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Will Nigeria’s transport sector survive the electric vehicles transition?

Will Nigeria’s transport sector survive the electric vehicles transition?

The climate crisis is forcing global powers to reduce their contributions to the degradation of our planet, but the challenge looks quite different in Nigeria: our transportation policy is primarily focused on improving mobility access for people and goods. As we are heavily reliant on imports from global manufacturers, and global priorities are shifting away from ours, we need to create bespoke solutions to ensure the survival of our transport sector.

By harnessing granular data around local demand, and collaboration between financial institutions and industry stakeholders, there is potential to boost the local industry, making Nigeria a key player in the mobility market across the region

Global context

The transportation sector produces almost a quarter of emissions that have contributed to recent climate disasters. Since most transportation is powered by fossil fuels, which use internal combustion engines (ICE) –, efforts to lower the collective emissions from these vehicles will go a long way to reduce transportation-related emissions.

To that end, Electric Vehicles (EVs) are the current global favourite on the path to achieving climate-positive goals, as they achieve zero tailpipe emissions, and their costs are dropping rapidly. EVs crossed the 10% threshold of new vehicle sales globally last year, moving from their ‘early adopter’ phase to ‘mass adoption’.

Read also: Future of electric vehicles tied to Africa, says Adesina at investment forum

Implications for Nigeria

Nigeria’s National Policy on Climate Change does not mandate a zero emissions future but aims to bring down overall emissions at a reasonable pace. At the same time, the global value of used combustion vehicles is likely to fall as more manufacturers electrify, making them more accessible to Nigeria’s overflowing demand. However, this means that the lag between our local market conditions and the ones for which global auto manufacturers plan will continue to expand. And, as supply from that market dwindles, the used-car market for both vehicles and spare parts will shrink, unless Nigeria is able to chart a course that allows it to take advantage of that gap.

Data, access to finance & the industry’s untapped potential

Even though Nigeria’s transport sector barely contributed .5% to the country’s GDP in the second quarter of 2023, at around ₦160 billion, this figure should be over five times larger (closer to ₦1 trillion) using conservative estimates based on assumptions around the travelling population, daily spend, and number of travel days. However, there has not been enough robust reported data to back this up – until now.

Pioneering entrepreneurs have been able to generate bespoke pools of high-fidelity mobility data which can be leveraged to build a self-sufficient, sustainable and financially rewarding transportation ecosystem for the local economy, through intentionally fostered partnerships between policymakers, financial institutions, and industry players:

· Kobo360 has been able to connect truck owners with producers and distributors for long-haul trips and is using the data from this to provide working capital, asset financing, diesel discounts, and discounts on auto parts to registered truck owners and drivers.

· Max. ng offers a range of services such as bike-hailing, delivery, e-commerce, electric vehicles, and financial services. They claim to have empowered 21,000 champions with financial inclusion and have also introduced electric vehicles into their portfolio.

· Mecho Auto has grown from being a vehicle repair and maintenance company serving fleets, to include a focus on leveraging data from its customers to collate demand for spare parts across the sector, turning them into a spare parts distributor.

Read also: Nigeria must design legal and regulatory framework for electric vehicles to meet NDC targets – Part I

· Moove has been democratizing vehicle ownership by providing revenue-based vehicle financing due to limited access from traditional financial institutions. They claim to have created close to 9,000 jobs for their customers in 2022.

· Shuttlers enables affordable and accessible transportation services, reducing carbon emissions and creating jobs. They’ve effectively built the infrastructure to empower mass transit and fleet owners while reducing emissions and congestion.

· Touch and Pay (TAP) have introduced Cowry & Omituntun cards used widely for public transport in Lagos and Ibadan respectively, making fare payments as easy as the tap of a card. More than removing the hassle of calculating change, it has also created a pool of data that allows bus owners to predict demand.

Recommendations for policymakers, financial institutions & mobility companies

Policymakers need to collaborate with industry leaders to increase local production. Companies like Innoson Vehicle Manufacturing are already proving local capabilities despite the tough environment, and more of this should be incentivized. Financial institutions should create specialized products for this sector, backed up by proven demand data, allowing for more uptime and revenue for mobility businesses.

Finally, mobility companies should continue to stay laser-focused on fine-tuning their operations. The more surgical they can become in executing against their vision, the more they will create value for their stakeholders.

Conclusion

The energy mobility transition is changing the face of the transportation sector, and the next 5 to 10 years will be crucial for Nigeria. By harnessing granular data around local demand, and collaboration between financial institutions and industry stakeholders, there is potential to boost the local industry, making Nigeria a key player in the mobility market across the region.

Adeola is founder, Leke Services, a consultancy that partners with leaders to improve performance margins by helping to instil operational discipline.