The Nigerian Automotive Industry Development Plan

BY ENGR. AMINU JALAL, F N S E , F N I M e c h E , F N I M ,

THE DIRECTOR-GENERALNATIONAL AUTOMOTIVE COUNCIL,

ABUJA . NIGERIA

AT THE

NIGERIAN AUTOMOTIVE SUMMITSOUTH AFRICAN AUTOMOTIVE WEEK

JOHANNESBURG, 14-17 OCTOBER 2014

Outline

Facts about Nigeria

The Nigerian Automotive Industry Development Plan

The Plan Implementation

Local content Development

Response to the Plan

Conclusions

Map of Nigeria

NIGERIA ANDNEIGBOURING COUNTRIES.

The Nigerian Economy: Vital Indicators

GDP (2013): $510bi l l ion. Major contr ibutors are: -Agr icu l ture: 21.97%;- Industry: 25.64%

• Crude Petroleum and Natural Gas: 14.4%• Manufacturing: 6.83%.

• Mining and quarrying; construction: 4.41%

-Serv ices: 51.89%• Telecoms & Information Services: 8.69%• Motion pics, music prod, etc.: 1.42%

Real GDP growth rate: about 7% annual ly for the last decade. Per capita GDP (2013): $2,700.

Natural Resources

Minerals• Oil and natural gas, Tin, Columbite, Iron ore,

Coal, Limestone, Lead, Zinc.

Agricultural Products• Cocoa, Palm oil, Yam, Cassava, Sorghum,

Millet, Corn, Rice, Livestock, Groundnuts, Cotton, Gum Arabic.

Industry

Food and confectionary, Beer, Textile, Footwear, Cement, Motor vehicle assembly/manufacture,Bus body building, Automotive components, Metal products, Lumber, Soaps and Detergents.

The Nigerian Automotive Industry

Brief historical facts:-Some private companies started SKD assembly in the 60s;

-By early 70s and 80s, the federal government set up 2 car, and 4 l ight and heavy commercial vehicle assembly plants, assembling vehicles from CKD parts

-these were al l privatised by December 2012.

The Nigerian Automotive Industry, 1980-2006

S/n Plant Year Started Ops

Products Annual Capacity

1 Peugeot Nig. Ltd. 1975 Cars, Mini-buses 63,000

2 Volkswagen of Nig. Ltd.

1975 Car, Mini-buses 45,000

3 Leyland Nig. Ltd. 1980 Lt. Com*, Mini- Buses

7,500

4 MB-Anammco 1980 Trucks, Buses 7,500

5 National Trucks Manufacturers Ltd.

1980 Trucks, Buses, Tractors

13,000

6 Steyr Nigeria Ltd. 1980 Trucks, Tractors, Buses

13,000

7 GM Nigeria Ltd. Lt. Com, Bus, Trucks

7,500

8 SCOA Nig. Ltd. Lt. Com, Bus, Trucks

12,000

*Lt. Com = Light Commercial vehicles

The Nigerian Auto Industry in 2013S/n Plant Products Annual Capacity

1 ANAMMCO, Enugu Trucks, Buses 5,000

2 GM Nig. Ltd., Lagos Trucks, Buses 5,000

3 Innoson Vehicle Mfg. Co., Nnewi Pick-ups, Buses, Trucks 10,000

4 Iron Products Industries (IPI), Lagos

Truck & Tanker Bodies, Buses

400

5 Leventis Motors Ltd., Ibadan Trucks, Buses 5,000

6 Leyland-Busan Ltd. Trucks, Buses 5,000

7 NTM Nig. Ltd., Kano Trucks, Buses 5,000

8 PAN Nig. Ltd. Kaduna Cars, Buses 25,000

9 Proforce Ltd. Armoured Vans, Jeeps 420

10 Steyr Nig. Ltd., Bauchi Trucks, Buses 5,000

11 VON Nigeria Ltd., Lagos Cars, Lt. Com, SUV, Buses 39,000

12 Zahav Auto Co. Nig. Ltd. Lagos Pick-up Trucks, 5,000

Table 1. Import of Vehicles into Nigeria (UNCTAD) in US$M.

Year 2007 2008 2009 2010 2011 2012

Motor Vehicles for transport of goods, special purpose

427 930 847 1,466 731 1,125

Motor Vehicles for the transport of persons

1,096 2,344 1,746 2,705 2,024 2,326

Total 1,523 3,274 2,593 4,171 2,755 3,451 

Reasons for the Collapse of the Industry

• Lack of an Automotive Policy• Low demand due to economic problems in

the 1980s and 90s • Low Patronage by government and its

agencies• Inconsistent and Insufficient protection

policy ;

The Prospects of the Automotive Industry in Nigeria

Nigeria has the following advantages:i. A growing middle class (40 million), and a

potential vehicle market of one million vehicles annually.

ii. Annual spending on vehicles import is over N550 billion (US$3.5 billion) and growing, making it the number two user of foreign exchange in 2012 after

Boilers, machinery and appliances.

The Prospects of the Automotive Industry in Nigeria

iii. Nigeria has not bound its tariff on vehicles at the WTO, except for ECOWAS and the auto industry has been admitted into the common tariff exclusion list.

iv. Regional Export potential into the West and Central African market; and

v. Availability of a large and trainable workforce.

The Automotive Industry Development Plan

The Auto Sector is a key component of the Nigerian Industrial Revolution Plan (NIRP). The NIRP is a 5 year programme developed by the Federal Ministry of Industry, Trade, and Investments to diversify Nigeria’s economy and revenues through industry and to increase manufacturing’s contribution to GDP 7% today, to 9% by 2015, and finally above 13% by 2017.

