Auto Stakeholders Count Loses amid Stagnating Demand

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CBN Governor, Mr. Godwin Emefiele

Manny Philipson
The country’s automotive sub-sector may as it were, be enmeshed in fresh round of uncertainty, if the recently retained 14 percent Monetary Policy Rate (MPR) is anything to endorse.

Just last Thursday 22 November 2018, the Central Bank of Nigeria (CBN) Governor Godwin Emefiele announced after the 264th Monetary Policy Committee meeting in Abuja that the decision to sustain the MPR underscores the confidence CBN had in the various policies and administrative measures it had deployed lately, which it said has resulted in the moderation in domestic price levels and stability in the foreign exchange rate.

Enthusiastic as Emefiele sounded, he was also mindful of the fact that some key sectors of the economy had continued to experience what he described as “Significant challenges, baring the tepid recovery of the domestic economy from recession,” but warned that effort should be stepped up to strengthen aggregate output and demand.

The automotive sector may undoubtedly not be unconnected with the significant challenges the CBN Governor pointed at in his observation, especially when viewed against precarious turmoil that has thrust the sector in the last couple of years against obnoxious winds.
Patronage of new automobiles, be it passenger cars, commercial vehicles, vans and even heavy-duty vehicles have continued to decline year-on-year, leaving stakeholders in a quandary of hesitation.

Those particularly affected are the stakeholders who had upon the inauguration of the National Automotive Industry Development Plan late 2014, liaised with some Foreign Direct Investments (FDI) to stake their resources in the emerging automotive sector.

The FDIs had indeed came in their hundreds, hoping that the Federal Government was truly committed to the speedy development of the automotive sector, but no sooner they staked their funds than they perceived some cracks and crevices in the policy document, believed to have passed through the mandatory legislative arcades, and currently waiting to be accented by the executive.

To say the investors are in a dilemma would be an understatement as majority of them have either given up hopes that anything meaningful would come from the Memorandum of Understandings earlier signed with the local stakeholders who are similarly still waiting endlessly for the executive accent.
However, a flash of relief came in December 2016, when the Federal Government ordered a restriction of vehicle imports through the land borders but that respite soon paled into obscurity as smugglers returned to the creeks to railroad used vehicles popularly called tokunbo into the country via porous land borders.

Prospective new vehicle buyers have resorted to patronizing used vehicles imports moments after they discovered the vehicles could still find their way into the country, once again dashing the hopes of local vehicle assembly plants who have watched helplessly as combined sales figures plummeted from 50, 000 units annually, (using 2014 statistics) to a paltry 14, 500 units in 2016 and less than 10, 000 units in 2017, the worst in five years.

Situations at the marketplace are still not promising yet as transactions at the end of the third quarter of 2018 is nothing to cheer. In fact, the performance index by the end of the year may not usher even a glimmer of hope as majority of the emerging plants have had their most horrible year ever, downsizing workforce and underutilizing their plants.

Peugeot Automobile Nigeria (PAN) for instance, who had invested hundreds of millions of naira to retool the Kaduna plant in readiness for the new policy implementation that it hoped would get the plant to a promising beginning is at crossroads of improbability, watching its plants gather dust and moist in the cocoon of its factory at Kakuri Industrial Estate Kaduna.

PAN, which has remained a milestone in Nigeria’s automobile industry, was conceived in 1969 by the then Federal Military Government under the leadership of General Yakubu Gowon, and in the build-up to actualize the dream, 16 reputable vehicle manufacturing companies were invited to tender their proposals for the establishment of vehicle assembly plants in the country.

While PAN and Volkswagen of Nigeria assembled passenger cars, Leyland, ANAMMCO and Styr were conscripted to assemble trucks and agricultural equipment. They all produced at their respective installed capacities until the 1990s when they gradually became moribund.

New investors have since acquired majority stakes in these plants at the inauguration of the National Industrial Development Plan in 2014, retooling and rejuvenating the plants.
Former VWoN for example was acquired by VON Automobiles Nigeria Limited who retooled the factory and converted the facility to a multipurpose vehicle assembly plant, assembling Nissan brand of vehicles, Hyundai vehicles and Light Commercial Vehicles as well as Ashok Leyland range of trucks and buses.

These facilities are capable of manufacturing the entire vehicular needs of the country if adequately managed and supported by the Federal Government through effective policies and assured of sealess access to Forex, but ironically, the host being the Federal Government doesn’t appear to be taking these investments seriously as it rarely patronize the products of the plants.

Only recently, Nissan sub-Saharan Africa, a key FDI in Stallion NMN, the local Nissan custodian had in October 2018 announced a fresh MOU (Memorandum of Understanding) with Ghana to commence vehicle assembly at a new plant that would also service the growing demand for Nissan vehicles in that country and parts of the West African sub-region.

This development, no doubt, is an affront on Nigeria who in 2014 became the first country in sub-Saharan Africa to accommodate a Nissan plant and of course the first to roll out on line a wholly indigenous Nissan model.

What this implies is that, Nigeria may be losing the opportunity it earlier got on a platter to become a potentially viable Nissan hub in West Africa to newcomer Ghana, and could as well be relinquishing the resultant commercial gains.

Nigeria, however, need not cry over spilt milk as it has a substantially buoyant youthful population that could play a large role in fostering the growth of the country’s automobile market if the needed machinery is put in place.

Blue chip companies including Oil and Gas concerns could as well as enhance the patronage of locally assembled vehicles to encourage the plants to expand production just the government too has a role to play in the growth and acceleration of the market.

Government should introduce market-support initiatives, especially around regulations, helping with seamless credit schemes, granting tax holidays, and ensuring seamless access to FX, while disseminating information to both manufacturers and consumers alike to avoid undue asphyxiation.
*Philipson is principal partner at Media Advocate Limited, an automotive resource and marketing communications company.