The Nigerian government aims to revamp its automotive industry by focusing on improving infrastructure and providing assistance to boost local manufacturing over the next ten years. Minister of Trade, Industry, and Investment, Doris Uzoka-Anite discussed the strategy during a recent interview, highlighting its goals to overcome existing obstacles and maximize opportunities in the Nigerian market. Uzoka-Anite said it is feasible to manufacture these products locally in Nigeria since there is a demand in the market that we can capitalize on. The blueprint clearly maps out the strategies for Nigeria to independently produce its own automobiles. We have thoroughly assessed the obstacles and are prepared to launch the initiative, she added.
Infrastructure availability is a major obstacle that is expected to be addressed under the plan by creating a centralized industrial park. This park will bring together company manufacturers in one location, offering them essential facilities such as electricity, water, and necessary raw materials. By providing transport and logistics support as well, the government aims to alleviate much of the operational burden on these companies. During the 1960s and 1970s, the Nigerian auto industry saw remarkable expansion with strong government backing. However, the sector took a downturn in the 1980s due to privatization initiatives.
Nigeria continues to be a net importer of used vehicles.
According to Uzoka-Anite, Nigeria has a huge opportunity to benefit from the auto industry, as it has the potential to make up 25% of the country’s GDP. Right now, the auto industry only contributes 0.04% to Nigeria’s GDP. Despite employing around ten thousand people at the moment, there is a possibility to increase this number to 300,000 in the future. Over the span of two years from 2018 to 2019, Nigeria spent approximately 1 trillion naira towards the importation of used vehicles, amounting to around 2.6 billion dollars. Fast forward to 2021, the country’s expenditure on importing used cars skyrocketed.
Even with a significant vehicle market size of 1,150,000 for new and used cars and a rising middle class, Nigeria continues to be a net importer of vehicles, particularly used ones, leading to a decline in domestic production. Imports of vehicles in 2021 totaled approximately $2.3 billion, with passenger cars accounting for 60% of this amount. It is safe to say that the persisting reliance on imports is unsustainable in Nigeria, considering the current circumstances. Nigeria relies heavily on imports to fulfill local demand for vehicles, as domestic production falls short.
Expanding domestic market opportunities show great promise.
In 2014, the launch of the National Automotive Industry Development Plan (NAIDP) caught the attention of major global automakers and reignited small-scale vehicle assembly in the nation. Recent reports indicate that 28 assembly plants started functioning after receiving 54 auto assembly licenses. But, currently, only 6 plants are still running, albeit at a significantly reduced capacity, facing obstacles like forex issues, infrastructure limitations, and capacity shortages. Considering many obstacles faced, many car manufacturers decided to establish assembly plants in neighboring countries like Ghana, with the intention of exporting the vehicles to Nigeria.
Moreover, Nigeria’s automotive sector shows great promise as it taps into an expanding domestic market and can even excel well with the vast continental market growth opportunities offered by African Continental Free Trade Area (ACTA). Currently, Nigeria exports various vehicle parts like tractors, trailers, semi-trailers, and new tires to other African countries. Exporters who have gained valuable experience in exporting may find it easier to access important supplier networks within the sector. Furthermore, with the implementation of the AfCFTA, the Nigerian automotive industry could potentially see a rise in market-seeking foreign investors coming into the country.
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Generally, the automotive sector plays a vital role in boosting industrial growth across several African nations, offering a pathway out of poverty for millions. Nigeria, in particular, stands to benefit greatly from the industry’s growth, paving the way for economic progress. The ripple effects of a thriving automotive industry are expected to positively impact related industries within the economy. Acknowledging the challenges posed by poverty, climate change, and development issues in the process of industrialization, Nigeria can strive towards sustainable development in its automotive sector by leveraging the opportunities presented by the AfCFTA.
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