The National Automotive Council, Nigeria
The National Automotive Council Nigeria
THE NATIONAL AUTOMOTIVE COUNCIL NIGERIA (NAC) Published by Henley Media Group Ltd in association with the Commonwealth Secretariat The National Automotive Council Establishment of the National Automotive Council Introduction The Automotive Industry constitutes a very potent force in the socio-economic development of a country. The vital contributions made by this industry led to the rapid transformation of the leading South East Asian economies (South East Asian Tigers) from primary under-developed economies to world rated industrial giants, in the second half of twentieth (20th) century. This is widely recognized and well documented. The industry had earlier made significant contributions to the industrial development of developed economies. In Nigeria the auto industry dates back to the early 1960s when private sector initiatives pioneered the establishment of auto assembly plants. The pioneering efforts included those of UAC, Leventis, SCOA, BEWAC and R.T. Briscoe. In the 1970s, the Federal Government became involved in the auto industry, with the establishment of two cars and four truck assembly plants. Government involvement was based on its desire to fast-track Nigeria's industrial development and to control the strategic sectors of the economy (the Federal Government has since made a reversal and privatized the assembly plants). The Nigerian automotive industry performed well, assembling vehicles with increasing local content until 1986, when its fortunes began to slide, a trend that has continued since. The auto industry has continued to be undermined by a number of inhibiting factors, which includes � lack of basic industrial infrastructure, high cost of industrial services, erratic supply and high cost of utilities, low tariffs on imported fully built units as well as inconsistency in government policy. 7. The National Automotive Policy The absence of a clear National policy for the sector was identified as the cause of its inability to adjust for survival in the face of changing economic environments. Given this consideration, the Government facilitated a stakeholder meeting through a Standing Technical Committee on National Automotive Industry (STC on NAI) in 1992, to 8. 9. 6. 3. 4. 5. 2. 1. Provision of automotive vehicles for urban and rural areas Accelerated technological development of the Nigerian economy Increased employment opportunities for Nigeria Conservation of scarce foreign exchange Establishment of an integrated automotive industry in Nigeria Standardisation and rationalization of the Nigerian automotive industry Increase private sector participation in the establishment of the auto industry Technology acquisition Creating conducive operational environment incentives through the introduction of appropriate fiscal and monetary produce a National Automotive Policy. The draft policy received Presidential approval and Transitional Council endorsement on the 30th of December 1992 and 10th of August 1993 respectively and the formal launch took place on the 23rd August 1993. The thrust of the National Automotive Policy is to ensure the survival, growth and development of the Nigerian automotive industry using local human and material resources. This is with a view to enhancing the industry's contribution to the national economy, especially in the areas of transportation of people and goods. The elements of this objective include: The National Automotive Council The National Automotive Council as a Parastatal of the Federal Ministry of Commerce and Industry was established by Act 84, 1993 to implement the National Automotive Policy. The functions of the Council include the following: (i) Regular study and review of the automotive parts/ components development industry in Nigeria; (ii) Developing a local content programme specifying which component parts are to be continuously deleted from the imported CKD's (iii) Recommending incentives for ensuring compliance with approved local content programmes (iv) Approve and recommend new models of vehicles envisaged for the Nigeria market to ensure model rationalization (v) Inspection and other quality assurance activities in factories, ports and roads in pursuance of other objectives specified above (vi) Regular evaluation of the pricing structure and quality of the products of the Assembly Plants to ensure international competitiveness (vii) Forecast the demand and supply patterns for various types of automotive vehicles produced in Nigeria and the basic raw materials (such as sheet metal alloy and special steel) (viii) Regular review of the penalties to be imposed for non-compliance with the guidelines and programmes specified by it. Vision: To facilitate the production of components and vehicles of international standard at competitive prices by the Nigerian automotive industry. Mission: To ensure the survival, growth and integrated development