Every day for the past five years approximately 220 vehicles are imported into Nigeria through different entry points such as ports, airports, and land borders.
These amount to the 400,000 vehicles imported between 2015 and 2020 and which has set the country back by N1.8 trillion, according to the Minister of Finance, Budget and National Planning, Zainab Ahmed. The vehicles come in various forms and shapes, mostly used, a few new ones, and damaged, also known as ‘accidented vehicles’.
Nigeria, along with Ethiopia is the largest importer of used cars in Africa. While being the largest importer in other countries could be a good sign that income levels are growing, in Nigeria’s case, importation is practically the best option to meet up with huge gaps in demand due to low local production. This is despite the country’s potential in possessing some of the raw materials for vehicle production. Efforts by local manufacturers to kick off local production have made little impact.
Yemi Osinbajo, Vice President of Nigeria at a summit in 2020, said demand for vehicles in Nigeria currently stands at about 720,000 against actual local production by the available assembly plants at about 14,000 capacity. This was mainly why President Muhammadu Buhari cut the duty on imported vehicles from 35 per cent to five percent, a decision that has been criticised by many local manufacturers.
A country’s economic development has long been linked with the increase in the demand for transportation and particularly in the number of road vehicles (with at least 4 wheels, including cars, trucks, and buses). However, we believe that actively participating in the production process of these vehicles could significantly improve the economic fortunes of Nigeria.
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We are not deluded that the country can achieve self-sustainability in vehicle manufacturing but it is possible to drastically reduce the economic flight the country incurs through import by intentionally empowering local manufacturers.
We are not deluded that the country can achieve self-sustainability in vehicle manufacturing, but it is possible to drastically reduce the economic flight the country incurs through import
As far back as 2016, the automotive industry became the largest manufacturing sector in South Africa’s economy, with vehicle and component production accounting for 33 per cent of South Africa’s manufacturing output. The industry also contributes 6.8 per cent to the South African economy and employs 110,000 people across vehicle and component manufacturers as of March 2021. This exceeds the average contribution to world GDP at 3.65 per cent.
In Nigeria, the industry contributes about 9.20 per cent to the GDP. However, unlike South Africa, vehicle importation dominates contribution. At 220 vehicle imports per day, it means about 80,300 vehicles make their way to Nigeria annually compared to the 14,000 that are manufactured locally.
Nigeria can certainly do better to avoid a situation where it continues to use its meager resources to enrich the economies of already rich countries. Stability in economic policies is one thing manufacturers in South Africa have come to associate with the government and are already planning to reward the government’s commitment by increasing local content in South Africa assembled vehicles from around 37 per cent it was in 2015 to 60 per cent by 2035. The industry in South Africa currently has a capacity for 600,000 vehicles and will be looking to grow this to 1.4 million vehicles by 2035.
14,000 capacity for Nigeria’s vehicle assembly plants is abysmal for a country with an adult population of 99 million, which represents a big opportunity for investors. It is, therefore, no surprise that vehicle smuggling continues to be rife in the country. In 2017, the comptroller-general of customs claimed that smuggled vehicles represented 90 per cent of total vehicle imports in Nigeria.
But Nigeria can curb smuggling by ensuring banks prioritise releasing financial instruments to local manufacturers that will enable them to scale vehicle financing for individuals. While the influx of imported vehicles lowers the prices of these vehicles, it is a disincentive for local manufacturers that have to compete with the prices. Even when they try to compete, their prices are still considered expensive.
But with very flexible vehicle financing plans, these manufacturers would stand a chance and in the long run start to grow their capacity. Fortunately, the country already has the Automotive Development Fund (ADF) managed by the National Automotive Design and Development Council (NADDC). There is a need for proper governance of the ADF for the impact to be felt by the Nigerian consumers. The unmet vehicle demand in the country is an opportunity the government should ensure does not slip through the fingers of local manufacturers.
