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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

produce a National Automotive Policy. The draft policy received Presidential approval and Transitional Council

Introduction

endorsement on the 30th of December 1992 and 10th of

The Automotive Industry constitutes a very potent force

August 1993 respectively and the formal launch took place

in the socio-economic development of a country. The

on the 23rd August 1993.

vital contributions made by this industry led to the rapid

The thrust of the National Automotive Policy is to ensure the

transformation of the leading South East Asian economies

survival, growth and development of the Nigerian automotive

(South East Asian Tigers) from primary under-developed

industry using local human and material resources. This is

economies to world rated industrial giants, in the second

with a view to enhancing the industry’s contribution to the

half of twentieth (20th) century. This is widely recognized

national economy, especially in the areas of transportation

and well documented. The industry had earlier made

of people and goods. The elements of this objective include:

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

1.

reversal and privatized the assembly plants). The Nigerian automotive industry performed well, assembling vehicles

Provision of automotive vehicles for urban and rural areas

2.

with increasing local content until 1986, when its fortunes

Accelerated technological development of the Nigerian economy

began to slide, a trend that has continued since. The auto

3.

Increased employment opportunities for Nigeria

industry has continued to be undermined by a number of

4.

Conservation of scarce foreign exchange

inhibiting factors, which includes – lack of basic industrial

5.

Establishment of an integrated automotive industry in

infrastructure, high cost of industrial services, erratic supply and high cost of utilities, low tariffs on imported fully built

Nigeria 6.

units as well as inconsistency in government policy.

Standardisation and rationalization of the Nigerian automotive industry

7. The National Automotive Policy

Increase

private

sector

participation

in

the

establishment of the auto industry

The absence of a clear National policy for the sector was

8.

Technology acquisition

identified as the cause of its inability to adjust for survival

9.

Creating conducive operational environment

through

in the face of changing economic environments. Given this

the introduction of appropriate fiscal and monetary

consideration, the Government facilitated a stakeholder

incentives

meeting through a Standing Technical Committee on National Automotive Industry (STC on NAI) in 1992, to

The National Automotive Council

The National Automotive Council as a Parastatal of the

vii) The Federal Ministry of Commerce and Industry.

Federal Ministry of Commerce and Industry was established by Act 84, 1993 to implement the National Automotive

Governing Board Committees

Policy. The functions of the Council include the following:

The Governing Board of the Council has three standing Committees. They are:

(i) Regular study and review of the automotive parts/ components development industry in Nigeria;

1. Policy, Planning and Establishment Committee 2. Technical Committee

(ii) D  eveloping a local content programme specifying which

3. Finance and General Purpose Committee

component parts are to be continuously deleted from the

Structure of National Automotive Council

imported CKD’s (iii) R  ecommending incentives for ensuring compliance with approved local content programmes

The Secretariat of the Council is charged with the day-to- day administration of the council and is headed by the Director

(iv) Approve and recommend new models of vehicles

General. It is presently operating with three departments

envisaged for the Nigeria market to ensure model

namely: Administration, Finance and Accounts; Policy and

rationalization

Planning and Industrial Infrastructure which are headed by

(v) Inspection

and

other

quality

assurance

activities

Directors.

in factories, ports and roads in pursuance of other objectives specified above

Administration, Finance and Accounts

(vi) Regular evaluation of the pricing structure and quality

The department is responsible for providing and managing the

of the products of the Assembly Plants to ensure

human resources, handling all matters relating to appointments,

international competitiveness

promotions, discipline, training, staff welfare. Other functions

(vii) Forecast the demand and supply patterns for various types of automotive vehicles produced in Nigeria and

of the department include: management of funds; payment of staff salaries, allowances and other entitlements.

the basic raw materials (such as sheet metal alloy and special steel)

Policy and Planning Department

(viii) Regular review of the penalties to be imposed for

The department is responsible for planning, implementation

non-compliance with the guidelines and programmes

and evaluation of the council’s programmes; UNIDO matters,

specified by it.

procurement operations, project monitoring, generates statistical data, conduct industrial and sectoral studies.

Vision: To facilitate the production of components and vehicles of international standard at competitive prices by

Industrial Infrastructure Department

the Nigerian automotive industry.

The department is charged with the coordination and implementation of policies to promote the development of

Mission: To ensure the survival, growth and integrated

local components and parts, monitoring of the local content

development of the Nigerian automotive industry using local

deletion programme of auto component, identification and

human and material resources.

classification of components and parts for standardization.

