ON CREATING ENVIRONMENT, BUSINESS-FRIENDLY POLICIES TO ATTRACT MORE CAR MANUFACTURING COMPANIES

By Zik Gbemre

It was on Friday the 14th March 1975 that the then Head of State, Gen. Yakubu Gowon opened the N8.5 Million Peugeot Car Assembly Plant in Kaduna. This was actually a predecessor to the N11.5 Volkswagen Plant Gowon had opened the following week in Lagos. The said Peugeot Plant was built on a capacity to produce 20,000 cars per annum and was owned then by the Federal Government, Peugeot Automobile Motors of France, and a number of Nigerian shareholders. Gowon asserted then that the Plant was part of the fulfilment of his administration plans to disperse industries across the Federation. He also added that the creation of the industries was to benefit, particularly the young people in acquiring expertise and technological skills without the need for them gravitating to urban centers such as Lagos.

That was 46 years ago. One would have thought that by now, Nigeria would have left the league of having just car assembly plants to also becoming a car manufacturing country. Mind you, Gowon was a military officer then who never really planned to lead the nation as a Military Head of State. But power was thrust at him by accident, as Gen. Aguiyi Ironsi was killed in a coup. Yet, Gowon’s military Government had a great vision for the industrialization of the country. One would expect that by now, the country would have been producing its own cars and not just assemble parts of manufactured car parts put together as cars. A car assembly plant is not a really a car manufacturing plant that produces a car from the scratch to finish. What we have always had in Nigeria are car assembly plants where car parts, manufactured in other factories, are put together. If in the 70s, the then military administration led by a then young Gen. Gowon was able to build two Car Assembly plants, what excuse do subsequent Governments, including the present Muhammadu Buhari administration, have for not being able to make Nigeria become a car manufacturing country?

As of today, even the stated car Assembly Plants have been ran aground by selfish military politicians like Gen. Ibrahim Badamosi Babangida (IBB), and Sani Abacha. And since 1999 till date, nothing good has come forth in the country’s automobile industry. Apart from automobile companies like Innoson Vehicle Manufacturing (IVM) Plant at Nnewi in Anambra State, I really can’t think of any other functional automobile company that is making significant impact in the country’s automobile industry. Just few years ago, a Japanese automobile company, Suzuki, had set up a production plant in Ghana, and I thought this development, though a welcomed one, should be a wakeup call to Nigeria, unarguably Africa’s largest market for automobile products. According to the reports, the Japanese multinational automobile manufacturing company, Suzuki Motor Corporation, resolved to set up production in Ghana and also plans to make the country its operations hub in sub-Saharan Africa.

Without a doubt, for the Federal Government to fast track the nation’s economic growth and drastically reduce the unemployment crises in the country, there is need for prompt steps to be taken and more attention given to Nigeria’s automobile industry. This is one industry the Nigerian Government can use, if properly developed, to address and achieve a whole lot, which include the creation of vast employment opportunities, stop car smuggling across our borders/ports, ensure transfer of technology, stop capital flight, create vast opportunities for further industrialization of the nation’s economy, increase revenue from exports, and so much more. But despite the importance of this sector, why have we failed to attract more automobile companies to come and invest in Nigeria?

This was also the opinion of an Editorial of one of the nation’s leading tabloids. When it noted that in this new world when foreign direct investments find locations where investments are safe and easy, there are questions to ask the country’s commerce and industry officials why our country is not an investment destination despite all the incentives for ease of doing business policy thrust in the last few years.

For instance, Can Nigeria easily attract a foreign investor wishing to come to Africa to establish business? If not, why? The gloomy state of critical infrastructure in the country that once triggered relocation of tyre production firms such as Dunlop and Michelin to our West African neighbours, may not have changed after all. With regard to the automobile industry, what is Nigeria’s automobile policy like and how has it fared in attracting both local and international investors? What is the role of Nigeria’s National Automotive Council? What incentives have been given to local automobile manufacturers like Innoson Vehicle Manufacturing (IVM)? How was the government-owned Peugeot Automobile Nigeria (PAN) privatized years ago fared? What patronage is extended to the local vehicle producers? And why did most of the automobile companies that flourished in the 70s and 80s close shops? The answers to these would help government re-direct policies, not only in the automobile industry, but also the whole gamut of industrial manufacturing in the country.

Nigeria has the potential to become the hub of Africa’s automobile industry because the country is home to an estimated 200 million people, over 35 million of who are in the growing middle class. This makes it to be seen as the continent’s largest economy, which is also increasingly seen as an attractive destination for investors across all sectors. That means, the “largely import dependent automobile industry” of Nigeria should become the focus of the present and future Nigerian Governments. It is however sad that other African countries are the ones ahead of us in this regard.

