Despite the efforts of local manufacturers so far, Nigeria’s automotive industry’s growth has been sluggish due to problems like low demand and high production costs.
By Michael Akuchie
A country’s automotive industry comprises the companies and the efforts geared at manufacturing vehicles such as cars and trucks, except for fuel, batteries, and tyres. The automotive sector is one of the biggest contributors to the national economy, as seen in the case of the USA. For context, the USA has a vibrant auto industry, with up to 20 indigenous automakers managing 55 vehicle assembly plants across the country.
When the focus shifts to Africa, specifically to Nigeria, auto manufacturing plays a less influential role. Due to several factors including deficient infrastructure at home and a skill gap, Africa has remained an import-driven continent for the longest time. Last year, the United Nations, in a report, claimed that Nigeria was overly reliant on the import of goods including refined petroleum, smartphones, and vehicles.
The story of Nigeria’s increasing preference for imported vehicles as opposed to their locally manufactured counterparts is quite interesting. According to a PWC document titled “Africa’s Next Automotive Hub”, the country was highly interested in locally assembled vehicles many years ago. In the 1960s, private companies such as UAC, Leventis, and SCOA began a trend in the country that soon spread nationwide.
The firms established auto assembly plants for Completely Knocked-Down and Semi Knocked-Down vehicles. For context, Time Matters, a glossary of logistics terms, defines Completely Knocked-Down Vehicles as “products delivered in parts and assembled at the destination”. Essentially, local manufacturers ordered parts from suppliers worldwide. Upon delivery in their home country, they then utilise the imported parts to build vehicles. Shipping the parts of a vehicle is a preferred option for local manufacturers because it helps them cut costs on import tariffs.
Following the success of these private firms in the ‘60s, the then-federal government partnered with European Original Equipment Manufacturers (OEMs) to build state-controlled assembly plants across the nation. The Northern region had Peugeot Nigeria Limited, the South had Volkswagen of Nigeria Limited (VON), and the East had Anambra Motor Manufacturing Company (ANAMMCO).
However, the impressive structure of that period soon met an untimely end by the 1990s up until 2013. Following the growing interest in crude oil exports, particularly the revenue generated from that sector, the government decided to concentrate most of its attention on that area, which led to the gradual decline of the country’s automotive sector.
According to OEC, a research and data website, Nigeria imported $1.24 billion worth of cars while exporting vehicles worth a mere $2.24 million. The fact that the country even has any locally assembled vehicles is credited to the resilience of home-based companies, despite the harsh economic situation. A document prepared by the Nigerian Bureau of Public Procurement, a government agency, contains 25 fully registered local manufacturers, including recognised local automakers like Innoson Vehicle Manufacturing, Hyundai Motors Nigeria Limited, and Dangote Sinotruk West Africa Limited which assemble vehicles such as passenger cars, trucks, buses, and pickup trucks.
Although the above-mentioned vehicles are either petrol or diesel-powered, Nigeria has announced its presence in the global electric vehicle (EV) scene. In 2021, former Vice President Yemi Osinbajo test-drove Nigeria’s first locally assembled vehicle called the Hyundai Kona Electric. The Kona Electric is, as the name suggests, an electric-powered vehicle that uses a battery instead of the engine that most Nigerians are familiar with. It can drive up to 482 kilometres before needing a battery charge using a Level 2 or Level 3 (DC Fast) charger at a public charging station or a Level 1 charger at home. EVs are a nice alternative to internal combustion engines (ICE) because they give off little to no carbon emissions. This makes them great for the planet. EV owners also enjoy significant savings on maintenance fees.
Relying on local vehicle manufacturing efforts has many advantages to developing economies like Nigeria. Firstly, Nigeria can witness massive economic growth due to local vehicle assembly. Instead of spending valuable foreign exchange on vehicle importation, a local vehicle assembly ensures that the money spent remains in the country and contributes to its economy. Additionally, local assemblies are potential employers of labour. In a time of growing unemployment, this should engage labour not only with paychecks, but also with valuable experience to bridge the skill gap. Another benefit of having a local vehicle assembly is that investors will be inclined to support the country’s efforts. The foreign investments will enable the country to scale its efforts by a wide margin. If the country maximises the potential of its local automotive industry, it will spur players in other sectors such as the health sector, which can begin manufacturing medical devices and assistive technologies such as pacemakers and wheelchairs.
Although the aforementioned benefits are attractive, growing Nigeria’s auto industry is not an easy task. For instance, production costs have increased over the months due to the decline of the Naira’s value. Also, low patronage from the public, including government officials, has made it nearly impossible for local manufacturers to thrive. The country’s high interest in imported cars has not helped local vehicle assemblies too. Nigerians prefer to spend millions on vehicle import and customs fees instead of buying ready-made vehicles at home due to a popular misconception that products shipped from overseas are made with high-quality materials. Epileptic power supply further complicates the efforts of local manufacturers to work as they have to explore alternative power supply. Following the subsidy removal on refined crude oil products such as diesel and petrol, their pump prices have astronomically increased.
Despite the many challenges plaguing the sector, Nigeria’s automotive sector is undeniably promising. The government can consider sensitising citizens on the importance of buying Made-in-Nigeria products along with helping to curb the unhealthy notion that local products are not on the same level as imported ones. The government can also give local manufacturers an image boost by patronising and using home-made vehicles. Establishing partnerships between the government and local manufacturers can also help the latter scale their production efforts to meet the country’s vehicle demand and drive revenue to the economy.
Michael Akuchie is a tech journalist with four years of experience covering cybersecurity, AI, automotive trends, and startups. He reads human-angle stories in his spare time. He’s on X (fka Twitter) as @Michael_Akuchie & michael_akuchie on Instagram.
Cover Photo: REUTERS/Toru Hanai