Organisational Structure Automotive Council

of

the

National

Funding The Act establishing the council provided for the

The Council is made up of the Governing Board, its

establishment of a fund which consists of a 2% levy on the

Committees and the Council Secretariat. Membership of

cost, insurance and freight (CIF) value of all imported fully

the Governing Board is drawn from relevant agencies and

built units (FBU), auto components, spare parts, completely

comprises representatives of the following:

knocked down (CKD) and raw materials imported for the

i) Nigerian Automotive Manufacturers Association (NAMA)

automotive sub-sector. The fund is meant purely for the

ii) Automobile Local Content Manufacturers Association of

administration of the council, staff training, direct intervention

Nigeria (ALCMAN)

in the sector in form of soft loans and research. Collection

iii) S  tandards Organisation of Nigeria (SON)

of the levy started in November 1994 and was stopped in

iv) Raw Materials Research and Development Council

May 2007. Total amount in the fund on the 31st December,

(RMRDC)

2009 is in excess of N15 billion which is being managed by

v) Manufacturers Association of Nigeria (MAN)

Bank of Industry (BOI) under the managed fund agreement

vi)Nigerian Society of Engineers (NSE)

whereby NAC continues to meet its budgetary requirement.

Programmes and Projects (i) NAC – Automotive Development Fund (NAC-ADF)

Production of Auto Lubricating Grease of Various Grades

A major factor that inhibited the development of the

from Petroleum Oils, Hexose Cassava and Saponification

sub-sector was the absence of long-term funds at

Materials” with N 4.00 million

concessionary interest rates. NAC- ADF has substantially addressed this issue with the funding of 27 projects out

(iii) Local Content Development Programme

of 70 applications received to date. Total disbursement

Automotive manufacturers produce about 30% of nearly

as at 31st July, 2010 stood at N9.9 billion.

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) H as commissioned the production of project profiles for some bicycle, motorcycle and vehicle parts (ii) D eveloped 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

To ensure the safety and health of Nigerians

(ii) Specialised Auto Industry Research Fund

To develop local automotive content

The council supports R&D work aimed at advancing the

To ensure the good operation and maintenance of

frontiers of technological development in the sub-sector. A project, “The Developent of Production Tools for the

Nigerian vehicles •

To obtain capability to conduct homologation tests

Commercial Production of 3HP Petrol engine” submitted by Prof. A. O. A. Ibhadode, University of Benin, Benin City

The feasibility study for the establishment of the test

has been funded with N3,335,850.00 (three million, three

centre has been concluded, and preliminary activities for

hundred and thirty five thousand, eight hundred and fifty

its establishment have started.

naira only) and Berekotry Industries Nigeria Ltd. project“

(v) Capacity Building in the Repairs and Maintenance of

Automobiles inNigeria

to aid policy initiation, formulation, implementation and to

The council in its efforts at capacity building in the

assist prospective investors in their investment decisions.

repairs and maintenance of new generation vehicles has,

It has therefore developed an internet based platform to

in collaboration with other stakeholders carried out the

capture data from 18 data sources including that of all

following:

vehicles registered in Nigeria, automotive components

manufacturers, assembly plants, car dealership etc...

(i) D eveloped a curriculum and training manual for teaching automotive mechatronics in the informal

Conclusions

sector

With the anticipated conclusion of the merger of the

(ii) Acquired mechatronics diagnostic equipment and tools for training Nigerian auto technicians.

National Automotive Council (NAC) and the Centre for

Automotive

Design

and

Development

(CADD)

plus the long term plan for the automotive industry in (vi) Campaign for Patronage of Made in Nigeria Automotive

2010, the Council will develop synergy to actualize the

Products

implementation of the National Automotive Policy. In

The council has intensified the campaign for the

addition, the establishment of the Automobile Test Centre

patronage of local automotive products to shore up

will be pursued to enable complete testing of vehicle

capacity utilization, local content development and

parts and promote the production of globally competitive

employment generation.

automotive products to sustain domestic demand and take advantage of export opportunities.

(vii) Industrial Environment Surveys and Sector Studies The council in its drive to attract Foreign Direct Investment

The Council will continue to pursue its programmes and

(FDI) into the Nigerian auto industry concluded preliminary

projects with a view to realizing the potential gains of

work towards undertaking a national survey of consumer

the automotive sector to the Nigerian economy. These

preference profile for automobiles in Nigeria. This has

include:

remained an essential request by potential investors in the Nigerian automotive industry for years.

