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Nigeria Autos Report Q4 2010
Business Monitor International, Oct 2010, Pages: 52
Nigeria Autos Report provides industry professionals and strategists, corporate analysts, auto associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Nigeria's automotive industry.
Nigeria’s government is ambitiously targeting a 10% growth rate over the next three years as it pumps US$212bn into the economy. An injection of funds directly into the country’s auto industry, along with investment in the power sector, was the only good news for carmakers in recent months, however, as imports dropped declined. The lack of a comprehensive reform package for the sector, along with stronger but still weak-spirited approach to the industry long-term growth, will result in a sluggish expansion in the medium term. BMI expects total vehicle production to edge up from 1,340 in 2009 to 1,403 units in 2010.
The Nigerian government announced in August 2010 that the Central Bank of Nigeria (CBN) was finding ways to raise a NGN200bn (US$1.33bn) bond to boost the country's automobile sector. A committee has been established by the government to resolve various conflicts related to the sale of shares in carmakers as well as to ensure the early commencement of auto companies' operations in the country. The companies listed for revitalisation include Volkswagen Nigeria, Mercedes-Benz, Magna Steyr, Fiat and Leyland.
Most industry players will likely see the move as a placebo for the long-term development of the sector, which continues to be in need of genuine reform. Indeed, soon after the announcement both the Nigeria Automotive Manufacturers Association (NAMA) and the National Trucks Manufacturers (NTM) said that the funds would not result in a local revival if not accompanied by long-awaited changes. NAMA again highlighted the long-familiar litany of desired reforms, including tariff adjustments, poor infrastructure and the lack of local patronage. Indeed, the government plan to abandon fuel subsidies will join tighter credit policies for car purchases among local lenders to dampen demand. NAC argued that the funds would at least revive auto parts manufacturing in the country.
Meanwhile, the government took a move towards protectionism in another bid to make locally assembled units competitive and increase employment in the auto sector. The NAC’s policy and planning director Luqman Mamudu said in September 2010 that the country would apply a zero-rate tariff on unassembled vehicles imported into Nigeria. Fully assembled vehicles would have a 30%-35% tariff applied, however. In a rare event for an indigenous company, Innoson Vehicle Manufacturing Company (IVM) had its manufacturing plant commissioned by President Goodluck Jonathan in early September 2010. The government has been closely involved with the development of the plant, which is located in Nnewi and began producing at 30% of full capacity some months ago. The NAC previously provided IVM with a NGN200mn (US$1.29mn) loan, which has since been repaid, and has recently issued the company a NGN800mn loan, according to Daily Trust.
Nigeria’s new vehicle imports fell 43% year-on-year (y-o-y) in the first seven months of 2010, to 19,183 units, compared with 33,597 units in the same period of 2009. The fall is attributed to less consumer spending on vehicle purchases, especially as local lenders tighten credit policies. However, auto dealers in the country anticipate a boost in demand for trucks and buses in 2010.
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