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By Steve Agbota
AMID plans to review the Nigeria Automotive Policy, the nation’s Organised Private Sectors (OPS) and other stakeholders in the nation’s maritime industry have identified cost of production as a major factor bedeviling the auto industry.
It has therefore called on the Federal Government to address the high cost of production to make the auto industry vibrant and functional.
The clarion call came as the Minister of Industry, Trade and Investment, Otunba Adeniyi Adebayo, last week, said the ministry will soon submit a new auto policy for the approval of the Federal Executive Council (FEC) with the aim of increasing local production of vehicles.
The minister said this when the Senior Executive Course 45 participants of the National Institute of Policy and Strategic Studies (NIPSS) visited him on Monday in Abuja.
Speaking on the development, the Chief Executive Officer of the Center for Promotion of Private Enterprise (CPPE) Dr. Muda Yusuf said that the auto policy might not work unless the government addresses the cost of production in the general manufacturing sector.
According to him, the auto sector is part of the country’s manufacturing sector, and whatever affects the general manufacturing sector also affects the automobile sector.
He added that no matter the review, if the cost of production remains high and the product price remains very high it will be difficult to make any progress with the auto industry.
“Close to 90 per cent of the auto vehicles inputs are imported, while local content may not be up to 10 per cent. If the nation has that kind of production structure, it will lead to a very high foreign exchange exposure, that makes it very difficult to be competitive,” he said.
However, he urged the government to address the fundamental issues that have to do with fiscal policies.
“The auto sector is part of our manufacturing sector, and whatever affects the general manufacturing sector also affects the automobile sector. So, you must deal with the issue of Industrialization, I think it’s best to deal with it holistically and by that, I mean that they should address the issue of cost of production, no matter what you do if the cost of production remains high and the product price remain very high it will be difficult to make any progress with the auto policy.
“Now if you look at the auto sector, close to 90 per cent of their inputs are imported local content. I’m not sure it’s up at 10 per cent. So, if we have that kind of production structure, that means there is very high foreign exchange exposure, and if you have that kind of product, it will be very difficult to be competitive because the whole thing boils down to competitiveness and what people can afford.
“We can see many more people in the middle class are buying Tokunbo vehicles. How many people can afford to buy a new vehicle whether it is imported or whether it is even made locally, the idea in the beginning was that vehicles that are produced locally will be cheaper but are they necessarily cheaper now?
“So, we should address the fundamental issues and the fundamental issues is what fiscal policy measures can we use to support them, to bring down their cost of production so that the product can be more affordable,” explained.
