Ahead of the January 2015 implementation of the 35 per cent levy on the importation of used cars, there is nothing to suggest that the new automotive policy will achieve its strategic objectives. Industry experts and stakeholders say the government put the wrong foot forward when it came out with the policy without first addressing the more fundamental challenge of lack of infr
It took threat of total withdrawal of services by clearing agents to force down the hand of the Tin Can Island and Ports Terminal Multi Services Limited (PTML)Command of Nigeria Customs Service (NCS) over the alleged hurried implementation of the 35 per cent levy on the importation of fairly used cars. The clearing agents, under the aegis of the Association of Nigerian Licensed Customs Agents (ANCLA) and the National Association of Government Approved Freight Forwarders (NAGAFF), were peeved by the implementation of the levy, which was scheduled to take off in January 2015, but was allegedly hurriedly implemented by the Customs high command before its take-off date, and without consulting or informing them.
The prompt resistance by both unions starved off a labour crisis that would have paralysed economic activities at the nation’s ports and thrown the vehicle importation arm of the automobile industry into chaos. The National President of NAGAFF, Comrade Eugene Nweke, told The Nation that the matter has been resolved. He, however, blamed the sudden implementation of the new levy regime, which is a key component of the new automotive policy,on communication gap between the NCS and the Federal Ministry of Finance. But the matter, though resolved, may have confirmed fears earlier expressed by critics of the automotive policy that it would not achieve its strategic objective of encouraging the manufacture of vehicles locally.
Since the formal launch of the auto policy, it has been the booth of scathing criticisms by experts and stakeholders in both the maritime and automobile industry most of who argue that the policy, though good and commendable, is dead on arrival on account of faulty implementation. As Neke put it, “The auto policy is a good one, but the approach is wrong.” He pointed out, for instance, that the auto policy would only make Nigeria haven for all manner of foreign auto producing companies to come into Nigeria and assemble cars. According to him, all the necessary raw materials for auto assembly have been processed in the countries of origin of the foreign auto firms, leaving Nigeria producing none of the over 2, 500 car components.
As far as Nweke is concerned, “The auto policy is all about encouraging trading and nothing more.” “We want to see an auto policy that encourages sourcing of raw materials locally,” he added. He was referring to the need to fully revive the Ajaokuta Steel Company in Kogi State and other related raw material processing facilities in the country. His thinking and indeed, those of other industry experts and stakeholders is that components/raw materials that are used in the manufacture of vehicles should be carefully identified and broken down to ascertain opportunities for local sourcing/production. The belief is that the auto policy would fail to achieve its strategic objective if the steel used by auto companies are imported solely from their parent companies.
While also admitting that “The idea of the auto policy is a good one, but the implementation is faulty,” Dr. Odion Oscar Odiboh, a marketing communication expert, could not agree less on the need for local sourcing of raw materials. “Ajeokuta has to be working,” he insisted. Odiboh, who also consults for CFAO Motors has reason to so insist, considering recent disclosure by the Minister of Industry, Trade and Investment, Dr. Olusegun Aganga that Nigeria spends $3.3 billion annually on the importation of steel and iron. The minister, who spoke last week in Ilorin, the Kwara State capital, at the inauguration of the Cold Roll Mill Project of Kamwire Industries Limited, said this is despite the fact that Nigeria had the second largest iron ore deposit in Africa and the 12th largest in the world.
However, lack of locally sourced raw materials is not the only challenge raising fears that the auto policy is already off to a rough start and may not achieve set targets. “Power supply has to be stable. The enabling environment has to be there,” Odiboh said. As things stand today, he was emphatic that “The auto policy won’t work, its all a deceit. When you put the cart before the horse, it won’t work.” He accused the National Automotive Council (NAC) of forcing the local auto assembly firms to admit having the capacity to produce cars to meet local demand when indeed, “The local autos are currently under intense under-capacity.”
NAC is a parastatal under the Federal Ministry of Industry. It was established by Act No. 84 of august 25, 1993. The Council, with inputs from the Nigerian Automobile Manufacturers Association (NAMA), and other organisations involved in the industry drafted the automotive policy for Nigeria. The trust of the National Automotive Policy (NAP) was to ensure the survival and growth of the Nigerian automotive industry using local, human and material resources. This is with a view to enhancing the industry’s contribution to the national economy, especially in the areas of transportation of people and goods.
