Tuesday, March 22, 2016 9:10AM /FBNQuest Research
The current situation with fx liquidity in Nigeria has visibly affected importation of goods into the country, automobiles inclusive. The National Automotive Design and Development Council (NADDC) estimates annual imports at about 400,000 vehicles (with 50,000 units as new cars) valued at US$3.45bn.
Industry sources suggest that the importation of brand new cars fell by 67% y/y in 2015. Some attribute this decline to yielded fruits from the FGN’s re-launched automotive policy while others opine it is mainly due to the challenges with fx liquidity.
The latest national accounts (Q4 2015) provided by the National Bureau of Statistics (NBS) show that the motor vehicles & assembly segment of the manufacturing sector contracted by -13.0% y/y, compared with 24.3% growth recorded in the corresponding period in 2014. These figures reflect the current macro challenges.
Based on our estimates, the CBN is only able to meet about 15% of their domestic fx requirement, resulting in manufacturers having to source most of their fx requirements at a premium from the parallel market. We believe local auto assemblers are facing challenges with importing their CKD and SKD inputs.
Data from the NADDC reveal that there are now over 40 auto assembly plants across the country. One of the plants belongs to Toyota Nigeria which recently unveiled its first locally-assembled vehicle, a Hiace bus.
We gather that Sterling Bank has partnered with Innoson Motors to provide auto finance to prospective customers at an undisclosed rate.
It is likely that the government will retain the automotive policy. However we expect a revised version tailored to the country’s current economic situation.