LAGOS – Traffic jams have become so common in Nigeria’s largest city that locals now refer to them as ‘go-slows.’ The sheer number of automobiles crowded onto the streets of Lagos is indicative of Nigeria’s love of cars, a market now valued at more than $6 billion, boasting imports surpassing half a billion vehicles per year.
While this development is promising, it has also come with a drawback: the importation of tokunbo, or used cars of sometimes unknown origins. Large numbers of tokunbo arriving into Nigeria have created a stir of controversy and suspicion, leaving many wondering about the safety and quality of these vehicles. While tokunbo may be regarded as shady and somewhat dangerous, if demand is harnessed correctly, the flow of these vehicles into Nigeria could be lessened and eventually replaced with legitimate domestic manufacturing practices, creating revenue and additional road safety. After all, the inception of this market was driven by a desire for cars in an economy largely defined by members of a lower-middle income bracket.
Nigeria once locally manufactured cars in the 1970s at a rate of roughly 108,000 per year, but the industry’s production rate has since dwindled, lacking innovation and weakened by the high cost of production and increased imports.
Former President Goodluck Jonathan, wanting to move Nigeria away from imports and toward automobile manufacturing, had been planning to promote the country’s capacity for the assembly and manufacturing of cars so that it would rely less heavily on its oil exports. After President Muhammadu Buhari’s election defeating Goodluck last March, questions have been raised as to whether the country will continue with its plans to revitalize the auto industry.
In October 2013, the National Automotive Industry Development Plan, or NAIDP, was announced to spark the process of industrialization by adding tariffs to imports, thus creating more competition amongst domestic manufacturers. It is hoped that the policy will lead to further job creation and the development of conditions conducive to the furthering of Nigeria’s involvement in automobile manufacturing. Aside from tariffs, existing issues of car smuggling into the country will be addressed through “better controls on vehicles, car dealers and ports.”
Since the creation of NAIDP, planned increases in tariffs have been delayed due to public resistance and other constraints. It was announced in February that a 70 percent tokunbo tariff would not go into effect until June, supposedly because domestic assembly operations are not yet strong enough to sustain the impacts of the tariff, but it has been suggested that the more likely cause of the delay was the unpopularity of the new policy.
Although President Bahari’s All Progressive Congress, or APC, has voiced support for NAIDP, it has been reported that the newly-elected Vice President Yumi Osinbajo may not. Osinbajo has stated that the APC intends to promote domestic production of cars, but he added that it “will reduce the high tariffs that Nigerians are paying to import vehicles.” It is possible that the program will continue but with less effect than it may have seen under President Jonathan.
In April, it was announced that Nissan had produced its first made-in-Nigeria automobile, which may be a sign of positivity for those seeking to revamp the local automobile industry. Most recently, on May 8, KIA Motors unveiled its Nigerian-made 2015 Sorento. The same day, a Nigerian news outlet also announced that the Stallion Group, a Dubai-based conglomerate, plans to increase its investments in the Nigerian auto industry. In a statement concerning the expansion of Stallion Group’s operations, Chairman Sunil Vaswani said, “Stallion Group is well poised to expand its operations and investments in the Nigerian Automobile value chain and the other West African markets in the coming years.”
If Nigeria is to effectively continue its efforts to spark the automotive industry, the country must bring in more manufacturers like KIA and Nissan to stimulate job growth while also developing domestic production and providing the population with an affordable selection of cars outside of the tokunbo market. Provided that the government under newly-elected President Bahari actively supports the local car industry, it may finally be energized, leading to the diversification of exports and the expansion of this existing source of revenue.
– Amy Russo
Sources: Forbes, Reuters, All Africa, CNBC Africa
Photo: Mob76 Outlook