and are also out of the reach of the average Nigerian. Sadly though, the Nigerian consumer who never recovered from the last recession is on the verge of being plunged into another recession and has seen further erosion of purchasing power by further devaluations and elevated inflation. At the last check, many automobile firms were operating at less than 5% capacity utilisation. When the auto policy was announced, Naira was N162/US$1. Now, Naira is N385.75/US$. The average middle class Nigerian who was unable to afford a brand new car, pre 2014 will almost certainly not be able to afford one now.