of the Nigerian automotive industry using local human and material resources. vii) The Federal Ministry of Commerce and Industry. Governing Board Committees The Governing Board of the Council has three standing Committees. They are: 1. Policy, Planning and Establishment Committee 2. Technical Committee 3. Finance and General Purpose Committee Structure of National Automotive Council The Secretariat of the Council is charged with the day-to- day administration of the council and is headed by the Director General. It is presently operating with three departments namely: Administration, Finance and Accounts; Policy and Planning and Industrial Infrastructure which are headed by Directors. Administration, Finance and Accounts The department is responsible for providing and managing the human resources, handling all matters relating to appointments, promotions, discipline, training, staff welfare. Other functions of the department include: management of funds; payment of staff salaries, allowances and other entitlements. Policy and Planning Department The department is responsible for planning, implementation and evaluation of the council's programmes; UNIDO matters, procurement operations, project monitoring, generates statistical data, conduct industrial and sectoral studies. Industrial Infrastructure Department The department is charged with the coordination and implementation of policies to promote the development of local components and parts, monitoring of the local content deletion programme of auto component, identification and classification of components and parts for standardization. Organisational Structure Automotive Council of the National Funding The Act establishing the council provided for the establishment of a fund which consists of a 2% levy on the cost, insurance and freight (CIF) value of all imported fully built units (FBU), auto components, spare parts, completely knocked down (CKD) and raw materials imported for the automotive sub-sector. The fund is meant purely for the administration of the council, staff training, direct intervention in the sector in form of soft loans and research. Collection of the levy started in November 1994 and was stopped in May 2007. Total amount in the fund on the 31st December, 2009 is in excess of N15 billion which is being managed by Bank of Industry (BOI) under the managed fund agreement whereby NAC continues to meet its budgetary requirement. The Council is made up of the Governing Board, its Committees and the Council Secretariat. Membership of the Governing Board is drawn from relevant agencies and comprises representatives of the following: i) Nigerian Automotive Manufacturers Association (NAMA) ii) Automobile Local Content Manufacturers Association of Nigeria (ALCMAN) iii) Standards Organisation of Nigeria (SON) iv) Raw Materials Research and Development Council (RMRDC) v) Manufacturers Association of Nigeria (MAN) vi) Nigerian Society of Engineers (NSE) Programmes and Projects (i) NAC � Automotive Development Fund (NAC-ADF) A major factor that inhibited the development of the sub-sector was the absence of long-term funds at concessionary interest rates. NAC- ADF has substantially addressed this issue with the funding of 27 projects out of 70 applications received to date. Total disbursement as at 31st July, 2010 stood at N9.9 billion. (iii) Local Content Development Programme Automotive manufacturers produce about 30% of nearly 2,000 parts in a typical car, the rest they purchase from small and medium industries. This will result in huge employment opportunities and acquisition of technology. Local manufacturers have the capacity to meet the demand by both local and foreign assemblers. Accordingly the council: (i) Has commissioned the production of project profiles for some bicycle, motorcycle and vehicle parts (ii) Developed import deletion programmes for bicycles and motorcycles (iii) Is developing capacity for computer aided design (CAD), engineering (CAE) and manufacture (CAM) (iv) Is providing soft loans for the production of auto parts and components (v) Is providing research and development grant to develop auto parts and components. (iv) Establishment of an Automotive Test Centre NAC want to establish a test centre to achieve the following objectives: � Flickr/Ashley Palmero Production of Auto Lubricating Grease of Various Grades from Petroleum Oils, Hexose Cassava and Saponification Materials" with N 4.00 million � (ii) Specialised Auto Industry Research Fund The council supports R&D work aimed at advancing the frontiers of technological development in the sub-sector. A project, "The Developent of Production Tools for the Commercial Production of 3HP Petrol engine" submitted by Prof. A. O. A. Ibhadode, University of Benin, Benin City has been funded with N3,335,850.00 (three million, three hundred and thirty five thousand, eight hundred and fifty naira only) and Berekotry Industries Nigeria Ltd. project" � � � To ensure the