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BusinessDay

Manufacturing GDP to grow on back of auto industry investment

The proposed investments in assembly operations by Peugeot Automobiles of Nigeria (PAN), Innoson Vehicle Manufacturers, VON Nigeria, among other automobile dealerships in Nigeria, are expected to push up the manufacturing sector’s contribution to the country’s Gross Domestic Product (GDP), BusinessDay has learnt.

The implication of this is that motor vehicles and assembly’s current contribution of 0.8 percent to the manufacturing sector will increase significantly, going by the volume of ongoing and proposed investments in the sub-sector.

Consequently, the manufacturing sector’s current GDP contribution of 9 percent, which represents about $46 billion of Nigeria’s $510 billion GDP, is also expected to increase considerably.

“We expect investments made by automobile companies to drive the manufacturing sector’s increased contribution to GDP,” said FBN Capital analysts, led by Gregory Kronsten, in a September 3 report.

“The emergence of the auto policy may catalyse the revival of the tyre manufacturing industry. Dunlop and Michelin used to have a strong presence in Nigeria. It also bodes well for companies that engage in the local production of rubber, such as Okomu Oil,” said the analysts.

According to the Manufacturers Association of Nigeria (MAN), the country’s manufacturing sector has 10 broad sub-sectors, which include food, beverage and tobacco; textile, apparel and footwear; wood and wood products; pulp, paper, printing and publishing, and chemical and pharmaceuticals.

Others are non-metallic products; domestic/industrial plastic and rubber; electrical and electronics; basic metal, iron and steel, as well as motor vehicles and miscellaneous assembly.

Data from MAN show this sector made N760.16 million investments in the first half of 2013 (H1 2013), while a total of N571.97 million investments were made in the second half of the year (H2 2013).

But since the launch of the Nigeria Industrial Revolution Plan (NIRP) in February 2014, significant investments have been added in the auto industry and along its value chain.

PAN Steel Group Corporation from China took advantage of the NIRP to invest $5 billion into a new steel plant in Nigeria that will produce 4-5 million metric tonnes per annum.

Adeniyi Ogunsanya, chairman, industrial/SME group, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), said last week that a number of businessmen in the group are also gearing up to invest in ancillary industries such as bolts and knots, among others.

BusinessDay had earlier reported that a total of 21 automobile dealerships in Nigeria had made commitments with some foreign technical partners to set up assembly operations in the country since the announcement of the new automotive policy last year. Industry watchers say the move will boost local automobile assembly and discourage the influx of grey and parallel imports into the country.

Other dealerships which have signed agreements, or  are in discussions with foreign technical partners, include Dana Motors, Transit Support Services Limited (owned by ABC Transport), Kewalram Chanrai Group, and Coscharis Motors.

The NIRP was designed to attract substantial foreign investment inflows in the short to medium term, and targets N5 trillion manufacturing revenue annually. It focuses on agriculture and agro-products, metals and solid minerals, oil and gas, construction and light manufacturing services, particularly the automobile and textile industries.

In tandem with the National Automotive Industry Development Plan and the Power Sector Master Plan, the NIRP has had an impact on the investment inflows into the auto industry.

At the launch of NIRP in February, President Goodluck Jonathan said, “The goal of the Nigeria Industrial Revolution Plan is to increase the contribution of the manufacturing sector to GDP, from the present four percent to more than 10 percent over the next five years. This will boost the annual revenue earnings of Nigerian manufacturers by up to N5 trillion per annum.”

Busty Okundaye, the Nigerian who led the team that set up General Motors in China, told BusinessDay in an interview that domestication of technology, both the product and the knowledge, was not an overnight business.

“The challenge will be in implementation of the new auto policy because it is just  paper work,” Okundaye said.

Yinka Abraham