Advancing local auto production


Thursday, March 19, 2015 9:55 AM / FBN Capital Research


An objective of the Nigeria Industrial Revolution Plan (NIRP), a five-year programme developed by the FGN, is to increase manufacturing’s contribution to GDP to above 13% by 2017.


The sector contributed 9.8% last year according to data from the National Bureau of Statistics. The auto industry, which is a core component of the NIRP, has gained a good deal of traction.


The multiple challenges that hindered its development before the relaunch of the automotive policy in October 2013 are currently being tackled. Nigeria, by virtue of its size, presents an opportunity for vehicle assembly as well as manufacturing of auto components. However, policy consistency by the FGN and stringent controls on smuggling are prerequisites if the potential is to be realised.


Currently, semi knocked down vehicles ‘SKD I’ and ‘SKD II’ attract duty of 5% and 10% respectively, with no levy on either, while fully built vehicles (within the auto programme) are subject to a duty of 35% without a levy. However, for such vehicles outside the programme, both a duty of 35% and a levy of 35% are imposed. The duty element was scheduled to rise to 70% in January, but has now been deferred to April 2015.


Industry information reveals that annual spending on vehicle imports exceeded N550bn (then US$3.5bn) in 2012. Current market demand is estimated at 400,000 vehicles, new and used (combined).


Last week we attended a briefing by Aminu Jalal, director-general of the National Automotive Council (NAC). He disclosed that the council is working hand in glove with the Federal Road Safety Commission and the Nigerian Customs Service to curb smuggling by upgrading the vehicle registration system. Data from industry sources at the ports highlight a sharp fall of 19,000 units in vehicle imports at Lagos in January from last year and a corresponding increase of 10,000 units at Cotonou.    


A few infrastructure projects such as automotive supplier parks and clusters, as well as an industrial training fund, are currently being put in place. The parks will allow manufacturers to share infrastructure, resources, and technical expertise.   


A credit scheme is being developed by the NAC in conjunction with WesBank, which provides consumer finance for one in three vehicles sold in South Africa.   It had been hoped that the scheme would lend at single-digit interest rates although Jalal told the local media on 15 March that initially rates of between 10% and 12% were achievable.

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