The Nigeria automotive policy was first launched in 1993, and the National Automotive Council (NAC) was established to implement it. However, the policy was not fully implemented for more than two decades due to a lack of political will to give it the needed strength. But in October 2013, the Federal Executive Council of Nigeria approved a new National Automobile Policy to encourage local production of vehicles in the country.
The executive council also stipulated that the government should direct that all vehicles purchased by the government should be from local assembly plants unless they are specialized vehicles and the National Automotive Council has certified that they are not produced in Nigeria, Labaran Maku, Nigerias minister of information and national orientation told local media. The council approved that the recommendation should be backed by appropriate legislation to give assurances to investors that there will be no abrupt change in policy.
According to a document issued by the NAC in Abuja, Measures to Transform the Nigerian Automotive Industry and Attract Investment into the Sector, Nigeria holds enormous potential for the auto industry. It is the seventh most populous country in the world with a growing middle class of 38 million people and a potential vehicle market of one million vehicles.
According to NAC statistics, about 400,000 vehicles (100,000 new and 300,000 used) valued at over N550 billion (U.S. $3.5 billion) were imported into Nigeria in 2012. In its outline of the Nigerian Automotive Industry Development Plan, the NAC emphasized that the new auto policy will produce an automotive industry that will create significant, good quality employment and a wide range of technologically advanced manufacturing opportunities. This industrial base can then form the foundation of other modern, advanced manufacturing activities.
Nigerias Auto Industry
The Nigerian auto industry started domestic production of vehicles in the late 1970s in partnerships with foreign companies. Between 1970 and 1980, six assembly plants were built, including two dedicated to cars and four to trucks. The plants consist of Peugeot Automobile Nigeria Ltd. (PAN) in Kaduna; Volkswagen of Nigeria Ltd. (VWON) in Lagos; Anambra Motor Manufacturing Ltd. (Anammco) in Emene, Enugu; Steyr Nigeria Ltd. in Bauchi; National Truck Manufacturers (NTM) in Kano for Fiat trucks; and Leyland Nigeria Ltd. in Ibadan.
These plants produced 328,000 vehicles per year, but the auto industry witnessed a decline in the aftermath of the collapse of the Nigerian economy, Arthur Madueke, executive director of the Nigerian Auto Manufacturers Association told LubesnGreases at NACs office in Abuja. However, with the introduction of the new auto policy, the Nigerian auto sector is being rejuvenated, attracting more than 19 automakers that are fine-tuning a roll out in the country. According to Madueke, the Nigerian auto industry presently produces 70,000 vehicles in a single shift, at below 10 percent capacity, at about six or seven auto plants. We have 19 auto plants coming on stream, and we can produce more than five million vehicles per year, he added.
Protective Tariff
The new auto policy has also spurred a new tariff system for automobiles to protect local auto plants. According to a two-page document, dated 14 November 2013 and signed by the Nigerian Minister of Finance and Coordinating Minister for the Economy, a fully built imported car would incur a duty of 35 percent and an additional levy of 35 percent of the cost of the vehicle. This 70 percent duty makes it very challenging to import new cars into Nigeria. Under the old system, new cars carried a duty of 20 percent and an additional levy of 2 percent; 10 percent was levied on commercial vehicles. The new tariff system takes effect 1 July 2014.
Olusegun Aganga, Nigerias minister of trade and investment clarified the tariff situation at the recent Trade and Investment Framework Agreement meeting with United States investors and the State Department Trade Representative in Washington. When you bring complete knock downs (CKDs) [all the separate parts needed to assemble a car] into the country, it is at zero percent duty. When you bring in semi-knock downs (SKDs), it is at five percent duty. When you bring in SKD2s [a more complete assembly], it is at 10 percent duty. Companies that assemble cars in the country can import cars of the same make. For every car they produce, they can bring in two new cars at 35 percent duty. Only those not in the auto program will be assessed a 70 percent duty.
