By Moses Akaigwe
The recent two-day visit of the German Chancellor, Mr. Olaf Scholz, to Nigeria has raised the hope of stronger relations between the two countries, especially in the areas of trade and economic development.
Upon arrival, Sunday, October 29, Chancellor Scholz had held talks with his host, President Bola Tinubu, and later discussed trade and investment prospects and expansion with relevant government and sectoral leaders, as well as industrial and trade groups.
The high-level diplomatic interfacing between Europe’s biggest economy and Africa’s largest population sought to diversify trade partners, expand economic partnerships and expand frontiers in the energy (oil and gas) and solid minerals.
Beyond seeking to deepen economic interests, the bilateral discussions focused on insecurity in Nigeria and the West African sub-region, in addition to efforts to address undue migration.
These culminated in the signing of a memorandum of understanding (MoU) on solid mineral development between the two countries, which the Minister of Solid Minerals Development, Dele Alake, announced after that week’s Federal Executive Council (FEC) meeting on Monday.
However, expectations in Nigeria’s automotive sector that at least an appraisal, if not a review, of the MoU signed five years ago between Nigeria and Volkswagen would be on the front burner during Chancellor Scholz’s visit were dashed.
This is regardless of the fact that the MoU has been utterly dormant with no part of it so far implemented.
During a similar visit to Nigeria and Ghana by Scholz’s immediate predecessor, Angela Merkel, in September 2018, separate agreements were signed one day apart between Volkswagen and the two West African countries towards the up-scaling/commencement of auto production in Lagos and Accra.
By August 2020, Volkswagen Ghana, a product of the MoU, had rolled out cars at its plant in Tema, near Accra, while Nigeria has continued to dither.
The inaction on the part of Nigeria is despite the obvious advantage of an existing auto policy, Nigeria Automotive Industry Development Plan (NAIDP), that came into effect about four years prior, in 2014, and an existing VW plant, VON Automobiles, now owned by the Stallion Group following government’s privatisation programme.
This means that, unlike Ghana, Nigeria didn’t have to invest in a new production plant, and did not need to articulate a fresh automotive policy because one was already in effect, but needed a legal support.
In the MoU signed by the then Managing Director of Volkswagen South Africa, Thomas Scheafer, the automaker undertook to implement a phased approach in relation to the assembly of vehicles, initially from assembly kits with the long-term view of establishing Nigeria as an automotive hub on the West Coast of Africa.
What this translates to was that Volkswagen, a global leader in the auto industry, committed itself to boosting the current assembly activities at VON Automobiles, Lagos.
The German automaker further undertook to establishing a training academy in conjunction with the German government, which would train the initial employees and also provide broader technical training in automotive skills.
As part of the agreement, Volkswagen was also expected to develop a comprehensive vehicle and service network for its brand in Nigeria {subject to commercial viability}.
On the other hand, the Nigerian government, represented by the then Minister of Industry, Trade and Investment in the Muhammadu Buhari administration, Dr. Okechukwu Enelamah, committed to accelerating the approval of the auto policy pending then in the National Assembly.
The idea was that a legal framework for the auto policy would endure the gradual transition from the importation of used {tokunbo} cars to the manufacture and distribution of new passenger vehicles.
Generally, the government of Nigeria committed to providing a conducive legislative environment that would encourage the manufacturing of motor vehicles in the country.
Sadly, as expected, the Nigeria Automotive Industry Development Plan (NAIDP) Fiscal Incentive and Guarantees Bill was passed by the National Assembly later in 2019, but curiously, was refused assent by the incumbent President Buhari.
This singular act of declining to sign the bill into law by the former President, as well as the government’s tepid approach to implementing the auto policy, put the MoU with Volkswagen and the industry in general, in the lurch till today.
Meanwhile, modelled after Nigeria’s older policy document, Ghana Automotive Development Policy (GADP), which was announced in August, 2019 (about a year after the Volkswagen’s MoU), has paved the way for the establishment of a very active Volkswagen plant.
