Almost one year after the Nigerian Automotive Council and WesBank signed a memorandum of understanding (MoU) for the South African group to enter the Nigerian market, WesBank is yet to finance a vehicle purchase.

WesBank had an “optimistic objective” to write its first deal in March, WesBank CEO Chris de Kock told Engineering News Online last year.

The signing of the MoU followed eight months of talks, and flowed from the Nigerian government’s ambition to grow its fledgling vehicle assembly industry. In order to stimulate sales of locally made vehicles over popular imports, the West African country has to provide affordable mobility to its domestic market.

However, the Nigeria of October 2014 is distinctly different from Nigeria today.

The plummeting oil price has led to a sharp drop in revenue, while elections earlier this year saw former military ruler, Muhammadu Buhari, take over from incumbent Goodluck Jonathan.

Is WesBank’s West African expansion still on track?

The process to establish the group’s Nigerian operations is “well advanced”, but remains subject to regulatory approval processes in Nigeria and South Africa, says De Kock.

“There will also be a waiting period, following regulatory approval, for the establishment of an operating entity.”

This means it is not possible to provide an accurate timeframe of when WesBank will be able to sign its first deal, notes De Kock.

He says WesBank’s expansion into Nigeria is predicated on the implementation of the New Automotive Industry Development Plan (NAIDP), which aims to resurrect vehicle assembly in the West African country, through, for example, increasing the duties on imported vehicles.

Theoretically, the NAIDP should see a surge in the sale of new vehicles in Nigeria, a market dominated by used vehicles up to now.

“It is envisaged that WesBank will offer instalment sale and leasing products, in addition to various value-added insurance products,” notes De Kock.

“We will operate in both the used and new vehicle sectors. The model will be similar to the operation in South Africa.”

It is proposed that the WesBank venture will be funded by Nigeria’s National Automotive Design and Development Council  – through levies set aside for this purpose – as well as by senior and mezzanine debt funders and development funding institutions.

“The proposed ownership structure remains subject to regulatory approvals and, therefore, cannot be commented on at this stage,” says De Kock.

Possible obstacles to WesBank’s West African venture include failure for the NAIDP to gain traction and low credit appetite.

Grey vehicle imports will be a challenge to the programme, but will become more costly as the NAIDP is implemented, believes De Kock.

“There remains a high potential concerning finance offerings for Nigerian-produced vehicles.”

According to the NAIDP the estimated yearly demand for new vehicles is around 100 000 units, with used-vehicle demand at 400 000 units, with many of these vehicles imported from markets abroad. A significant number of vehicles are also smuggled into the country.

De Kock adds that WesBank’s expansion efforts are supported by local vehicle plants moving into Nigeria to set up assembly facilities there, such as Ford and Nissan.

“We can leverage off the partnerships we have already formed with local [vehicle manufacturers] as most of their sub-Saharan operations are managed from South Africa.”