OEMs Jump on the Offer
I have been greatly encouraged by the announcements from reputable and global original equipment manufacturers that they are going to establish their automotive assembly plants in Nigeria, Minister Aganga said in an interview with local media. So far, we have been pleasantly surprised by the positive response from local and international investors who are already taking advantage or have signified their interest in leveraging the huge opportunities provided by the new automotive policy.
OEMs such as Hyundai, Kia, Renault, Jiangsu, Foton, Joylong, Higer and Toyota are expected to commence production soon. By the end of the year, 12 auto manufacturing companies are expected to have established their vehicle assembly plants in the country, Aminu Jalal, NAC director general told local media.
Renault-Nissan has taken the lead among automakers with the roll out of a Nissan Patrol from its Lagos assembly plant. We are grateful to the Nigerian government for implementing automotive legislation that is conducive to investment and that was instrumental in our decision to open an assembly plant in partnership with the Stallion Group, already our exclusive distributor in Nigeria, Nissan South Africa Managing Director, Mike Whitfield said.
NAMAs Madueke told LubesnGreases that some NAMA members are already producing vehicles in Nigeria (See the table), and Nissan recently rolled out its first batch of Nigerian made cars in Lagos.
Innocent Chukwuma, chairman of Innoson Vehicles Manufacturing Co. Ltd., said the new auto policy will energize Nigerias industrialization. Ibrahim Boyi, managing director of PAN Ltd. agrees that the new auto policy, if fully implemented, will bring back the glory of the good old years of automotive assembly in Nigeria.
Impact on Lubricants
Madueke, who noted that a vehicle comprises 2,000 parts, said this expansion implies that new auto plants will generate about 2,000 new factories, and the lubricant sector is one industry that will gain from a viable auto industry in Nigeria. Emeka Obidike, executive secretary of Lupan agreed. The auto policy will have a positive effect on indigenous lubricant manufacturers. It is expected that there will be a boost in business relationships between auto manufacturers in the country and Lupan members that will lead to increased capacity utilization, he said.
As an added benefit, Luqman Mamudu, NACs director of policy and planning, noted, The countrys robust petrochemical industry represents an opportunity to make automotive plastics and composite materials that have gained increased application in automotive manufacturing.
In his presentation at the 2013 ICIS Base Oil & Lubricants Conference in Cape Town, South Africa, Mehrdad Vajedi, director of Permian Energy, said, Nigerias ambitious target to produce two million cars locally is a major boost for higher grade lubes. And Olaniyi Okedairo of the Velvet Hill Nigeria Ltd. consultancy agreed that the new auto policy will have a significant impact on the kind of lubes that will be consumed by Nigerians. Mostly, what we have in Nigeria is mineral oil, but most of these newer engines require higher quality, tending toward synthetics. It definitely means there is going to be a shift, he said. It also means that the kind of base oils that will be coming into Nigeria will improve from API Group I to Group II/III to improve oil viscosity.
John Erinne, CEO of Matrix Petro-Chem, a Lagos-based petrochemical concern, concurred, If the new auto policy eventually comes into force, it will help accelerate the shift toward high-quality lubricants. However, he added, it is going to be a gradual shift. I dont expect to see a drastic impact.
Okedairo also said the new auto policy will drive a shift toward the consumption of synthetic lubes in Nigeria. The use of synthetics has started already in Nigeria, and there is going to be an upward trend in their use, he said. Erinne countered that it could elicit a marginal increase in the consumption of synthetics, but there will be greater demand for other high-end mineral oil lubricants.
However, Okedairo said that oil marketers need to embark on an education program because many end-users lack knowledge about lubricants. When some people buy a new car, they lack knowledge about the kind of lubes to use, even when the manufacturer gives specific directions to use a certain oil. Then, when they go to garages, the technicians manipulate them. He emphasized that Lupan members will certainly do everything possible to improve the quality of products to maximize the opportunities that the auto policy presents.