Nigeria spends $6bn yearly on vehicle importation

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Nigeria spends $6bn yearly on vehicle importation” width=”239″ height=”152″ />Nigeria is spending not less than $6 billion annually in importing vehicles. The emergence of new auto policy has drastically reduced the amount of money Nigeria is spending on imported vehicles since January.

It was learnt that the country spends $6 billion annually to ferry both used and new vehicles into the country According to the Minister of Trade and Investments, Olusegun Aganga, some original equipment manufacturers (OEMs) had also dropped 30 per cent.

Also, South Africa’s National Association of Automobile Manufacturers’ Director, Mr Nico Vermeulen, has said that vehicle exports by some South Africanbased manufacturers to Nigeria was affected by the introduction of duties on new car imports.

He however, said it was difficult to quantify the impact. Aganga added that global brands including Nissan and Peugeot, among others, were driving partnerships and capacity expansion in the country’s auto sector, adding that with the current fall of oil price, it had become imperative that Nigeria should not continue to import what could be produced here locally.

The minister said that Nigeria had joined the league of global car manufacturers, saying that the vehicles produced by Innoson Vehicle Manufacturing Company Limited, in Nnewi, Anambra State, were made up of about 70 per cent locally sourced contents. Customs duties Before now, Customs duties paid for the categories of vehicle include: Cars 30 per cent, bus 15 per cent, trucks 30 per cent and completely knocked down vehicles, five per cent.

Other taxes are the Comprehensive Import Supervision Scheme (CISS), one per cent, National Automotive Council, two per cent, VAT five per cent and ECOWAS Trade Liberalisation Scheme. Those who formerly paid 20 per cent duty and two per cent levy on new cars now pay 35 per cent duty and another 35 per cent levy, bringing the total tariff to 70 per cent.

Because of this, the Vice President of Operations at General Motors South Africa (GMSA), Mr Ian Nicholls, explained that the new regulations and higher vehicle import duties in Nigeria had made automotive companies to shift their attention to Nigeria by establishing assembly plants in order to compete effectively.

South Africa’s strategy Nicholls noted that vehicle manufacturers with production facilities in South Africa are considering establishing an assembly plant in Nigeria. The Vice President stressed that General Motors would have to rethink its plans in Nigeria.

“We have to look, along with our distributors there, what the opportunities are to do something locally. But we haven’t made a decision to do something in Nigeria.”

Also, the former South African minister of trade and industry and of public enterprises, Alec Erwin, was a technical adviser to the Nigeria Automotive Council and had contributed to the creation of the strategic framework for the development of the Nigeria Automotive Industry Development Plan (NAIDP). Nicholls said that Nigeria’s automotive plan defined what semi-knocked-down (SKD) assembly must comprise, which means that it was not a case of merely taking the “wheels off and that’s it.”

The challenge But he said that the biggest challenge in Nigeria was that the country did not have any existing automotive component supplier base. “The challenge is going to be how you set up an SKD assembly facility that makes financial sense without any local value added, except labour. By its very nature, SKD just adds on to the cost of a vehicle,” he said.

Nicholls stressed that Nigeria has a population of about 160 million people and a new car market of about 50,000 units a year, but the market for used cars and grey vehicle imports was about 450,000 units a year. “If you control the used car and grey import market, you could have a significant industry in Nigeria, so it is something you just can’t ignore,” he said.

Competition Nigeria emerged last year as a potential competitor to South Africa for foreign direct investment by global multinational vehicle manufacturers when the Renault-Nissan alliance and West African conglomerate, Stallion Group, announced their intention to jointly launch vehicle assembly in Nigeria and indicated there was potential to develop the plant into a major manufacturing hub for Nissan in Africa. Also, a maritime economist and Executive Director of ABN Consults, Mr Harrison Agada, noted that there was a huge gap between demand and local capacity.

He explained that local production capacity of automobiles by all the assembly plants in the country today stands at a pathetic 45,000 units per annum while demand stands at 800,000 units per annum.

However, Nissan South Africa’s managing director, Mike Whitfield, who is responsible for the sub-Saharan Africa region, including South Africa and Nigeria, stressed last year that it did not pose any threat to the domestic motor industry and was an opportunity for co-operation and complementation.

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