Unfortunately however, lack of critical infrastructure, particularly electricity supply, remains one of the greatest hurdles before the realisation of the objectives of the auto policy. With electricity supply currently hovering between N3, 500 and N4, 000 megawatts, with no hope of a major improvement anytime, concerns are mounting over the success of the policy. The thinking is that the auto policy was premature, and that government put the wrong foot forward when it came out with the policy without first addressing the huge infrastructure gap in the industry.
According to experts, a steady electricity supply is critical to the operations of any manufacturing entity, including auto manufacturing. Independent generation of electricity by auto companies, it is believed, would adversely affect prices, the result of which would be borne by end users and this would inadvertently erode part of the gains of setting up the auto plants. Besides, environmental experts argue that resorting to independent generation runs against the global policy on sustainable energy and reduction in green house gas emissions. Simply put, independent generation is not eco-friendly.
As Dr. Odiboh recalled, lack of infrastructure particularly power was partly responsible for the disappearance of over 10 auto assembly plants from Nigeria in the past. He noted that while there is nothing wrong with Nigeria aspiring to return to a viable and competitive auto industry, there is need to go back to the drawing board and address the issue of lack of enabling environment that saw the disappearance of some of the once vibrant auto plants from the nation’s industrial landscape.
Indeed, in the past, auto firms such as Peugeot in Kaduna, Steyr in Bauchi, Leyland in Ibadan, and ANNAMCO in Enugu dotted the landscape. Same for tyre manufacturing firms like Michelin and Dunlop. Today, most of these companies have either closed shop or relocated to neigbouring West African countries where the operating environment is considered investor-friendly. “Why did these companies fail?” Nweke asked, insisting that government should address its mind to providing answer to the question. According to him, there hasn’t been any change in the fortunes of the industry to guarantee the success of the auto policy.
Lack of necessary infrastructure is not the only factor that has cast a shadow of doubt on the workability of the policy. Government is yet to make good its promise to roll out a vehicle refinancing scheme to enable Nigerians buy cars and other locally manufactured vehicles at affordable rates. According to Aganga, the scheme would allow Nigerians buy vehicles of their choice and pay for them over a period of four years. He said government was in discussion with both local and international banks to set aside a vehicle refinancing fund that Nigerians can access at not more than 10 per cent interest per annum.
However, less than three months before the scheduled take-off of the implementation of the 35 per cent levy on the importation of fairly used, the vehicle refinancing scheme is yet to come on stream. And while prospective car owners await the take-off of the scheme, the cost of new vehicles in Nigeria, at present, remains astronomically over and above the sale in the countries of origin. For instance, KIA and Hyundai brand of vehicles are generally considered suitable for Nigerian roads. The snag however, is that they are overpriced despite the fact that they are promoted and sold in most centres by the parent companies. This is partly because of the exchange rate of the naira to the dollar.
While majority of Nigerians are hoping to ride on the back of the yet-to-be-unveiled vehicle refinancing scheme to own their own dream cars, the Standard Organisation of Nigeria (SON) is said to have called the attention of the government to the failure of the auto assembly plants that promised to roll out made-in-Nigeria vehicles to approach the agency for standardisation of their products. The agency reportedly insisted that any vehicle coming out of the assembly plants must meet the Nigerian standard before the policy could be implemented.
But as far as government and operators in the local auto industry are concerned, those opposed to the auto policy are merely using scare tactics against a progressive policy designed to make cars cheaper in Nigeria, domesticate their production, create jobs and bring about transfer of technology.
According to them, those citing lack of infrastructure as reason why Nigeria should not venture into local production are missing the point. No nation, NAMA argued, for intance, has had to wait till all the necessary infrastructure is put in place before venturing into production. The association praised government for defending the policy and warned the public against being “swayed or fooled by laggards” who failed to move in response to the very strong stimulus provided by government. It alsourged Nigerians to bear with the government, listing some countries that have gained from such policy as South Africa, Brazil, India, Egypt, and Thailand.
Can Nigeria ride on its auto policy to replicate the successes of the afore-mentioned countries? The answer, perhaps, lies in her ability to set her priorities right and address comprehensively the numerous challenges before the policy.
astructure, reports Chikodi Okereocha.