safety and health of Nigerians To develop local automotive content To ensure the good operation and maintenance of Nigerian vehicles To obtain capability to conduct homologation tests The feasibility study for the establishment of the test centre has been concluded, and preliminary activities for its establishment have started. (v) Capacity Building in the Repairs and Maintenance of Automobiles inNigeria The council in its efforts at capacity building in the repairs and maintenance of new generation vehicles has, in collaboration with other stakeholders carried out the following: (i) Developed a curriculum and training manual for teaching automotive mechatronics in the informal sector (ii) Acquired mechatronics diagnostic equipment and tools for training Nigerian auto technicians. (vi) Campaign for Patronage of Made in Nigeria Automotive Products The council has intensified the campaign for the patronage of local automotive products to shore up capacity utilization, local content development and employment generation. (vii) Industrial Environment Surveys and Sector Studies The council in its drive to attract Foreign Direct Investment (FDI) into the Nigerian auto industry concluded preliminary work towards undertaking a national survey of consumer preference profile for automobiles in Nigeria. This has remained an essential request by potential investors in the Nigerian automotive industry for years. (viii) National Automotive Data Base The council places premium on reliable and timely data to aid policy initiation, formulation, implementation and to assist prospective investors in their investment decisions. It has therefore developed an internet based platform to capture data from 18 data sources including that of all vehicles registered in Nigeria, automotive components manufacturers, assembly plants, car dealership etc... Conclusions With the anticipated conclusion of the merger of the National Automotive Council (NAC) and the Centre for Automotive Design and Development (CADD) plus the long term plan for the automotive industry in 2010, the Council will develop synergy to actualize the implementation of the National Automotive Policy. In addition, the establishment of the Automobile Test Centre will be pursued to enable complete testing of vehicle parts and promote the production of globally competitive automotive products to sustain domestic demand and take advantage of export opportunities. The Council will continue to pursue its programmes and projects with a view to realizing the potential gains of the automotive sector to the Nigerian economy. These include: Large scale employment generation Acquisition of technological know-how Effective utilization of local raw materials and resources Foreign exchange savings and earnings Aminu Jalal Director-General National Automotive Council Investment Opportunities Within Nigeria's Automotive Industry bicycles is one million units of each. The country has Introduction The automotive industry in Nigeria has tremendous opportunities in the manufacture of vehicles, spare parts and components. This paper looks at the auto industry in Nigeria, the potential areas of investment, the incentives available to investors in the sub-sector and the raw materials and manpower situation. the capacity to produce these, but locally produced units average only 20 percent in the motorcycle industry and 40 percent in the bicycle industry. The Nigerian Government aims to encourage the increased local content in motorcycles to 50 percent and in bicycles to 100 percent by the end of 2011. This requires new investment to produce the needed components and spare parts. The Automotive Industry in Nigeria The automotive industry in Nigeria is over three decades old and has the capacity to produce 108,000 cars as well as 56,000 commercial vehicles, 6,000 tractors, 1.2 million motorcycles and a million bicycles annually. There are over 50 auto-component manufacturers, some of which are original equipment manufacturers, with others supplying the after-sales market. Capacity utilisation in the sub-sector, which was 90 percent in 1981, currently stands at only at ten percent in automotive assembly and 40 percent in components manufacture. Investment opportunities in the manufacture of vehicles The high demand for used vehicles translates into a need for new investment in the manufacture of low cost vehicles. A low cost utility vehicle would service the needs of the majority of Nigerians who live in the rural areas. There are facilities already in the country for the assembly of cars and light commercial vehicles. Most of these facilities are currently under utilized and could be used by potential entrepreneurs. There are also well established component suppliers who will supply many of the auto components required. Motor Vehicles The vehicle demand in Nigeria is about 75,000 for new and 100,000 for used vehicles. Over five million vehicles are registered in the country, the