Nigeria dithers as automakers establish plants in Kenya, Morocco

The Federal Government’s bureaucratic bottlenecks and lack of a clear cut policy to stimulate the local assembly of motor vehicles, has seen Nigeria crawling in this sphere, while co-African countries Morocco and Kenya have joined South Africa as the preferred destination for automotive assembly by global automakers.
It would be recalled that upon the introduction of the present automotive policy in 2013 the National Automotive Industrial Development Plan (NAIDP) and its subsequent implementation in 2014, many global automakers saw the move as an opportunity to invest in the country.

This resulted in some auto franchisees aligning with their principals to set up assembly facilities. These include Hyundai, Ashok Leyland, Kia, Volkswagen, some Chinese brands, and lately Toyota, while others such as General Motors, Mercedes Benz, Jaguar Land Rover and BMW watched with cautious optimism.
According to Goldie Princewill, an industry analyst who has been monitoring developments, all the auto assembly plants, together have the capacity to employ over 300,000 Nigerians across many skill sets.
However, following the lacklustre posture of the Federal Government, made worse by the tough business and economic environment, which has impacted negatively on the ease of doing business, the automakers turned to alternative countries on the African continent, such as Morocco and Kenya, after South Africa, as comparatively more economically and politically stable, to set up auto assembly operations.
While South Africa is home to about eight assembly plants, cutting across various brands, Kenya and Morocco are emerging as the next beautiful brides.
While Volkswagen, Peugeot and Volvo , have been set up assembly operations in Kenya, Renault is consolidating its presence in the north African country of Morocco, as its regional hub for the export to other African countries in the northern region.
Among the fears expressed by the OEMs, include doubts about a national automotive policy of the Federal Government that was yet to be made a law by the National Assembly.
The automotive industry in Morocco contributes between 16 and 20 percent to the gross domestic product (GDP) of that country, whereas the whole of Nigeria’s manufacturing sector contributes less than nine percent to the economy.
Morocco has leaped from fifth in 2016 to third in Africa (in 2017) in World Bank Doing Business, ranking 68th globally out of 189 countries.
Kenya ranks 92 in the World Bank Doing Business, moving 21 places in overall performance.
Nigeria, on other hand, ranks 169, with access to electricity and justice being the biggest challenges.
The 2017 budget was passed mid-way into the year, failing to give investors a clear direction of what the year holds.
Local manufacturers complain that the business environment in the country is unfriendly, owing to the high cost of alternative sources of energy, poor infrastructure and high cost of funds.
Electricity remains the biggest challenge facing Nigerian manufacturers, gulping 40 percent of their expenditure and the country ranks 180 out of 189 in getting electricity in the World Bank Doing Business report.
Energy supply from power distribution companies (DisCos) worsened across the country in 2016 as manufacturers spent N129.95 billion on alternative energy sources within the year, as against N58.82 billion recorded in 2015.
The 2016 figure represents a 121 percent jump from that of 2015, data exclusively obtained from the Manufacturers Association of Nigeria (MAN) shows.
“Critical to be addressed, are the supply, pricing and efficiency in the administration of power to manufacturers. Same goes for gas, which government needs to make a definite pronouncement on, to elicit positive reaction from investors in the manufacturing sector,” said Frank Jacobs, president of the Manufacturers Association of Nigeria (MAN) in an earlier statement mailed to BusinessDay.
The Lagos Chamber of Commerce (LCCI) believes that the business environment in the country is still very tough for investors, citing high charges at ports and high cost of funds, as disincentives to investment.
A recent statement released by Muda Yusuf, director-general of LCCI, said the chamber was concerned over the indiscriminate and arbitrary queries raised by officials of the Nigeria Customs Service, on the value of imports, stating that it was stalling raw material import and the economy.
Segun Kuti-George, chairman, Nigerian Association of Small-Scale Industrialists (NASSI), Lagos State Chapter, says it will be difficult for manufacturers, including auto makers, to find the country attractive when the lending rate is very high.
“Funding is needed now more than ever considering the fluctuations of the naira-dollar exchange rates. We need the Development Bank of Nigeria to start work,” Kuti-George said.