The Nigerian Automotive Industry Development Plan

1. The Nigerian Automotive Industry Development Plan By Engr. Aminu Jalal, FNSE, FNIMechE, FNIM, The Director-General National Automotive Council, Abuja. Nigeria At the Nigerian Automotive Summit SoUTH African automotive week Johannesburg, 14-17 october 2014 NAC Presentation at Soth African Auto Week

2. Outline Facts about Nigeria The Nigerian Automotive Industry Development Plan The Plan Implementation Local content Development Response to the Plan Conclusions NAC Presentation at Soth African Auto Week

3. Map of Nigeria NIGERIA AND NEIGBOURING COUNTRIES. NAC Presentation at Soth African Auto Week

4. The Nigerian Economy: Vital Indicators GDP (2013): $510billion. Major contributors are: -Agriculture: 21.97%; -Industry: 25.64% Crude Petroleum and Natural Gas: 14.4% Manufacturing: 6.83%. Mining and quarrying; construction: 4.41% -Services: 51.89% Telecoms & Information Services: 8.69% Motion pics, music prod, etc.: 1.42% Real GDP growth rate: about 7% annually for the last decade. Per capita GDP (2013): $2,700. NAC Presentation at Soth African Auto Week

5. Natural Resources Minerals • Oil and natural gas, Tin, Columbite, Iron ore, Coal, Limestone, Lead, Zinc. Agricultural Products • Cocoa, Palm oil, Yam, Cassava, Sorghum, Millet, Corn, Rice, Livestock, Groundnuts, Cotton, Gum Arabic. NAC Presentation at Soth African Auto Week

6. Industry Food and confectionary, Beer, Textile, Footwear, Cement, Motor vehicle assembly/manufacture, Bus body building, Automotive components, Metal products, Lumber, Soaps and Detergents. NAC Presentation at Soth African Auto Week

7. The Nigerian Automotive Industry Brief historical facts: -Some private companies started SKD assembly in the 60s; -By early 70s and 80s, the federal government set up 2 car, and 4 light and heavy commercial vehicle assembly plants, assembling vehicles from CKD parts -these were all privatised by December 2012. NAC Presentation at Soth African Auto Week

8. The Nigerian Automotive Industry, 1980-2006 NAC Presentation at Soth African Auto Week

9. The Nigerian Auto Industry in 2013 NAC Presentation at Soth African Auto Week

10. Table 1. Import of Vehicles into Nigeria (UNCTAD) in US$M. NAC Presentation at Soth African Auto Week

11. Reasons for the Collapse of the Industry • Lack of an Automotive Policy • Low demand due to economic problems in the 1980s and 90s • Low Patronage by government and its agencies • Inconsistent and Insufficient protection policy ; NAC Presentation at Soth African Auto Week

12. The Prospects of the Automotive Industry in Nigeria Nigeria has the following advantages: A growing middle class (40 million), and a potential vehicle market of one million vehicles annually. Annual spending on vehicles import is over N550 billion (US$3.5 billion) and growing, making it the number two user of foreign exchange in 2012 afterBoilers, machinery and appliances. NAC Presentation at Soth African Auto Week

13. The Prospects of the Automotive Industry in Nigeria Nigeria has not bound its tariff on vehicles at the WTO, except for ECOWAS and the auto industry has been admitted into the common tariff exclusion list. Regional Export potential into the West and Central African market; and v. Availability of a large and trainable workforce. NAC Presentation at Soth African Auto Week

14. The Automotive Industry Development Plan The Auto Sector is a key component of the Nigerian Industrial Revolution Plan (NIRP). The NIRP is a 5 year programme developed by the Federal Ministry of Industry, Trade, and Investments to diversify Nigeria’s economy and revenues through industry and to increase manufacturing’s contribution to GDP 7% today, to 9% by 2015, and finally above 13% by 2017. The Automotive Industry Development plan was developed after extensive consultations with existing local auto manufacturers, international OEMs, as well as MDAs . Finally, FMITI had offsite sessions with other countries that have successfully implemented automotive development programmes NAC Presentation at Soth African Auto Week

15. The Automotive Industry Development Plan The Plan has the following Elements: (i) Industrial infrastructure Automotive supplier parks and clusters are where industries can share infrastructure, resources, information, knowledge and technical expertise. There are already three areas where the industry is located and where we will develop the clusters: Lagos-Ogun, Anambra-Enugu and Kaduna-Kano States. (ii) Skills development: (a) OEMs and their Global suppliers have extensive manpower development programmes, both local and international. NAC will work with pioneer OEM investors to fill skills gaps in auto operations. NAC Presentation at Soth African Auto Week