It is rather unfortunate to see countries like Kenya, Rwanda and South-Africa making giant strides ahead of Nigeria in the automobile industry. South Africa alone is years far ahead of Nigeria. For instance, vehicle manufacturers such as BMW, Ford (incorporating Mazda), General Motors, Mercedes Benz, Nissan, Renault, Toyota and Volkswagen – all have Production Plants in South Africa. While Component (spare parts) Manufacturers such as Arvin Exhaust, Bloxwitch, Corning, Senior Flexonics have also established Production Bases in South Africa. In fact, South Africa’s automobile industry is a global, turbo-charged engine for the manufacture and export of vehicles and components. Many of the major multinational firms use South Africa to source components and assemble vehicles for the local and international markets. The sector is one of South Africa’s most important, contributing at least 6% to the country’s GDP and accounting for almost 12% of South Africa’s manufacturing exports, making it a crucial cog in the economy. In 2010 alone, 271 000 vehicles were exported. And also, as at 2010, more than 28, 000 people are directly employed in South Africa’s automotive manufacturing, with 65, 000 employed in the component manufacturing industry. About 200, 000 are employed in retail and aftermarket activities, with 6, 600 employed in the tyre manufacturing industry.

Part of the problem is the failure of the Ajaokuta Steel Company, which for decades has remained a pipe dream. Same also with the Delta Steel Company (DSC) Phase 1, in Ovwian-Aladja, near Warri, which was completed by the administration of former President Shehu Shagari to produce steel. But was ran aground, and the Delta Steel Company (DSC) Phase 2, which was to produce flat steel, was also completely abandoned by successive military administrations till 1999, and even up till now. Whereas, without the production of flat steel, Nigeria cannot be industrialized as it ought to, and this is the basic fact. These companies were intended to provide a “BASE FOR INDUSTRIAL TAKE OFF IN NIGERIA” that would include automobile manufacturing. Today, Nigeria has not made progress industrially. The country remains a MAJOR CONSUMER NATION importing billions of dollars’ worth of vehicles annually from Asia. Incidentally, most of the imported cars are Japanese brands – Toyota, Honda, Nissan, Mitsubishi, Suzuki, among others. Thus, while Nigeria serves as a huge market to Japanese automakers, Japan is doing nothing for Nigeria in return.

Nigeria, being a large market in Africa, should be able to get Japan attracted to play more beneficial role in her economy. Sometimes, not asking could be the reason for the lackluster relationship. Nigeria should push to have Japanese presence in the country like in many other African countries. The Federal Government should also make the manufacturing of tyres a top priority in the country, and there should be policies to encourage investors and companies like Dunlop and Michelin to come back to Nigeria as it were in the past.

The Federal Government should also make it, as a matter of Government policy, for the patronage of locally manufactured vehicles in the country by Government agencies and officials. Such Nigerian-Made Vehicles should also be made affordable. I still remember that the official cars of the Nigerian Government in the 70s down to the mid-80s were Peugeot and Volkswagen cars. Volkswagen and Peugeot cars were used by the military State Governors, Ministers and Commissioners. Only the Military Head of State used one Mercedes Benz car. But as of today, the President, Ministers, Lawmakers, Governors, Commissioners, Heads of Government Parastatals – use fleets of costly imported cars for their outrageous motorcade convoys. The Nigerian Government at all levels need to start patronizing locally made vehicles, just as it was in the past when all Government vehicles were either Volkswagen or Peugeot cars.

The truth is that we have the market, the manpower population and the resources and wherewithal to use the nation’s automobile industry to transform the country’s fortunes in the near and far future. The global automobile industry is looking for new growth opportunities and those opportunities reside in Africa, particularly in Nigeria, regarded as the continent’s largest economy and by far the most populated. This presents huge opportunities for investors in the automobile space. Creating employment opportunities is not by building structures or creating more offices and Departments within the Government and collar-based sectors. Creating rapid jobs is about the Government going into partnership with foreign and domestic investors in the automobile industry, to bring them in to do the transformation and development needed in this sector. The Government’s main job is to enact the right policies and business-friendly environment that would encourage all of this at a tremendous scale. The Nigerian automobile sector is something that the Federal Government should seriously and promptly focus on, especially since the larger population of Nigerians are desirous to own cars. In advanced countries like the US, car is not a luxury but a necessity, hence it is readily affordable and available by most Americans.

The Federal Government of Nigeria should seriously focus on revamping the automobile industry for the manufacturing of cars from scratch to finish, and not just having car assembly plants. They need to refurbish and upgrade the Delta Steel Plants Company (DSC) to produce flat steel as well. Since the plant and its facilities are already in existence. Nigeria will save a lot of money, generate wealth and also provide great employment opportunities with this line of action, especially since all cars in use in Nigeria today are imported. The Nigerian Elites and Politicians like state-of-the-art cars, so we need to start manufacturing such cars in the country, not just having assembly plants, to save a lot of capital flight. The Government should simply upgrade the abandoned Delta Steel Plant Company to manufacture flat steel of all kinds.

Zik Gbemre
July 10, 2021


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