By Moses Akaigwe
•L-R: Femi Olafunmiloye, MD, Lafbart Innovations and Consulting Ltd, Akure; Bennett Ejindu, NAMA Board Member; and Nunu Diwan, Chairman, Iron Products Industries Ltd {IPI}, Ikotun, Lago… all NAMA members, at the NADDC, NAMA and AAAM forum in Lagos, recently.
As part of the itinerary for the recent two-day visit to Nigeria by a delegation from the South Africa-based African Association of Automotive Manufacturers (AAAM), the National Automotive Design And Development Council (NADDC), and the Nigerian Automotive Manufacturers Association (NAMA) organised an interactive forum on the Nigerian Automotive Industry Development Plan (NAIDP 2023-2033). One of the highpoints of the event held on Thursday, May 2, 2024, at the Radisson Blu Hotel, Ikeja,Lagos, was a presentation by NAMA as articulated by BENNETT EJINDU, the association’s Board Member (and Chief Operating Officer, ANAMMCO, Enugu).
Reproduced below, Ejindu’s presentation lauded AAAM’s interest in seeing Nigeria’s auto development plan have a legal backbone. He gave a historical insight into the country’s automotive industry development, which started formally in the 70s. The address spanned through the heydays of the first generation, government-initiated vehicle manufacturing plants which thrived on CKD production – juxtaposing the experience with the current realities as the implementation of the NAIDP 2023-2033 begins to get traction:
There is a study that concluded that the Amazon Forest thrives because the Sahara Desert is lifeless. There was also the street-held equivalence that Africa should remain a consumer of automotive products for the established automotive economies to thrive.
In 2015, the African Association of Automotive Manufacturers (AAAM) killed that perception when upon introducing itself, it stated that the adoption of the Nigerian Automotive Industry Plan (NAIDP) in 2014 provided the inspiration for OEMs (original equipment manufacturers) operating in Africa to join efforts towards developing the automotive industry in Africa.
The AAAM has been tireless in its engagements with the government and stakeholders of the Nigerian automotive industry towards birthing a legislated automotive industry development plan, which is a basic requirement for these owners of patient capital to inject the much-sought FDI (foreign direct investment) that would spur revival of robust vehicle and component parts production in Nigeria.
Of course, there are lots of other things that AAAM has done over the years to support automotive industry and policy developments in other countries of Africa. We in NAMA continue to hope that collaborating with the AAAM, we shall achieve success with the present administration, through the Federal Ministry of Industry, Trade, and Investment headed by the cerebral Dr. Doris Anite and the National Automotive Design and Development Council (NADDC) led by Mr. Joseph Osanipin, who is from the private sector, and have been in automotive production.
This presentation is a walkthrough of the history of our nation’s automotive industry development. From its inception in 1959 to 1970, automotive production in the country was operated by private businesses, who assembled and sold vehicles from SKD sets without any form of policy anchor, or regulation, except for general trade policies. In the 1970s, recognising the potentials of the automotive industry to economic development, the government got involved, and set up six assembly plants. The AAAM has demonstrated that it understands this history. It and other development partners like JICA (I hope it is correct to say JICA (Japan International Cooperation Agency) and SITA (Supporting Investment and Trade in Africa) have commissioned studies and research into the Nigeria automotive industry that attest to their keen interest.
There is, however, a poignant omission that everyone – not just the AAAM and other development partners – tend to be guilty of in their conclusions about the capacity of the Nigerian automotive industry. In the recent policy-making rounds and in studies released by notable global industry stakeholders, the projected progression of the Nigerian automotive industry development invariably starts at SKD format, with CKD assembly placed a decade or more from “year zero”. No “waiver” is given for the capacities that we have acquired in our chequered history, much of which survive to this day. From the 1970s to 1993 (I think the inflexion point began around 1983 and was sealed in 1986) Nigeria was doing well in automotive production: we assembled CKD (completely knocked down); we achieved local components production; we achieved 102,000 vehicles per year. A significant fact about that achievement was that the government deliberately chose the CKD format as the starting point.
The options of commencing from DKD, SKD (Semi Knocked Down), MKD (Medium Knocked Down), DKD (Disassembled Knocked Down), CKD and finally to full CBU (Completely Built Unit) production, were available, but the Federal Government bypassed the gradual progression under which success at the lower-level assembly models would determine migration to higher levels, and went directly to CKD assembly. The plants that were established by the government in the 1970s are CKD plants.
Meaningful local component production is a natural corollary of CKD and CBU modes of production. Shortly after the plants commenced production, Nigeria saw a burgeoning of component manufacturing. Low in complexity though they may have been, but good quality they were, nonetheless. Jobs were created in the country, and the vista was for more complex and better-quality component manufacturing. If the government, responding to the economic shock from the oil price crash of the 1980s, hadn’t sacrificed the automotive development programme on the altar of expediency, we would be competing with South Africa and Morocco today.
A key feature of the 1970 to 1993 automotive manufacturing era was the direct participation of the selected global OEMs in the programme. This contrasts with the present era in which OEMs view their Nigerian subjects as no more than sales agents, having scarcely any interest in aiding indigenous automotive manufacturing, except to the extent that their agents may exploit the tariff incentives in the NAIDP to gain some competitive advantage. Component manufacturing can hardly start under such detachment. Thanks to the AAAM, we are hoping to have back the wholesome involvement of OEMs that will support a sustainable organic development.
