By Bambo Adebowale
We have a new Hon. Minister for Industry Trade and Investment – Otunba‘NiyiAdebayo and there will be a wave of courtesy calls from all manner of persons and groups. As Chairman of the Auto Group at the Lagos International Chamber of Commerce and Industry (LCCI), I have been imagining what my meeting with the Hon. Minister would be like if I had the opportunity.
First the mode of dress. The new Minister looks more of a traditional attire man (the last Minister was a suit and boot man). I personally like having the casual jacket and trousers, but I want to impress, so maybe a formal suit. Dark blue. White shirt. Grey tie. My drink, if asked, will be a cappuccino – none of that single/doubleespresso stuff. I plan to be there for one hour – I am a big believer of the one-hour discussion – anything more and listeners start to lose interest, or bring out their phones, or both.
I assume he will say “Bambo relax, we are in this together.” and I will start….
The Nigeria Auto policy – of stakeholders and vested interests
Honorable Minister good morning and thank you for the opportunity to share my thoughts as the Auto Group Chairman of the Lagos Chamber of Commerce.
The Nigeria auto industry and the NADDC
After three years as chairman and five years of raising issues on the Nigeria Auto policy, I have come to the realization that many of us in industry have assumed that the National Automotive Design and Development Council (NADDC) is responsible for the development of the entire Nigeria auto industry. We know that there is a regulation that states this, but in reality, the NADDC mandate is “…to initiate, recommend…programmes for locally manufactured vehicles and components” – the promotion of made-in-Nigeria vehicles and parts (interpretation is mine). It seems however, that the NADDC’s technological interests and the industry’s economic needs are contained in the same document – the auto policy. It probably explains why many of us in industry have accused the NADDC – maybe unfairly, of advocating or supporting the imposition of industry stifling duties, of leaving auto dealers unregulated, of not controlling the influx of large numbers of defective used vehicles and of giving insufficient attention to the development of a robust financial structure, when all along, it wasn’t NADDC’s core mandate nor core competence. I wholeheartedly apologize to my friend and Director General of the NADDC Eng. Jelani Aliyu.
In my opinion, NADDC’s mandate is more of developing the technological aspects of Nigeria’s auto industry. From discussions among industry members, from the NADDC website and from the NADDC Facebook page, its core competencies are “Technological development, ICT and Innovation”, I can now see why the NADDC board is comprised of technical interests – “manufacturers” and “assemblers”. You therefore need to support the brilliant minds in the NADDC in achieving their mandate and focus on developing those technical aspects of Nigeria’s auto industry that will propel us into the world of hybrid engines, vehicles adapted for our rural roads, engines that can be used on boats in the creeks and so forth.
Hon. Minister, the 58 licenses in issue from NADDC are for combustion engine vehicles. In the meantime, more than nine OEMs and a dozen or so cities have announced the ban or phase out of such vehicles, meaning that we will eventually run out of CKD and SKD kits. There were 783,000 Electric vehicles delivered during the 1st half of 2018 – an increase of 66 % over the same period in 2017. The cities of London, Paris, Madrid, Athens and Mexico City are planning to end diesel engine vehicles. So, in 20 years time, Africa will probably be the only place producing combustion engine cars – these are the issues that the NADDC should be supported to focus on.
The Nigeria Auto Industry Value Chain
The auto policy’s objective is the development of the auto industry in alignment with the Nigeria Industrial Development Plan – encourage local assembly of vehicles, increase employment, promote skills transfer etc. the actualization of the policy however, requires a review to ensure that it is comprehensive and operational and that all stakeholder interests are at least dealt with.
We have a $30bn industry but the dynamics are complex – 193m people mostly dependent on road transport; 11m registered vehicles that need to be on a central database; 2million vehicles that need to be overhauled or scrapped in order to save lives and protect the environment; a million-unit new car market that is in need of a robust financing structure; 500,000 technicians who need flexible certification and continuous professional development with the phasing out of combustion engines; 450,000 vehicle assembly capacity that is under-utilized because of power constraints, limited access to finance and unregulated competition from dubious dealers; 400,000 spare part dealers that need to be encouraged to sell certified parts and escalate to the production of the parts; 250,000 used vehicle imports/yr. that should be scaled down from an allowed 15 year age to a more realistic 5 year; 100,000+ unregulated car dealers that need to be registered and a yet to be developed ecosystem that links through the entire auto value chain.
