Nigeria: 2021 – Used vehicles thrive as auto policy bill lingers

As 2021 draws to a close today, stakeholders conclude that the previous year’s auto industry remains stagnant thanks to the uncertainty surrounding the passage of the National Development Plan bill. the auto industry (NAIDP) known as the Auto Policy Bill. This, they say, remains a setback for the industry and the reason used vehicles are littering the country.

At a time when the world is moving away from fossil fuel vehicles to gasoline or electric vehicles in order to reduce carbon emissions and mitigate its impact on climate change, Nigeria still thrives on imported vehicles. used commonly called Tokunbo.

Statistics available from the Nigerian Customs Service (NCS) indicate that used vehicles account for 90 percent of all vehicle imports per year and even worse in 2021, the depreciation of the naira against the dollar has made the acquisition of vehicles, whether new or used, difficult for Nigerians because purchasing power has fallen drastically.

And with the exchange rate exceeding the ceiling (565 N / $ as yesterday on the parallel market), used vehicles, which is usually not the desire of any car enthusiast, become even more expensive. .

The Daily Trust results indicate that Toyota models – from 1999 to 2010 – are the most expensive in the used vehicle segment. Those used for ridesharing services have even become hot cakes in the used vehicle market.

Stakeholders in the auto sector say investment in the industry is hampered by the lack of an auto policy the government has hesitated on for years. It is believed that with investments in the sector made possible by the legal framework guaranteed by the NAIDP, original equipment manufacturers (OEMs) would be encouraged to establish factories. This will not only create jobs for local auto technicians and engineers, but will also encourage mass production of automobiles while lowering the price of new cars.

Automobile policy should also facilitate the acquisition of vehicles through flexible payment methods as obtained in the developed world.

However, the all-important auto policy bill has been dragging on for too long according to observers and industry stakeholders.

President Muhammadu Buhari refused in 2019 assent to the National Automobile Industry Development Plan (NAIDP) bill adopted by the 8th Senate in 2017.

However, the rejection of the bill angered stakeholders who described the development as a setback for the NAIDP and a deterrent for investors.

But in January, the Minister of Industry, Trade and Investment, Otunba Niyi Adebayo, said the bill was ready and being finalized in the ministry, while it would be sent to the parties. automotive stakeholders for their contributions before being presented to the National Assembly.

He said the government had already called on original equipment manufacturers (OEMs) like Toyota, Honda, among others, to make Nigeria a manufacturing hub, noting that the bill would give them the confidence to invest. in Nigeria.

The Minister said: “It makes sense that anyone working in this sector uses Nigeria as a manufacturing hub.

“So we are putting in place this policy that would give them (OEMs) the confidence to know that we have a law that guarantees their investment here in Nigeria.

“We are looking at a situation where there will be a multiplier effect. This policy is supposed to bring a multiplier effect with regard to manufacturing within the Nigerian ecosystem, it is the essence of this policy.

“This is not just for the automakers, but also a ripple effect of what engine manufacturing will do for the manufacturing sector in Nigeria.”

The minister’s comment was a relief for stakeholders eagerly awaiting the bill to be operational while also galvanizing long-awaited investments in the sector. Now, 12 months later and as the new year begins, the bill has yet to be sent to the National Assembly.

Instead, the government introduced the 2020 finance law which experts said was a counter-climax to efforts to encourage local manufacturers through the several assembly plants that have been set up by automakers. native.

Under Article 38 of the 2020 Finance Law, which is now operational, the federal government approved a 5% duty on the importation of fully built vehicles from 35%, while the import duty for semi-defeated (SKD) remains at 10%. Protests from stakeholders who argued that the policy had jeopardized multibillion naira investments in assembly factories did not prevent the law from being implemented.

As the implementation of the finance law continues, auto policy continues to suffer amid several broken promises that it would again be sent back to the National Assembly as an executive bill.

