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We have been through this road before. Have we learnt our lessons or is this just another scam? Are we trying to do the same thing the same way and expect a different result?
The Nigeria auto policy is vindictive on the average Nigerian, wildly impractical to succeed and the policy makers know this. It has the potential to create scarcity, high prices without an alternate affordable means of transportation especially for the struggling middle class.
Nigeria can always pretend that it is has “made in Nigeria” vehicles while in reality most of the components are imported fully made. This is true even when they are mischievously classified as “locally sourced” to avoid duties, taxes etc.
Government (Federal, State, Local   and other government institutions) is the biggest buyer of new vehicles.  Why are they not as a first step enforcing a policy that only   vehicles assembled in Nigeria will be bought and used by ALL government officials and institutions?  This should keep the vehicle assembly companies fully busy and demonstrate sincerity and confidence in the auto policy. Why are they still using and buying imported fully built vehicles (some of them luxurious). Is this hypocrisy,   lack of confidence in the policy or just plain lies and corruption?
Globally in countries with good infrastructure, various auto companies have been struggling to avoid collapse by expanding their markets and production   volumes   while   improving   on   production technology, methods and cost. Some of the big players are just recovering from controlled bankruptcies.
Experts and various stakeholders have repeatedly cautioned the Federal Government of Nigeria against the dangers of implementing the proposed auto policy without first putting in place necessary infrastructure such as uninterrupted electricity supply, good road networks, rail, I.T. Other requirements for success include free trade agreements with other countries, trained and efficient labor force, significant local inputs from the petrochemical and iron/steel industries etc.  They have continuously said that without these items in place, the cost of production may push the cost of locally assembled cars beyond the reach of most Nigerians. Industrialization in Nigeria is a nullity if these challenges are not met.
Under the new auto policy, the Federal Government raised the duty and levy payable on imported new and used cars from 20 per cent to 70 per cent, pointing out that the initiative was aimed at encouraging the proposed local production of automobile.
The previous administration of President Olusegun Obasanjo cleverly avoided this policy or scam by stating then that the auto assembly policies would be implemented when they see the commitment, facilities, capabilities and products of these vehicle assembly companies. They would not act on promises that might not materialize and further compound the transportation problems in the country.
The Nigerian Senate President, David Mark was recently quoted as saying that the auto bill is a good one on paper, but the realization of the objectives would remain a tall order because power supply in the country has shown no sign of improvement. He was also quoted as saying that beyond the bill practically on ground, we are not just prepared because no investor is going to put his money in Nigeria if you cannot guarantee him constant power.
Japanese Ambassador to Nigeria recently stressed   at a press conference in Abuja that availability of electricity will  play a very significant role for Japan’s automobile giants- Toyota and Honda  to determine viability of establishing their respective assembly plants in Nigeria.
The President of the Ford Motor Company in South Africa who visited Nigeria earlier this year was quoted as saying that Ford would not be rushed into setting up an assembly plant in Nigeria without a fully developed and functional support service system such as road, railway and electricity. He also said they would not want to import parts for ever if they want to establish an assembly plant. They would want to have in place facilities such as the IT, road, rail and power to be efficient and competitive and he has not seen that in Nigeria now.
He estimated the annual new vehicle sales in Nigeria now to be about 100,000 and commented that this is rather too small for all the industry players to share and break even if they must assemble the vehicles in Nigeria. South Africa assembles about 650,000 vehicles annually and about 300,000 is exported to neighbouring countries where they have trade agreements.
Some other experts and operators of the system have advised that the assembly plants should start first and we see the production quality / levels.  Phased incentives over a period of time can be put in place based on identified parameters. They go on to say that one might hurriedly implement high protective tariffs now only to find out that the vehicle plants for various reasons cannot deliver anything near what was promised – this can be highly inflationary and creates a good environment for smuggling and corruption. Failure of the policy will send signals to investors in various other areas of the economy that investment policies in Nigeria are not well thought out.
It is quite easy to see a country like South Africa assembling vehicles for export and want to do the same. Has Nigeria put in place what South Africa has to competitively and profitably assembly vehicles for local use and export?
The auto industry in South Africa has high inputs from primary producers of raw material in the country e.g. iron and steel. South Africa’s installed electricity capacity is about 45,700 megawatts that is steady. It has in place   infrastructure which has helped in the development and establishment of a diversified manufacturing base that has shown its resilience and potential to compete in the world economy. This goes beyond automobiles but includes agriculture product processing, chemicals, IT and Electronics, textile/ footwear/ clothing, Metals, winery etc. The labor force is trained.
Nigeria has an average power generation of about 3,000 megawatts that is not steady. The installed transmission lines might be able to move maybe 5, 500 megawatts at optimum efficiency.
Nigeria has a very poor infrastructure base and there is a high shortage of skilled labor.  It presently does not have a manufacturing base to produce efficiently and profitably – locally or on a global base. The country has raw materials it cannot even process efficiently or profitably for local use or export.  Examples are crude oil refining, processing of cassava, palm kernel, cocoa etc. for local use and export earnings. We have massive tourism potential we cannot convert to reality. The   country now wants to import vehicle components it does not have and assemble them competitively for local and export earnings?
Importing almost all the components (including the bolts and nuts) might not result in any foreign currency savings – in fact it might cost more. Impact on real job creation might be negative – casual labor might be used mainly. Associated automotive parts and component companies (if any) will not be able to compete as they would also suffer the disadvantages in the environment. We need massive investment in infrastructure across the nation to help bridge the infrastructural deficiency which has stunted the country’s economic growth.
The auto policy right now should be focused on how Nigerians can get private and commercial vehicles (new and used) at very affordable prices especially with the very poor transportation situation. Auto service centers with professional services should be highly encouraged. Trying to assemble new vehicles from imported components especially in an environment with obvious unsolved disadvantages is a guaranteed path   to failure.
Some questions need answers:
If vehicles “made in Nigeria” need 70% ( duty and levy ) for protection to be competitive against  other imported vehicles is something not very wrong and should we then be in that business?  How does the auto policy help the struggling commercial drivers or the average Nigerian family buy vehicles at very affordable prices?  Can these assembly plants satisfy vehicle demand (new and used) in the country?
Lastly – which part of the vehicle can one really claim is now   “made in Nigeria”?
Ade Haruna is a Nigerian and an investment consultant. He contributed this from London at [email protected]