The Executive, the Legislature and the auto Industry
The government can generate serious income streams from the auto industry in form of taxation, levies, human capital growth and reduced carbon footprint. Unfortunately, the governments at all levels are making sentimental decisions in order to actualize vested interests at the cost of the collective. Its performance in the auto industry has been a mixed bag. In July this year, President Buhari rejected the auto bill. It was the right decision in our opinion, given the circumstances but it had taken five years from when the policy was originally introduced by the President Goodluck regime and contained in two letters:
• TED/FEM/FPC/GEN/01/003 of 20/1/2014 (from the CBN) re-launching the auto industry…. including a Credit Purchase Scheme, patronage by government and granting the Customs Service power to publish vehicle prices.
• BD/FP/DO/09/1/224 of 28/2/2014 (from Ministry of Finance) announcing revised fiscal policy measures for the automotive industry and increased duty rates – 70% for new FBUs without assembly, 35% for commercial vehicles and used cars and 20% for tyres.
In 2016, the Nigeria senate ordered SUVs from aboard, even though the re-launch of the auto industry in 2013 included promises of “patronage by government”. The Chairman of Nigeria Association of Automobile Manufacturers said the Senate could have saved N1.47bn if it purchased SUVs assembled in Nigeria. You will need to help address these deviations from the Public Procurement Policy. There have been positive results though. This year, more than 70 locally assembled pick-up trucks were ordered for the operatives of FRSC. This was then undone by news that Lagos State had been ordering BRT buses from outside Nigeria, when these busses are already in assembly here.
The Presidential Enabling Business Environment Council (PEBEC) strives to ease the way of doing business and save importers from a multiplicity of levies and charges – documentation, administration, MOWCA, Indirect Import Delivery, NIMASA Sea Protection, Terminal Handling. According to PEBEC, the Ministry of Finance and Nigeria Customs were list of 46 least transparent Federal Government’s Ministries, Departments and Agencies assessed in 2018. Interestingly, both the Ministry of Finance and the Nigeria Customs have in the past called for a review of the auto policy on the back of alleged falling revenues caused by manipulation of the duty waiver scheme and smuggling.
In 2018, the Secretary to the Government of the Federation commended used car dealers for contributing immensely to the country’s GDP and reducing the rate of unemployment. This gives the wrong message as most used car dealers are unregistered and unregulated. As to rub it in our faces, China has started the export of used vehicles to Nigeria.
The 9th Assembly is key to the industry and you will need to engage them on our behalf. We now have new Committee chairpersons for Finance, Industry, and Customs in both the Senate and the House of Representatives. The original promoter of the bill in the Federal House is back – as are four of the five senators that sat on the Senate committee to review the auto bill.
The Ministries and Parastatals –a maze of stakeholder interests.
The development of the Nigerian in general and the Nigerian automobile industry in particular, needs proactive participation. There is a cacophony of MDAs involved, singing sometimes discordant tunes to the chagrin of development and we need you to help bring about the needed cohesion.
• Monetary and fiscal policies are administered by the Ministry of Finance through the CBN who is also responsible for the LCs and forex required for Auto related imports. The CBN issued a letter TED/FEM/FPC/GEN/01/010 of 23/6/2015 restricting rubber and plastic products (key auto components) from accessing the CBN rate foreign exchange.
• Industrial development policies (mainly Pioneer Status and tax relief for investors) are managed by the Nigeria Investment Promotion Board under your supervision, but checked and effected by the FIRS.
• Funds for further auto development will likely come from the Nigeria Automotive Council Fund domiciled at the Bank of Industry, but the development of enterprise to produce the parts is the responsibility of SMEDAN.
• Quality control during and after assembly by any one of the 58 licensees and the verification of spare parts, is controlled by the Standards Organization of Nigeria (SON). The licensees themselves need their duty waivers revalidated annually (a totally avoidable exercise), by the Ministry of Finance.
• The Ministry of Transport is the supervisory ministry for the NPA.
• Training and development of mechanics sits with National Business and Technical Examinations Board who are accredited by the National Board for Technical Education under the Ministry of Education. Interestingly, the NADDC has drawn up a new training syllabus on mechatronics to be run by the Universities, overlooking the fact that most mechanic training in the country is through hands-on apprenticeship schemes.
The Private sector – more stakeholder groups
An investor wanting to set up business in Nigeria would have likely been in touch with his country’s Chamber of Commerce – who would introduce him to a Chamber member of the Nigerian Association of Chambers of Commerce Industry Mines Agriculture (NACCIMA) – like the Lagos Chamber of Commerce and Industry (LCCI). The Nigeria Investment Promotions Council (NIPC) One-stop shop would be his first point of call where the NIPC can help co-ordinate the processes of key entrepreneurial agencies. There is then a varied list of Trade Associations to thread through:
a) Auto assemblers (58 new and some existing already) will likely join the Nigeria Automotive Manufacturers Association (NAMA).
