Nigeria News
As Senate Backs Plan To Produce Made In Nigeria Cars, Tyres
David Mark

David Mark

A bill seeking production of cars and tyres in Nigeria narrowly scaled through second reading in the Senate last week. JONATHAN NDA – ISAIAH, in this report, takes a look at the importance of the bill.

Nigeria is one of the major car importers in the world. According to a Senate report, Nigeria spent N600 billion on car importation in 2012, a testimony to the fact that the country is one of the major car markets in the world.

Worried by the huge amount of money involved, the Senate has moved to keep revenue in the country by passing a bill titled Nigeria Automotive Industry Development Plan ( Fiscal Incentives, assurance and guarantees) Bill through second reading, a stage which is very critical to the survival of any legislative proposal.

Leading debate on the bill, Senate leader, Victor Ndoma Egba, said the bill is designed to confer pioneer status, provide tariff incentives and income tax reliefs on automobiles and automotive components as well as specify federal government assurances and guarantees to the automobile and tyre enterprise under the Nigerian Automotive industry Development plan.

In many countries of the world,the automotive industry plays both a strategic and catalytic role in economic development in respect to employment creation, GDP generation, economic linkages which serves as veritable platform for small, medium and micro- enterprises development, innovation, skills and technology development. According to the international organisation of motor vehicle Manufacturers( OICA), the auto industry directly employs over nine million people, which represents 5% of the world’s total manufacturing employment. In South Africa for instance, the automotive industry alone contributes 7% of GDP and 12% of exports and is the second largest employer of labour in the country.

The Nigerian automotive industry represented by Peugeot Automobile of Nigeria (PAN) Kaduna, Volkswagen of Nigeria, Lagos, Styre Nigeria, Bauchi, Leyland Nigeria, Ibadan, ANAMCO, Enugu, NTM, Kano etc, at its peak, had a combined annual output of well over 150,000 automobiles at an estimated value of N450 billion. Employment by the sector hovered around 20,000 Nigerians and local value added exceeded 27% on the average.Equally, the country had local capacity to meet all its tyre needs way back in the 1960s but by mid 1980s, the government took some policy decisions that compromised the fortune of the industry so it crashed. Consequently, capital utilisation in all the assembly plants collapsed as new and second hand vehicles were freely imported.

Leading debate on the bill, Senate leader, Victor Ndoma- Egba said passage of the bill will create about 770 thousands jobs in the country, adding that there is a huge market for vehicles in the country and in the sub region and this bill will enable the country to key into the opportunities presented by the automotive industry which will in turn enhance the standard of living of citizens, reduce social vices and earn revenue for the country.

He said the objectives, institutions, pioneer status, income tax relief, tariff re-adjustment, administration and assurances will enhance the prospects of a viable automotive development in the country.

According to him, the current operations of the Nigerian automotive is primarily limited to the assembly of commercial vehicles because of the economics of production but what the country needs is car assembly and production facilities to fully tap into and benefit from the industry’s global potentials.

“A total of about 400,00 vehicles( 100,000 new and 300,000 used) valued at over N550 billion were imported in 2012. The bill will thus facilitate the injection of foreign direct investment into the economy”, he told senators

“In a similar vein, Nigeria ‘s tyre plants have disappeared along with all the quality jobs and opportunities. Rubber produced locally is now exported while finished tyres worth over N100 billion are imported annually. The current operations of the Nigerian automotive industry is primarily limited to the assembly of commercial vehicles because of the economics of production but what the country really needs is car assembly and production facilities to fully to into and benefit from the industry global potentials “.

“The bill will help address the country’ balance of payment concerns. Automobile imports represent the second highest forex user in Nigeria today and the current strain on the country’s balance of payment by the reckless importation of vehicles at the expense of local industry is significant. And if nothing is done to reverse the trend,the economy will continue to be undermined, resulting in monumental socio-economic consequences “

Most of the senators argued that while the policy is good, the factors on ground are not conducive for the success of the policy, citing the case of Ajaokuta steel industry which has not been functioning.

On his part, Senate president, David Mark noted, “while on paper, this is an excellent bill and there is absolutely no doubt about it, but what is more important is that the bill alone will not solve the problem of the automotive industry.”

According to him:”Beyond this bill, practically on ground, we are not just prepared because no investor is going to put his money here if you cannot guarantee him power.If he is going to run on generator 24 hours, he will never be able to compete in the international market.

“It is not a matter of producing rubber for Michelin, it is beyond that. DICON, which is in Kaduna today was established the same time with the one in Brazil and India. Today the equivalent in Brazil is building ships, aircrafts, armoured cars, DICON in Nigeria is producing furniture.”

“We are missing the point, not by this bill, but you know because we have not laid the foundation for which this bill can become sustainable.I agree that the Ajaokuta Iron Steel Company is very important and so are all the other steel mills.”

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