Our short-lived era of glory produced skilled manpower both in automotive production and aftersales support. Without the deliberate initiatives of the OEMs, development of skills wouldn’t have been the way we experienced it. Nigerians were trained on curriculums developed by the OEMs in-country and at OEMs’ facilities overseas.
Upon the exit of the OEMs, automotive skills acquisition stalled, and eventually began to dissipate as the workforce aged. The model of involvement (or lack thereof) by the brands that dominate our automotive space today does not support skills acquisition beyond sales and, maybe, aftersales. We hope and pray that OEMs in AAAM get involved more than is presently obtainable, so that our automotive skill development may surge.
In the 1970s to the 1993 era, the vehicles that were produced under the automotive development programme were clearly defined. Necessary protective measures were established around them and enforced. The Volkswagen Beetle was a low-end/ entry-level car. The Peugeot 504 and 505 variants were cars for the middle class.
High-end cars were not produced here and attracted premium tariffs. Each assembler was uniquely identified with the brand and category of vehicles it produced. The rationalized brands and models enabled standardization of components and afforded scales that attracted and sustained component manufacturing.
The foregoing are but three out of the 10 enablers for effective industry development in this list – 30 percent performance, one may say – but that level of performance enabled the kind of success we experienced in 1983 when we attained annual production of 102,000 vehicles. You can imagine the quantum of success we would have had if the other seven enablers were successfully activated.
The necessary infrastructure that enabled the big achievements of the 1970s and 1980s did not disappear. Much of them are still there in PAN, ANAMMCO, and some first-generation assembly plants; and of course, at Innoson, Dangote Sinotruk and others that have attained capacity for CKD assembly.
Rather than repeatedly viewing our progress as being at the inception stage, we ought to appropriate the mileage we have already covered and proceed by pressing the restart button. A restart button would mean reactivating the aforementioned enablers, which though were little, were effective enough to spur component production in Nigeria. The complexities may be low, but the fact that we begin to produce the vehicles we use in Nigeria from the resources that we are endowed with has immense economic benefits.
There are some key developments today that were not available in Nigeria in the 1970s/1980s, which are sure to drive far greater success that we had. An example is Connected, Autonomous, Shared, Electric vehicles/ Mobility as a Service (CASE/MaaS), which generate large volume of new vehicle sales. If CKD plant requires 10,000 passenger vehicles or 2,000 commercial vehicles to break even, I am sure that within Nigeria, the capacity of CASE/MaaS alone to drive a volume of more than 100,000 per annum within the first two years exists. If that number is good enough for the emergence of component manufacturers, I think that the days of revival are here. Our attainment of CKD assembly level does not have to wait till 2035.
The era of 1993 to 2014, when we desperately pandered after the free-market appellation to gain acceptance should not be revived in the automotive industry in these days of democracy. The industry needs protection to incubate. We opened our market, and in the process destroyed the modest progress that we had made. Nigeria’s industry development cannot in any way thrive if we open our market for everybody to bring in whatever and compete unequally with us.
Of course, there is the looming presence of the WTO (World Trade Organisation), but there are measures allowable by the WTO that permit countries to develop priority sectors of their economy without the usual restrictions e.g., Trade Related Investment Measures agreement (TRIMs).
In 1993, the National Automotive Plan was approved at the end of the Babangida administration. This plan had the establishment of the NADDC as its only significant success. The role of the present day NADDC used to be performed by a Standing Technical Committee (STC), which comprised key participants in the automotive industry. These stakeholders requested the establishment of an institutional framework for the governance of the industry, and the NADDC was born. The roles of the NADDC have evolved far beyond the narrow mandates of the STC, consequently, for effective implementation of the NAIDP 2023, government recently inaugurated broad-based NAIDP Implementation Committee.
At a time, our economic development considerations did not seem to include the automotive industry as a necessary player. That was why there was no policy of the Federal Government from 2015 to 2023 that included the automotive industry. NAIDP 2023 could only be anchored on the policy of a prior government. That’s why a lot of automotive plants in Nigeria shut down.
From those years where we have not done well, we have also seen the things that we should not do. We are hoping that “Hope is Here” at last with the NAIDP 2023 because in addition to the objectives detailed in the NAIDP 2023, there are things the DG and the Minister are doing that support that hope. These include:
Definition of the programme vehicles for the NAIDP. That’s what we had in the 1970s and 80s that gave Volkswagen Beetle, Peugeot 504 and 505 etc.
Empirical bases for determining tariffs differentials that are justifiable and fair. Tariff incentives do not have to be determined arbitrarily, rather they should reflect the realities of doing business in Nigeria.
Setting up the stakeholders committee for the implementation of the NAIDP 2023. Countries that have developed their automotive industry are consistent in that pursuit. Yes, we have the NAIDP 2023, which will continue to be improved upon.
Building an industry that attracts only serious investors. I am sure that, AAAM being an association of OEMs, are serious people, whether they are coming in directly on their own or partnering with existing participants.
Developing component deletion programme. In fact, the involvement of OEMs should help in us agreeing on the components and the timeline for the deletions.