Nigeria: A bad student of automobile technology transfer

Nigeria is a bad student of automobile technology transfer. The chequered history of the nation’s automotive industry has proved that point without an iota of doubt. In the 1970s, six European automakers built elaborate assembly plants in Nigeria with the aim of transfering automobile technology.

Ironically, out of the six plants, only Peugeot Automobile Nigeria (PAN), Kaduna and Anambra Motor Manufacturing Company (ANAMMCO) in Enugu are still doing some form of vehicle assembling business. Iveco’s plant in Kano now assembles a brand of Chinese vehicle. Volkswagen’s plant in Lagos was at a certain point used to stock imported rice.

Some critics contend that the European automakers were not willing to transfer technology.  However, Daimler-Benz built the ANAMMCO plant in Enugu at the same time it established a similar plant in Brazil.

By the late 1980s, the ANAMMCO plant in Enugu was sourcing for completely knocked down (CKD) components from its sister plant in Brazil. The Brazilians had developed local content above the 80 per cent mark within 10 years. 

Today, ANAMMCO sells fully built up luxury buses from the Brazilian plant that the parent company in Germany built at the same time with the one in Enugu. It is obvious that the problem is with the student, not the teacher. Nigeria’s first automotive policy plan was a colossal failure because the student (Nigeria) was not ready to learn. 

Sometime in 2012, the federal government slapped together another automotive policy plan. That too has flopped.

The policy which was formulated during the administration of former President Goodluck Jonathan has done incalculable damage to Nigeria’s import duty revenue while it has failed catastrophically in achieving its Herculean task of encouraging investors to set up automobile assembly plants in Nigeria. It has equally failed to improve patronage of the so-called made-in-Nigeria vehicles. 

The policy failed because it was designed to be enforced by an incorrigibly corrupt institution and predicated on non-existent infrastructure.

Judging from the fact that 80 per cent of the vehicle imports into Nigeria are used vehicles and that most of them enter Nigeria through the Benin Republic Port of Cotonou, architects of the policy slammed a 35 per cent import duty on used vehicles and imposed a total ban on vehicle imports through the land borders.

Import duty on new cars was even more punitive. An import tariff of 35 per cent was imposed on new cars.  They also attracted an additional levy of 35 per cent which was to fund the provision of infrastructure for the local assembly plants. That pushed the import duty on new cars to 70 per cent all in a bid to give the local assembly plants some breathing space.

The tariff hike was designed to reduce used vehicles imports in a bid to increase the market share of vehicles from Nigeria’s assembly plants which would eventually create a viable used vehicle market from local products.

Designers of the policy had expected the Nigeria Customs Service (NCS) to ensure that no vehicle is smuggled into the country through the land borders and that the punitive tariff on used vehicles was high enough to discourage imports through Nigerian ports, thus reducing the market share of imported used vehicles and widening the market for made-in-Nigeria vehicles.

Ironically the NCS looked the other way as smugglers flooded the market with used cars and priced the few local products out of business.

The NCS had argued that the used vehicles were smuggled into the country through bush paths.  However, the partial closure of the border in the last three months has exposed the fallacy in the NCS claim. 

Nigeria lost from both ends through the policy. The dollar value of Nigeria’s import duty tumbled precipitously as a result of massive smuggling of used vehicles through the land borders. The local assembly plants were the biggest losers.  More of the used vehicles that the high tariff was designed to curb, entered the country through the back door and priced products of the local assembly plants out of the market.

The gainers were the corrupt officials of the NCS, smugglers and the government of Benin Republic which was making millions of dollars daily from import duty on used vehicles diverted to Cotonou Port.

The automotive policy plan was something of wishful thinking because Nigeria lacks the basic infrastructure needed to sustain an automotive industry. The policy hoped to boost the value chain in the industry by producing some electrical and plastic components locally.

Unfortunately, Nigeria’s petrochemical industry which could sustain the production of plastic components for the industry is practically wobbling on feeble knees. Nigeria imports more than 60 per cent of the plastic resins used in the country.

Besides, Nigeria has no steel industry which is the bedrock of the automotive industry.

Even the plan to reactivate Nigeria’s extinct tyre industry to support the automotive sector was inhibited by high cost of production and epileptic power supply.

The automotive policy plan failed because it tried to tackle a colossal infrastructure deficit through punitive tariff and unenforceable ban. The policy would have created the artificial scarcity envisioned by its architects if Nigeria had a customs service that could keep its borders closed against smugglers who are enemies of Nigeria’s economy.  Ironically the NCS is the closest friend of smugglers.

A new automotive policy plan must address the colossal infrastructure deficit that inhibits investment in the country’s automotive industry. The truth is that with deplorable roads, high interest rates, epileptic power supply and seemingly insurmountable security challenges, the cost of doing business in Nigeria is atrociously high. No amount of punitive tariff can make the product of Nigeria’s automotive industry compete favourably in the market.

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