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Viewing report
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Nigeria Autos Report Q4 2011
Business Monitor International, Oct 2011, Pages: 32
Vehicle production and sales in Nigeria will continue to grow strongly over the next few years, after they were battered by the financial crisis, plummeting demand and a sharp decline in access to credit. However, many of the gains in the following years will simply serve to revive the market rather than return it to its pre-crisis highs. Although BMI expects sales to jump by 26.00% to 26,607 units in 2011, after posting 32.45% growth to 21,116 units in 2010, sales will remain significantly lower than the 2007 high of 84,398 units.
Similarly, despite GDP growth of about 7.9% in Q211 and an economic growth rate target of 7.8% for 2011, BMI forecasts 5.05% growth in vehicle production to 1,476 units over the year. Output is unlikely to reach a high of 3,072 units seen in 2007.
Figures from the country's port authorities show vehicle imports were up 78% year-on-year (y-o-y) in the first five months of 2011, which is seen as a sign of growing consumer confidence following April’s elections. However, BMI is concerned that the data are not such a good sign for the development of the domestic production industry, which has been a priority for the government.
The domestic industry needs to be producing enough vehicles to fulfill the demand from incentive schemes, and so it may take time for policies to benefit domestic production. Vehicle output fell by over 30% in both 2008 and 2009 and it will take time to recover from such a setback. In the meantime, the growth in imports is evidence that consumers are ready to spend on vehicles again and when there are viable domestically produced options, this growth can start feeding through into sales of homegrown products.
Around one-fifth of car sales in 2008 were funded by credit, but the US$4bn bailout of troubled banks in 2009 put paid to this and the autos sector has suffered ever since as a result. However, dealers are crediting the ongoing banking reforms with giving consumers more confidence to purchase big-ticket items and this supports the view of BMI's Commercial Banking team that the government's renewed attention to the much-needed reforms in Nigeria's banking sector is an encouraging development. BMI calculates a y-o-y drop off in vehicle sales between 2011 and 2015, with growth falling 15.25% to 51,836 units in 2015. The value of total vehicle sales in the country will have reached NGN293.86bn (US$2.260bn) by the end of the period, up from NGN104.24bn (US$686mn) in 2011. Conversely, BMI’s forecast shows steady growth in production through to 2015 within 5% y-o-y, reaching 1,803 units and NGN43.29bn (US$333mn) in 2015 against 1,476 units and NGN14.39bn (US$95mn) in 2011.
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