funding is constrained. The total size of NAC fund which
of Japanese parts was 60% more than the international
was accumulated from the 2% levy in 14 years but scrapped
average and the law sought to cut this to 12% by 1960
by act of government in 2007, is just barely N15 billion or
while simultaneously bringing the quality to international
US$100m. This is definitely inadequate considering the
standard. In 5 years the value of production increased from
level of funding required to establish a truly integrated
¥8.5 billion to ¥175.8 billion. By the end of the 1965 financial
automotive industry estimated to require about US$20
year prices had reduced 29.4% lower than those of 1960.
in 24 years. If Nigeria must meet its target of becoming
In monetary terms the value of production quadrupled from
one of the 20 most industrialised countries in the world by
¥206.9 billion in FY 1961 to ¥833 billion in FY 1968 with a
the year 2020, it must urgently seek alternative source of
stable currency. Between 1961 to 1963 for instance, the
funding for this industry on whose part it must tread. At this
JDB and SBFC jointly provided 50% of their financing for
point it is perhaps necessary to take a cursory look at how
specified equipment used by the auto parts industry. The
other nations of the world have engaged this challenge.
cost of loans was severally reversed during the period such that by 1965 interest rate were 7.5% for an average loan
4. Strategies Adopted by some Countries to Develop Their Automotive Industries
period of 5-6 yrs as directed by the Ministry of Finance.
Most students of development economics agree that
4.2. South Korea
some form of government intervention in the financial
South Korea on account of its small domestic market
market is necessary to allocate resources in the form of
adopted an export oriented strategy within an industrial
loans, guarantees or interest rates subsidies to sectors that
and macroeconomic policy framework. Policy oriented
they may consider winners and which the market will not
loans therefore comprised about half of credit extended
ordinarily attend to because of factors bordering on risk
by the domestic financial market. The manufacturing
return trade-off. There are however those who would prefer
sector, especially automotive, received 46% of total bank
that credit decisions are best left to properly functioning
loans. Unlike in japan were credit policies depended on
markets but evidence from developing economies that
fiscal funds, the South Koreans depended heavily on
have attained admirable heights following policy based
central bank credit and deposit mobilised by DMBs. By
financing intervention abound.
controlling financing the South Korean government was effectively a risk partner with industrialists and motivated
4.1 Japan
their risk venture and entrepreneurship. In the same token
Post world war Japan established a policy based finance
they induced the industrialists to take the longer term
system by which funds were channelled to the private
business perspective. The risk partnership arising from the
sector through Fiscal Investment and Loan Programme
South Korean government’s implicit co-insurance scheme
(FILP) and the Japanese Industrial Bank. FILP account
with banks and industry enabled Korea to establish large
was established in tandem with overall general account
internationally competitive industrial firms within a short
whereby funding is allocated to meet national policy
period of time.
objective. By 1963. FILP was approximately 8% of GNP Japan rationalised its industry and strengthened the
5. Recommended Policy Based Finance Structure for the Nigeria Automotive Industry
capital accumulation necessary for rationalisation through
Given the success story of countries that have developed
Enterprise Rationalisation Promotion Law (ERPL)-1952.
through the varying mix of policy based financing,
and 50% of general account. Between 1945 and 1960
it
is
recommended
that
government
reinforces
its
A specific policy for fostering an infant automotive
commitment to this development strategy. I say reinforce
industry was equally put in place. In 1956 there was still
because the development history of Nigeria is replete
an imbalance between vehicle assembly plants and
with several attempts to adopt this policy as evidenced
components parts manufacture, therefore it passed the
in the establishment of institutions such as NIDB, NBCI,
law on Machine Industry Promotion law (MIPL). The law
NERFUND, NAC-ADF and some government guarantee
specified automotive parts as designated machinery and
schemes etc. The reason why they have not led to the
gave the Automotive Parts Sub- Committee the powers
expected outcome are extensive and debatable but be
to select the most important and essential parts to be
assured that most have been considered in making the
targeted. The law was aimed at lower costs and improving
following recommendation:
quality by modernising plant and equipment. The price