The Automotive Industry Development plan was developed after extensive consultations with existing local auto manufacturers, international OEMs, as well as MDAs . Finally, FMITI had offsite sessions with other countries that have successfully implemented automotive development programmes

The Automotive Industry Development Plan

The Plan has the following Elements:(i) Industrial infrastructure

Automotive supplier parks and clusters are where industries can share infrastructure, resources, information, knowledge and technical expertise. There are already three areas where the industry is located and where we will develop the clusters: Lagos-Ogun, Anambra-Enugu and Kaduna-Kano States.

(ii) Skills development: (a) OEMs and their Global suppliers have extensive manpower development programmes, both local and international. NAC will work with pioneer OEM investors to fill skills gaps in auto operations.  

The Automotive Industry Development Plan

(b)The Industrial Training Fund (ITF) is alreadyworking with SENAI in Brazil to design auto training centres similar to what they have in Brazil.

(c) The National Automotive Council (NAC) has been putting in place foundational skills development for the automotive industry for the longer term. This includes the introduction of degree programmes in automobile engineering in Nigerian Universities and new curricula for teaching automotive mechanics.

The Automotive Industry Development Plan

(iii) StandardsSafety and products standards are crucial to the development of a viable automotive industry. Specifically:

-Local content manufacturers would be encouraged and assisted to produce good quality items and obtain ISO 9001 QMS quality certification.

-Vehicles to be assembled would be required to have homologation certificate issued by an authorised agency in the country of origin pending when we acquire homologation capabilities.

NAC Presentation at Soth African Auto Week

The Automotive Industry Development Plan

-NAC, with the Standards Organization of Nigeria (SON) and other stakeholders, and have developed/adopted 106 vehicle safety standards in the last two years.

-NAC is building automotive component test centers with a view to achieving vehicle homologation in future.

-Finally, the Council has been in contact with the states’ Motor Vehicle Administration Departments to review and reform the vehicle inspection and certification system.

The Automotive IndustryDevelopment Plan

(iv) Investment PromotionWhile the provision of appropriate tariff measures, patronage, supplier parks, etc., will attract investors, a deliberate campaign will be mounted to attract them. The following are also prerequisites for investment in the automotive sector:

a) Policy consistency by government through legislation.

b) Checking Smuggling: NAC is already working with the Federal Road Safety Commission (FRSC) and the Nigerian Customs Service (NCS) on this issue. Measures to control vehicle smuggling through the control of vehicle registration system is being worked out.

The Automotive IndustryDevelopment Plan

C) Fiscal Measures: The incentives and support measures required by the industry can be achieved through appropriate fiscal measures and patronage. The fiscal regime is designed as follows:

S/n Category Duty Levy1. Capital equipment used

for Auto Assembly0% 0%

2. Completely Knocked Down Parts (CKD)

0% 0%

3. Semi Knocked Down Parts (SKDI)

5% 0%

4. Semi Knocked Down Parts (SKDII)

10% 0%

5. Fully Built Vehicles(Within Auto program)

35% 0%

6. Fully Built Vehicles(Outside Auto program)

35% 35%

Elements of the Automotive Development Plan

(V) Market Development The Nigerian vehicle market as it is can support an indigenous automotive industry. The following will be implemented to develop and sustain the market for local automotive industry: (a) Affordable vehicles programme(b) Vehicle purchase scheme(c) Patronage by government and its agencies

Local Content Development

In early years, it is expected that most vehicle parts will be imported, with Nigeria basically focused on assembly. However, over time, specific parts will be manufactured locally as Nigerian suppliers develop key competencies. The plan will facilitate local content increases in the following vehicle parts: Welded parts (exhaust system, Seat frames), Elect Parts (batteries, trafficators, wiring

harness), Plastic and Rubber Parts (tyres, tubes, fan

blades, seat foam, oil seals, hoses, radiator grills, etc),

Radiator, Cables, Filters, Brake pads/linings, Windscreens, side glasses, fibre-glass parts, paints, etc.

Rubber products – (tyres)

Plan ImplementationThe plan objective is to have vehicle assembly

operations with increasing local content incorporation. This may be achieved in the assembly stages below. The transition from one stage to another should not exceed 12 months. (i.e. a maximum of 48 months from start of SKDII to CKD operations (including 12 months set-up period)):

SKD 2 Phase I

• Vehicle cabin is fully trimmed, painted and dashboard, accessories installed. Other aggregates are loose and assembled on assembly line.

SKD 2 Phase II

• Assembly starts with Car/ truck cabin body fully painted and glazed.

SKD 1

• Assembly starts with Car body/ trucks cabin unpainted.

CKD

• All materials supplied loose for final welding and final assembly

Response to the Auto Policy23 Companies have signed commitments with technical

partners to assemble cars/SUVs, mini-buses, pick-up trucks buses and trucks.

VON started the assembly of Nissan and Hyundai vehicles in April and July 2014 respectively.

PAN flagged-off Peugeot 301 assembly line on 1st July 2014.

Dana Motors will start the assembly of Kia and Renault vehicles before the end of this year.

VW, Toyota, Ford and Tata Motors are conducting a feasibility study on assembling vehicles in Nigeria.

Conclusion

Nigeria presents an opportunity for the assembly of vehicles and the manufacture of automotive parts and components. The various challenges that prevented its growth and development are being addressed.

We are now working on a local content policy.

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

NAC Presentation at Soth African Auto Week

Thank you for your attention!

aminujalal@nac.org.ng

aminujalal@yahoo.com

www.nac.org.ng