b) CAC registered and recognized new auto dealers representing about 40 different vehicle brands, will likely join an organization like the Lagos Chamber, while the 100,000+ used vehicle dealer will join the Association of Motor Dealers of Nigeria (AMDON) or not register with any organization – a bottle of water on the car is perceived good enough!
c) Once he starts to import, he moves into port congestion, Customs operations and freight clearance territory, managed by members of the Association of Nigeria Customs Licensed Agents and/or National Council of Managing Directors of Licensed Customs Agents.
d) Once assembled or bought used, the new owner will insure the vehicle (with the other 11m). The insurance broker will be a member of the Nigeria Insurers Association.
e) Spare parts for repairs and service are sold by the 500,000+ members of Trade Associations like Auto Spare Parts and Machinery Dealers Association, Badagry (ASPAMDA) if new, or the Auto Spare Parts Dealers market in Ladipo, Oshodi if used vehicle parts.
f) Eventually, spare parts will be manufactured in Nigeria by members of MAN and/or any one or combination of the manufacturing entities, the smaller ones being under the auspices of Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) – Automotive Local Content Manufacturers Association of Nigeria (ALCMAN), Nigerian Association of Small and Medium Enterprises (NASME) or Nigeria Association of Small Scale Industrialists (NASSI)
g) Whenever the vehicles hit the roads, repairs will be carried out by one of the two major mechanic groups – the Motor Mechanics and Technicians Association of Nigerian (MOMTAN) or the Nigeria Automobile Technicians Association (NATA).
So, Hon. Minister, 15 Trade Bodies, 11 Parastatals, four Ministries (and a partridge in a pear tree you might add) and you have a multitude of stakeholdersand vested interests – all of them collaborating and leveraging on their various and varied connections, at different levels and for differing reasons.
Implications for auto entrepreneurs
For those already in the auto marketplace, the auto policy and auto regulations introduced in 2013 are still in operation together with the existing regulations. Investors – foreign and local will feel like they are being punished, caught in the cross-fire of the interests of other stakeholders. For instance, applications submitted in October 2018 for the renewal of vehicle assembly licenses and receipt of duty discounts on importation of new Fully Built vehicles (FBUs), were not being approved until June 2019 as a result of a suspension by the Ministry of Finance in response to opinions from the Ministry of Trade. It is likely that the NIPC, monitor of trade promotion most likely raised concerns on the fiscal incentives in the draft auto bill and did a push back. The Ministry of Finance, feeling slighted, or seeing an opportunity to force a policy review, responded in a heavy handed manner and suspended further approval of assembly plant license renewals, overlooking its likely effect – imports without the promised duty waivers, reduced trading and plant stoppages (and further reducing revenue to the government). Ironically, it was the Ministry of Finance under Hon Minister Ngozi Okonjo-Iweala that started the auto policy initiatives that are now being challenged.
Used cars are needed as a result of limited access to finance. We however need realistic regulation and enforcement – and a robust vehicle part-exchange platform. Circular 12237/S.403/VOL.1/206 extended the age of used motor vehicles from 10 years to 15 years from the year of manufacture. Furthermore, just about anyone can import a vehicle and set up a used car business. This needs to be controlled so that the environment is protected from harmful emissions, so that the government derives due revenue from taxes, so that the assemblers can scale up the registered used car dealers as assembled vehicle dealers.
Ghana announced its auto policy in December 2018 and had passed its auto bill into law by August 2019 (35% duty, 4-year maximum for used cars, a finance structure and a coordination team in place) all in 9 months. In Nigeria, we the stakeholders across the auto value chain need to sit together round a table as painful as it might be and hammer this policy out. The current policy is too vague, the duty rates are too high, fundamentals like finance are incontrovertible, old vehicles need tighter regulation. We can’t continue to allow just about anybody to sell vehicles, it is economic suicide.
In closing
I really hope we can get a robust and workable auto bill in place. The effort to get all the interest groups on the same page will be a challenge, but is needed. If I could, I’d stick a “post-it” note on your fridge as a daily reminder. It will read as follows…
Hon Minister,
Please help the auto industry. Help it receive support from the CBN on forex and forex related issues, please liaise with the BOI so that the banks can develop robust vehicle financing solutions, please engage the Nigeria Customs and NPA on easing the import process; please liaise with the NBTE for more flexible and forward thinking training for our technicians; please ask SMEDAN for a robust plan to ensure that our entrepreneurs produce more generic vehicle parts, please reach out to fellow ministers on cohesion and finally, please collaborate with the National Assembly and the Presidency on legislation – especially the archaic ones that allow Customs to dictate vehicle prices and unregulated vehicle sellers import vehicles up to 15 years from date of manufacture.
Best wishes sir…you will need it!
Bambo Adebowale, is the Chairman – Auto & Allied Sector of Lagos Chamber of Commerce

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