Chief Executive Officer of Financial Derivatives Company (FDC) Limited, Bismarck Rewane, says per cent of the cars on the road in Nigeria are used cars.
The implication according to him, is that for every 134 used cars in Nigeria, you can only find one new car.
The FDC CEO also said that an estimated $526 million was spent by the country in 2018 on used cars importation,, 68 per cent higher than the previous year.
Nigerian automobile industry remains a shadow of itself in spite of the auto-importation policy of 2014.
Rewane, in an FDC publication noted that the indirect impact of the development of the automotive industry on Gross Domestic Product (GDP) can be strengthened through related industries like agriculture (rubber for tire production), mining (metals and steel), and electricity to name a few.
He noted that when an automobile plant is erected in a country, relevant industrial clusters are formed such as steel plants, rubber manufacturers, glass manufacturers, car dealerships and transportation service providers.
he cluster and expansion of these industries lead to towns or cities with improved road infrastructure, railway developments, freight connectivity, and new housing developments. This trend is spreading to emerging economies.
“In New Delhi, for example, significant development has arisen in the suburbs of Noida and Gurgaon, bringing crucial industrial and infrastructural development to their respective states”, said Rewane.
In addition, the report further noted that the automotive industry pioneered the use of robots as an automation solution, which is being used extensively in several industries. So, if Nigeria can improve its automotive industry, it has the potential to also increase the use of technology in the country.
“Most importantly, the automobile industry plays a crucial role in job creation. This is reflective of the global growth of the industry and rise in consumer demand, which implies that manufacturers are continually seeking skilled technical professionals. In the US, original equipment manufacturers, who make the original parts that are used by automakers, employ about 1.7 million people directly and create 1.5 million jobs indirectly. Suppliers and dealers support an additional 4.8 million jobs. Also, every $1 million increase in revenue leads to the creation of approximately ten jobs. In Japan, the industry employs about eight per cent of the total workforce (5.4 million people).
“It is a fact that the auto importation policy of 2014 is not working,” it added.
FDC explained that to put Nigeria in the limelight like other countries, the government needs to set out policies to encourage the manufacturing of automotive components such as tires, doors and glass, etc. That way it will attract more automobile sub-industries and investors. It will also have a spillover effect on value-added for the economy and create a number of high-skilled jobs.
Secondly, the development of the automobile sector takes time and requires a supportive business environment. For instance, French carmaker Renault and Nigerian conglomerate Coscharis Group have formed a partnership to assemble and distribute Renault vehicles in Nigeria from October 2019. However, many domestic firms still continue to struggle in a weak business climate, coupled with skills shortages among the domestic workforce, as the quality of education and technical skills training is low. Improvements in these areas will boost investment and increase investors’ confidence.
The potential for growth of the Nigerian automobile industry remains strong. Nigeria has a population of over 190 million people, with over 40 million who are in the growing middle class. However, Nigeria has the ratio of 19 passenger cars for every 1000 persons, which does not compare favorably to the average of 68 passenger cars for every 1000 persons in the Middle East and Africa.
“This gap creates a unique opportunity for players in the industry. In addition, Nigeria signed the African Continental Free Trade Agreement which creates a free trade area among 55 African countries.
“The free trade area is a customs union, which will allow for movement of physical goods such as cars without tariffs from 2022. This would be a great opportunity for Nigeria as many auto manufacturers could invest in Nigeria with the view to de- velop a regional manufacturing hub in which its production can be imported within the free trade area.
“The automotive industry accounts for a significant part of the GDP of most developed coun- tries, and the growth dynamics will create new jobs, contribute to the expansion of the taxable population, increase the revenues of the government, influence industrial and technological ad- vancement and improve the standard of living of Nigerians.
“Therefore, a functional automotive industry is important, not only for economic growth but also for social impact and relevance in the global space,” the report stated.