Speaking on the development which stakeholders say has held back the growth of the industry over the past year, the Executive Director of the Nigerian Automotive Manufacturers Association (NAMA), Mr. Remi Olaofe, said that some cartels frustrated the auto policy bill.

In an interview with the Nigeria Auto Journal team, he said, “With every decision made, there will always be pros and cons. It favors some and it does not favor others. Some people don’t like it. I will say to you make it clear that it is easier to negotiate than to manufacture. When you bring in your fully built vehicle, all you need is your showroom. You know the cost up front in terms of customs clearance, customs, retention and profit margin.

“You can’t do that in manufacturing because over there you have a lot of things to do. For example, the problem of personnel, raw materials, capital expenditure, infrastructure and the like. assembly of a vehicle. But a vehicle that has already been assembled that you just brought is different. So, will these people be happy with the auto policy? The answer is no.

“It’s interesting that these people are very strong; they have the means. Keep in mind that the people who imported vehicles before are largely those who get into vehicle assembly. So when they have seven, eight, nine, ten lines of vehicles that they import, they only use one line for auto policy purposes to assemble. And the assembly they do here is not the top of the line of their products. It is the one that requires minimal resources to just test because no one brings money to any economy without being sure of the policy that supports and protects their investment. There is bound to be a cartel and we know the role it plays.

“The cartel we’re talking about isn’t just about those who bring in FBU. There is a different market that is difficult to assess. no difference between them and a brand new car; maybe because they just traveled about 50 or 100 miles in America and they are shipping them across the country on different platforms.

“When these vehicles come into this country and you open their hood, everything is intact. Nothing has been touched and some still have the nylon inside. These vehicles are classified as Tokunbo cars but they are not. . These are new vehicles. And this is the toughest market. These people have guidelines that new vehicles must enter the country through Company X. Now what they do to the States -United is that when they buy a new car, you drive it to achieve a particular mileage. ”

For his part, a former acting director general of the National Automobile Design and Development Council (NADDC), Mr. Luqman Mamudu, said the finance law signed in 2020 killed the auto industry.

Mamudu, who is the managing partner of Transtech Industrial Consulting, insisted the industry performed poorly in 2021.

In a conversation with Daily Trust, he said: “Until 2014, the Nigerian automotive industry had less than 70,000 installed capacities for the assembly of cars and commercial vehicles, including CKD / SKD capacity. , almost no capacity of components and parts. However, only around 1,600 units were assembled annually, largely dominated by Peugeot products, between PAN Nigeria (Peugeot), NTM, Kano (Sino-truck), Styre Bauchi (agricultural tractors), ANNAMCO Enugu (Mercedes Trucks), Leyland Ibadan (BUSAN Commercial Vehicles) and Innoson Manufacture of engines (buses, SUVs and cars).

“There was considerable local activity in utility vehicle bodywork, particularly tanks for lifting wet products and open trailer buckets for moving construction materials / general cargo. Gorgeous Metals (Kaduna) Proforce (armored), all other assembly factories previously active in Nigeria had been completely closed with equipment dismantled in some cases.

“Once the national automobile industry development plan was launched in 2013/14, activities with new entrants gradually increased to around 500,000 installed capacities or a 700% jump, but the capacity utilization has remained low at less than 4% or 15,000 vehicles per year. Meanwhile, Nigeria imports an average of 400,000 vehicles per year according to official customs statistics, but smuggling activity was widespread.

“All vehicles destined for Nigeria were shipped to Cotonou and neighboring countries and were gradually smuggled in. This remained the case between 2017 and 2020, as assembly activities and the potential for increased capacity utilization remained compromised by the increase in the import of USED vehicles from the scrap yards of Europe, North America etc …

“There has been virtually no positive change in 2021 except that some large global auto companies like Gilly, XCMG and new local brands have joined the ranks of local assemblers. The industry suffered a major setback with the adoption of the 2020 finance law which completely halted assembly. assembly activities of utility vehicles and vehicle bodywork. “

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