Nigeria Targets 80% Local Manufacturing in Auto Industry

  • Nissan, Honda, Ford, Hyundai among carmakers adding capacity
  • Challenges to goal include lack of power, rail infrastructure

Nigeria plans to raise the portion of local manufacturing in the automotive industry to 80 percent by 2023 as Africa’s most populous country seeks to cut imports and diversify the economy away from oil, the industry regulator said.

The West African nation currently imports “almost 100 percent” of vehicles, Luqman Mamudu, director of policy and planning for the Abuja-based National Automotive Council, said in an e-mailed response to questions on Tuesday. Developing manufacturing and assembly plants would create jobs and reduce the $9 billion annual cost of bringing in vehicles and components, he said.

Nigeria plans to assemble 500,000 vehicles per year over the next five years, compared with 10,000 units in 2014, after awarding 36 companies a production license, Mamudu said. Global automakers now building capacity include Japanese companies Honda Motor Co. and Nissan Motor Co., Ford Motor Co. of the U.S. and Hyundai Motor Co. of South Korea, as well as local carmakers.

President Muhammadu Buhari has pledged to diversify Nigeria’s oil-dependent economy, which has suffered as crude prices plunged by more than 50 percent since June last year. Economic growth is forecast to drop to 3.2 percent this year from 6.3 percent in 2014, the slowest pace since 1999, according to a Bloomberg survey of economists.

Obstacles to the new automaking targets include a lack of power and rail infrastructure, Ayo Teriba, chief executive officer of Economic Associates Ltd., an advisory firm, said by phone from Lagos on Wednesday. “It is wishful thinking,” he said. “If you have to transport your inputs by trucks instead of rail, you won’t be competitive. We have to render the business environment competitive.’’

Addressing Challenges

“The Nigeria government is committed to addressing the issue of rail and power,’’ Mamudu said. The regulator will partner with operators to “develop specialist automotive supply parks to ease set up challenges’’ for manufacturers, he said.

Nigeria will allow car producers to import two fully-built units at a discount duty of 35 percent for cars and 20 percent for commercial vehicles for every one built locally, according to Mamudu. That compares with the standard 70 percent tariff on imported cars, he said.

Equipment used to assemble cars can be imported duty free, he said. Other incentives include a crackdown on vehicle smuggling and tax holidays for producers.

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