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Nigeria can produce 384,000 units of vehicles annually – NADDC

The National Automotive Design and Development Council (NADDC) said Nigeria now has the capacity to produce 384,000 units of vehicles annually. Director, Policy and Planning, NADDC, Mr. Luqman Mamudu, made this known at an interactive session with Commerce and Industry Correspondents Association of Nigeria ( CICAN) in Lagos, lamenting that out the 384,000 capacity, only 25,000 was produced in 2015.

According to him, “The Original Equipment Manufacturers (OEM) such as Nissan, Ford, among others, usually invest in a country directly but because they are not sure of our environment, they did not really want to come directly, but we encourage partnership with our local entrepreneurs, who are car dealers and ex-car manufacturers.

As I speak, we have investment on ground that can do a combination of SKD and CKD of about 384,000 vehicles.

These number of vehicles can be assembled in this country, anybody can go and check these factories they are there. The down side of it is that, last year, 2015, we produced only 25,000. We have so much capacity and yet we are producing only 25,000. The reasons are many, some of which I know and some of which I don’t know,  whatever reason they are, the problem can be solved by all.

“One of the problems is logistics, to order your CKD and SKD from the sources takes quite a while, the bureaucracy is strangulating, so you find that most of the operators are not able to get their input, that is the kit, into their plants as at when due, that in itself is a problem. We also have the problem of influx of second hand vehicles. Before the investors can put a lot of money to realise this installed capacity, to bring in SKD, even if the Customs administration were perfect, something needs to be done about this influx of the second hand vehicle, because second hand vehicle reduces the market that is available to local entrepreneurs.

Of course, we have programmes to curtail influx of second hand vehicles, we are struggling to realise this programme and at the same time to be able to utilise that full capacity,  the local entrepreneurs need money to be injected, the OEM is beyond just signing a technical agreement. What we have done is to continue to pursue strategy to realise the reduction in the influx of second hand vehicles without off setting anybody and at the same time we are engaging the OEM.”

Mamudu said that the automotive industry is a critical sector that drives the economy and employs massive labour, adding that it takes a country out of problems just like it took America out of the 2008 recession. To this end, he said that during the first, second and third development plan of Nigeria in the 1960s to 1981, Nigeria chose to establish the automotive industry and so it had six plants – two car plants and four commercial vehicle plants, established over a period of 10 years.

By 1981, 120,000 brand new vehicles were being assembled in this country, but by mid 1984 and 1985, not only automotive industry, but most industries in Nigeria collapsed, that is because we were asked to embrace what they call free trade policy by the rest of the world. We embraced the policy and opened up our borders and all the second hand vehicles were flowing into the country and until now they are still flowing,” he said.

Vehicle credit acquisition scheme

Mamudu said that the federal government through the Council would launch Affordable Vehicle Credit Acquisition Scheme Scheme to give opportunities to Nigerians to purchase locally assembled vehicles in Nigeria. He added that the council is contributing about N7.5 billion interest free fund into the scheme  with a counterpart funding from a company in South Africa to help Nigerians get access to brand new vehicles. His words: “This is what we have been working on for the past two years.

We looked at the available access to asset financing in the country,we found out that the high interest rate is frustrating the purchase of a new vehicle. This is the gap we want to fill. We are currently working with a company in South Africa which has footprints in 8 African countries where they have developed a commercial and financial model to get recoup their investment.

At NADDC, we are also contributing our own N7.5 billion into the scheme while the South African company  will help source for finance from Development Finance Institution (DFI) at single digit interest rate. Our N7.5 billion into the scheme will be interest free.”

He added that when the funds are put together, it will guarantee an interest rate that will be easy for people to purchase vehicles at eight to 10 per cent.  “By the time we put the funds together, it will guarantee an interest rate that is fairly okay. We are in discussion with the Central Bank of Nigeria (CBN) to originate the loans and float it so that it will be attractive for investors to partake in the scheme. Going forward, this will bring down the interest rate. This facility will be given to people that have the capacity to buy cars because we expect that they will have good credit to purchase a car.

If you go to America, over 80 per cent  of car purchases are through loans. The credit purchase scheme will assist the operators to help the masses,” he said.