16. The Automotive Industry Development Plan The Industrial Training Fund (ITF) is already working with SENAI in Brazil to design auto training centres similar to what they have in Brazil. (c) The National Automotive Council (NAC) has been putting in place foundational skills development for the automotive industry for the longer term.This includes the introduction of degree programmes in automobile engineering in Nigerian Universities andnew curricula for teaching automotive mechanics. NAC Presentation at Soth African Auto Week

17. The Automotive Industry Development Plan (iii) Standards Safety and products standards are crucial to the development of a viable automotive industry. Specifically: -Local content manufacturers would be encouraged and assisted to produce good quality items and obtain ISO 9001 QMS quality certification. -Vehicles to be assembled would be required to have homologation certificate issued by an authorised agency in the country of origin pending when we acquire homologation capabilities. NAC Presentation at Soth African Auto Week

18. The Automotive Industry Development Plan -NAC, with the Standards Organization of Nigeria (SON) and other stakeholders, and have developed/adopted 106 vehicle safety standards in the last two years. -NAC is building automotive component test centers with a view to achieving vehicle homologation in future. -Finally, the Council has been in contact with the states’ Motor Vehicle Administration Departments to review and reform the vehicle inspection and certification system. NAC Presentation at Soth African Auto Week

19. The Automotive IndustryDevelopment Plan (iv) Investment Promotion While the provision of appropriate tariff measures, patronage, supplier parks, etc., will attract investors, a deliberate campaign will be mounted to attract them. The following are also prerequisites for investment in the automotive sector: Policy consistency by government through legislation. b) Checking Smuggling:NAC is already working with the Federal Road Safety Commission (FRSC) and the Nigerian Customs Service (NCS) on this issue. Measures to control vehicle smuggling through the control of vehicle registration system is being worked out. NAC Presentation at Soth African Auto Week

20. The Automotive IndustryDevelopment Plan C) Fiscal Measures:The incentives and support measures required by the industry can be achieved through appropriate fiscal measures and patronage. The fiscal regime is designed as follows: NAC Presentation at Soth African Auto Week

21. Elements of the Automotive Development Plan (V) Market Development The Nigerian vehicle market as it is can support an indigenous automotive industry. The following will be implemented to develop and sustain the market for local automotive industry: Affordable vehicles programme (b) Vehicle purchase scheme (c) Patronage by government and its agencies NAC Presentation at Soth African Auto Week

22. Local Content Development In early years, it is expected that most vehicle parts will be imported, with Nigeria basically focused on assembly. However, over time, specific parts will be manufactured locally as Nigerian suppliers develop key competencies. The planwill facilitate local content increases in the following vehicle parts: • Welded parts (exhaust system, Seat frames), • Elect Parts (batteries, trafficators, wiring harness), • Plastic and Rubber Parts (tyres, tubes, fan blades, seat foam, oil seals, hoses, radiator grills, etc), • Radiator,Cables, Filters, Brake pads/linings, Windscreens, side glasses, fibre-glass parts, paints, etc. • Rubber products – (tyres) NAC Presentation at Soth African Auto Week

23. Plan Implementation The plan objective is to have vehicle assembly operations with increasing local content incorporation. This may be achieved in the assembly stages below. The transition from one stage to another should not exceed 12 months. (i.e. a maximum of 48 months from start of SKDII to CKD operations (including 12 months set-up period)): NAC Presentation at Soth African Auto Week

24. Response to the Auto Policy 23 Companies have signed commitments with technical partners to assemble cars/SUVs, mini-buses, pick-up trucks buses and trucks. VON started the assembly of Nissan and Hyundai vehicles in April and July 2014 respectively. PAN flagged-off Peugeot 301 assembly line on 1stJuly 2014. Dana Motors will start the assembly of Kia and Renault vehicles before the end of this year. VW, Toyota, Ford and Tata Motors are conducting a feasibility study on assembling vehicles in Nigeria. NAC Presentation at Soth African Auto Week

25. Conclusion Nigeria presents an opportunity for the assembly of vehicles and the manufacture of automotive parts and components. The various challenges that prevented its growth and development are being addressed. We are now working on a local content policy. We hope to partner with all interested parties, in particular the South African local content manufacturers, to develop the automotive industry for our mutual benefit. NAC Presentation at Soth African Auto Week

26. Thank you for your attention! aminujalal@nac.org.ng aminujalal@yahoo.com www.nac.org.ng NAC Presentation at Soth African Auto Week