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23 companies sign up for Nigerian auto assembly programme

23 companies sign up for Nigerian auto assembly programme

Photo by Duane Daws

15th October 2014

By: Irma Venter

Creamer Media Senior Deputy Editor

  

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Twenty-three companies had signed commitments with technical partners to assemble cars, minibuses, pickups, buses and trucks in Nigeria, under the country’s new Automotive Industry Development Plan (NAIDP), said Nigerian Automotive Council director-general Aminu Jamal on Wednesday.

Speaking at the South African Automotive Week conference, in Midrand, he said the VON group had already started the assembly of Nissan and Hyundai vehicles in April and July this year respectively.

Dana Motors would start assembly of Kia and Renault vehicles before the end of the year, while Volkswagen, Toyota, Ford and Tata Motors were conducting feasibility studies on the assembly of vehicles in Nigeria, said Jalal.

He noted that the NAIDP’s objective was to host vehicle assembly operations, with “growing local content incorporation”.

The hope was to move from less-complex semi-knockdown (SKD) assembly to completely knockdown (CKD) assembly within four years of a plant being established. However, said Jalal, the Nigerian government “was flexible” on this timeline.

The drive for local assembly was being aided by a range of measures, such as sharp increases in tariffs for companies which chose not to assemble in Nigeria.

Nigeria was not new to vehicle assembly, with some private companies starting SKD assembly in the 1960s already. By the early 1970s and 1980s, the Nigerian federal government had set up two CKD car and four light and heavy commercial vehicle assembly plants.

These included Peugeot Nigeria that opened shop in 1975, building cars and minibuses at a plant with capacity for 63 000 units a year.

Today, however, mostly truck and bus plants remained, such as Proforce, and Leventis Motors.

The Nigerian automotive assembly industry was privatised in December 2012, with government no longer holding shares in plants.

In the void left by the absence of local assembly, vehicle imports into the country flourished, increasing from $1.2-billion in 2007, to $3.45-billion in 2012.

This was putting pressure on Nigeria’s balance of payments, noted Jalal.

The assembly industry started in the 1960s failed owing to a number of reasons, including the lack of a comprehensive automotive policy, explained Jalal. There was also low demand for new vehicles as the economy collapsed in the 1980s and 1990s, which saw the Nigerian currency weaken dramatically.

Jalal noted that the situation was made worse by inconsistent and insufficient protection policies from government. For example, tyre import duties were dropped from 40% to 10% in the space of one month, killing off tyre manufacturing in Nigeria.

Nigeria was currently importing tyres, he added, this while the country had rubber plantations.

The new vehicle market in Nigeria was estimated at roughly 50 000 units a year, with second-hand and grey new vehicle imports at 450 000 units.

Jalal said this meant that Nigeria presented a significant opportunity for the vehicle assembly industry, as it had a potential new vehicle market of one-million vehicles a year, with sales fuelled by a growing middle class.

There also existed regional export potential into the West and Central African markets.

DETAILS OF THE PLAN
Jalal said in Midrand that the auto sector was a key component of the Nigerian Industrial Revolution Plan (NIRP).

The NIRP was a five-year programme developed by the Federal Ministry of Industry, Trade and Investments to diversify Nigeria’s economy and revenue through industry, and to increase manufacturing’s contribution from the current 7% of gross domestic product (GDP), to 9% by 2015, and more than 13% by 2017.

Jalal said the NAIDP was developed after “extensive consultation” with existing Nigerian automotive assemblers and international vehicle manufacturers.

The plan detailed the development of industrial infrastructure, such as automotive supplier parks.

There was also a focus on skills development, as well as the development of standards and specifications. According to the NAIDP, government would work to reform the current vehicle inspection, registration and certification system, in an attempt to formalise the industry. Vehicle smuggling would also need to be addressed.

Supplier development would also receive attention.

It was expected that most vehicle parts would initially be imported, with Nigeria at first focused on assembly.

However, over time, the plan was for specific parts to be manufactured locally as Nigerian suppliers developed key competencies.

The plan was to facilitate local content increases in welded parts, such as exhaust systems and seat frames; electric system parts, such as batteries and wiring harness; plastic and rubber parts, such as tyres, tubes, fan blades, seat foam, oil seals, hoses and radiator grills; as well as parts such as radiators, cables, filters, brake pads/linings, windscreens, side glasses, fibre-glass parts and paint.

“We are now working on a local content policy,” said Jalal.

“We hope to partner with all interested parties, in particular South African local content manufacturers, to develop the automotive industry for our mutual benefit.”

Jalal added that he realised Nigeria had “serious power issues”.

However, with the power industry now privatised, he was hopeful “there would be a big change in the next two to three years”.

For those who hoped that the NAIDP would disappear after the Nigerian elections next year, Jalal had bad news.

“After the election next year people will see that the policy is here to stay. We expect to see more interest from the industry then.”

Edited by Creamer Media Reporter

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