Following the introduction of GADP, Ghana today has five other car assembly plants owned by different original equipment manufacturers {OEMs} apart from Volkswagen’s. They are Toyota, Sinotruck, Nissan, and Peugeot. Kantanka, Ghana’s answer to Nigeria’s Innoson in Nnewi, started assembly before the policy took effect.
In view of this unimpressive scenario in Nigeria – specifically, lack of progress in the implementation of the MoU with Volkswagen – auto industry watchers believe that the situation was weighty enough to have been part of the agenda during Chancellor Scholz’s recent visit.
A tour of the VW plant in Ojo, a part of the city of Lagos which was on the German leader’s itinerary, would not have been a bad idea.
This is in view of the fact that VON Automobiles’ (Stallion Group’s) plant which was in operation even before the MoU was signed, halted the assembly of VW cars following the pull-out by Volkswagen from the Nigerian market.
As a result of the suspension of operations in Nigeria a few years ago, there has been a total absence of new VW-badged vehicles in Nigeria today, because neither is the local plant in Lagos assembling, nor is Volkswagen still exporting fully built cars to Stallion.
Volkswagen has since officially explained that the decline of Presidential assent to the Auto Policy Bill passed by the National Assembly and the effect of the poor quality fuels on Volkswagen vehicles, including impaired performance of the engines, were some of the factors that prompted the suspension of Volkswagen’s operations in Nigeria.
This was confirmed by the sub-Saharan Africa office in South Africa at a media event in June, 2023, where both the Chairperson/Managing Director, Volkswagen Group South Africa (VWSA), Martina Biene; and the Head, Group Communications, Andile Dlamini, spoke on the issue.
The regional office also disclosed that the prevalence of dirty and low quality fuels in Nigeria was another reason for its painful decision to stop providing vehicles in the local market, explaining that its modern vehicles cannot run efficiently on such fuels.
Also revealed as the third reason the auto manufacturer pulled out were the activities of ‘wharf rats’ who vandalise new vehicles, including Volkswagen’s, at the ports of entry by removing the catalytic converters, thus making the cars emit dangerous gases into the atmosphere.
The regional office further clarified that with the catalytic converters stolen by the port miscreants, Volkswagen could no longer, in any way, offer warranty on the affected vehicles.
However, despite the myriads of challenges, the German automaker said Nigeria is still of great importance to its interests in Africa, even as Biene and Dlamini assured that a return to the country is not ruled out provided the NAIDP gets legal backing through a Presidential signature.
“We’ll return to Nigeria soon. But the government must give us the Automotive Policy (by assenting to the passed bill) first, and more cleaner fuels,” the VWSA MD remarked in June.
The same view was expressed by Dave Coffey, the Chief Executive Officer of the Association of African Association of Automotive Manufacturers (AAAM), in a recent interview with The Sun.
It was with the 2018 MoU still dormant and the Volkswagen having no form of presence in Nigeria presently, that expectations were high that the situation was going to receive a mention during Chancellor Scholz’s visit. But, this never happened.
Along with Mercedes-Benz and BMW, Volkswagen is among the biggest auto brands from Germany that are also among the most valuable names globally.
Moreover, considering that many other OEMs have maintained a similar stance with Volkswagen on lack of legal support for Nigeria’s nine year old auto policy, a reassuring statement would have rekindled some confidence.
“OEMs remain very interested in Nigeria. We need certainty of policy that has been passed into law and effectively implemented; this includes the required vehicle, fuel and parts standards to support investments,” Coffey had said
And, in line with the Renewed Hope agenda of the new Tinubu administration, such a joint statement committing to making the NAIDP work, with the President assuring of a robust legal framework – in form of a passed bill bearing his office’s stamp – would have sent a positive signal to the industry globally.
This would have made the job of the new Director General of the National Automotive Design and Development Council (NADDC), Mr. Oluwemimo Joseph Osanipin (who has taken over at a time the industry is mired in serious challenges), a little easier.