majority of which are pre-owned and would therefore require frequent maintenance. This translates to a heavy demand for spares and components. Other West African countries also provide a ready market, which is already exploited by some Nigerian component manufacturers. Motorcycles and Bicycles The estimated annual demand for motorcycles and Investment opportunities in the manufacture of auto components and spares The automotive parts industry consists of many manufacturing and sub-assembly plants that are fed by heavy engineering industries. These include casting, forging, presswork, plastic moulding, heat treatment, surface treatment and machining. Considering that about 70 percent of over five million vehicles plying our roads were bought as used vehicles, there is a vast scope for the manufacture of servicing and replacement parts. Other areas that need investment are in the establishment of Investment Opportunities Demand and Supply of Vehicle and Spares industries for making automotive components, like press shops, forge shops and precision machine shops. Raw Materials The average vehicle has up to 2,000 parts made from steel, cast iron, alloy steel, copper, tin aluminium, wood, glass leather and plastics. The Aladja Steel Company produces steel billets, rods and angles. The Ajaokuta Steel Company, when completed, would produce steel sheets, pig iron and alloy steel. The Eleme Petrochemical Complex produces polypropylene, polyethylene, ethylene and propylene. The Aluminium Smelter Company produces aluminium ingots. Though some raw materials would still need to be imported, the low labour costs in the country enable even factories with 100 percent of imported raw materials to be economically viable. Investment Incentives In addition to the general incentives available to investors, there are others that are specific for the automotive industry: 1. Import duty for `Complete Knock Down' vehicle assembly is 5 percent, while that for fully built units is 20 percent 2. The Nigerian Government has mandated all its ministries, agencies and parastatals to patronise the products of local automotive assembly plants 3. The National Automotive Council has established an Auto Development Fund to provide soft loans for industries that will produce auto parts 4. The automotive industry has the status of a `pioneer industry', which grants a five year tax holiday anywhere in the country and seven year tax holiday in any economically disadvantaged local government area 5. Up to 120 percent of expenses on Research and Development is tax deductible. For `R&D' on local raw materials, 140 percent is allowed 6. Industrial establishments that have in-plant training facilities enjoy a two percent tax concession for a period of 5 years 7. 8. 20 percent of investment in infrastructure (such as roads, water and electricity) is tax deductible Industries in economically disadvantaged areas would enjoy an additional 5 percent capital depreciation allowance, over and above the initial allowance 9. Industries with high labour to capital ratios are entitled to the following concessions: Those Manpower There are many technical schools, polytechnics and universities in Nigeria that produce craftsmen, technicians, technologists and engineers of the highest calibre. The various motor assembly plants, foundries, steel plants and existing auto parts manufacturers have, over the years, trained many Nigerian in various aspects of engineering, design, manufacture and management. Conclusion The Nigerian automotive industry offers significant investment opportunities in the manufacture of vehicles, motorcycles and bicycles, their components and spares. This is particularly true where the federal Government needs to ensure that more components are produced locally. Nigeria also has the vast potential to become the leading vehicle manufacturing centre for the Economic Community of West African States (ECOWAS). For further information contact: The Director-General National Automotive Council 23, Parakou Crescent Off Aminu Kano Crescent, Wuse II P.M.B 320, Garki, Abuja. Tel: +234 (0) 707 220 6911-3 E-mail: email@example.com firstname.lastname@example.org email@example.com www.nac.gov.ng employing 1,000 people or more will enjoy a 15 percent tax concession, those employing 200 or more will have a 7 percent tax concession and those employing 100 persons or more have a 6 percent tax concession 10. Engineering industries with high `local value added' will enjoy a 10 percent tax concession for 10 years 11. Expenses incurred on expansion, modernisation and/or diversification will attract allowances 12. Engineering industries using up to 60 percent local raw materials in their manufacturing process would attract a 20 percent tax credit for five years 13. The Federal Government has recently established a bank for the industry in order to provide long-term loans to industrial projects CREDITS Editor Sylvia Powell for Henley Media Group Ltd.