Large scale employment generation Acquisition of technological know-how

(viii) National Automotive Data Base

Effective utilization of local raw materials and resources

The council places premium on reliable and timely data

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 capacity to produce these, but locally produced

The automotive industry in Nigeria has tremendous

units average only 20 percent in the motorcycle industry

opportunities in the manufacture of vehicles, spare parts

and 40 percent in the bicycle industry. The Nigerian

and components. This paper looks at the auto industry in

Government aims to encourage the increased local

Nigeria, the potential areas of investment, the incentives

content in motorcycles to 50 percent and in bicycles

available to investors in the sub-sector and the raw

to 100 percent by the end of 2011. This requires new

materials and manpower situation.

investment to produce the needed components and spare parts.

The Automotive Industry in Nigeria The automotive industry in Nigeria is over three decades

Investment Opportunities

old and has the capacity to produce 108,000 cars as well as 56,000 commercial vehicles, 6,000 tractors, 1.2

Investment opportunities in the manufacture of vehicles

million motorcycles and a million bicycles annually. There

The high demand for used vehicles translates into a

are over 50 auto-component manufacturers, some of

need for new investment in the manufacture of low cost

which are original equipment manufacturers, with others

vehicles. A low cost utility vehicle would service the

supplying the after-sales market. Capacity utilisation in

needs of the majority of Nigerians who live in the rural

the sub-sector, which was 90 percent in 1981, currently

areas. There are facilities already in the country for the

stands at only at ten percent in automotive assembly and

assembly of cars and light commercial vehicles. Most

40 percent in components manufacture.

of these facilities are currently under utilized and could be used by potential entrepreneurs. There are also well

Demand and Supply of Vehicle and Spares

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

Investment opportunities in the manufacture of auto

and 100,000 for used vehicles. Over five million vehicles

components and spares

are registered in the country, the majority of which

The

are pre-owned and would therefore require frequent

manufacturing and sub-assembly plants that are fed

maintenance. This translates to a heavy demand for

by heavy engineering industries. These include casting,

spares and components. Other West African countries

forging, presswork, plastic moulding, heat treatment,

also provide a ready market, which is already exploited

surface treatment and machining. Considering that about

by some Nigerian component manufacturers.

70 percent of over five million vehicles plying our roads

automotive

parts

industry

consists

of

many

were bought as used vehicles, there is a vast scope for the Motorcycles and Bicycles

manufacture of servicing and replacement parts. Other

The estimated annual demand for motorcycles and

areas that need investment are in the establishment of

industries for making automotive components, like press

Raw Materials

shops, forge shops and precision machine shops.

The average vehicle has up to 2,000 parts made from

Investment Incentives

steel, cast iron, alloy steel, copper, tin aluminium, wood,

In addition to the general incentives available to investors,

glass leather and plastics. The Aladja Steel Company

there are others that are specific for the automotive

produces steel billets, rods and angles. The Ajaokuta

industry:

Steel Company, when completed, would produce steel sheets, pig iron and alloy steel. The Eleme Petrochemical

1. Import duty for ‘Complete Knock Down’ vehicle

Complex produces polypropylene, polyethylene, ethylene

assembly is 5 percent, while that for fully built units

and propylene. The Aluminium Smelter Company

is 20 percent

produces aluminium ingots. Though some raw materials

2. The Nigerian Government has mandated all its

would still need to be imported, the low labour costs in

ministries, agencies and parastatals to patronise the

the country enable even factories with 100 percent of

products of local automotive assembly plants

imported raw materials to be economically viable.

3. The National Automotive Council has established an Auto Development Fund to provide soft loans for

Manpower

industries that will produce auto parts

There

are

many

technical

schools,

polytechnics

4. The automotive industry has the status of a ‘pioneer

and universities in Nigeria that produce craftsmen,

industry’, which grants a five year tax holiday

technicians, technologists and engineers of the highest

anywhere in the country and seven year tax holiday

calibre. The various motor assembly plants, foundries,

in any economically disadvantaged local government

steel plants and existing auto parts manufacturers have,

area

over the years, trained many Nigerian in various aspects

5. Up to 120 percent of expenses on Research and

of engineering, design, manufacture and management.

Development is tax deductible. For ‘R&D’ on local

Conclusion

raw materials, 140 percent is allowed 6. Industrial establishments that have in-plant training

The Nigerian automotive industry offers significant

facilities enjoy a two percent tax concession for a

investment opportunities in the manufacture of vehicles,

period of 5 years

motorcycles and bicycles, their components and spares.

7. 20 percent of investment in infrastructure (such as roads, water and electricity) is tax deductible

needs to ensure that more components are produced

8. Industries in economically disadvantaged areas would

enjoy

an

additional

5

percent

This is particularly true where the federal Government

capital

depreciation allowance, over and above the initial

locally. Nigeria also has the vast potential to become the leading vehicle manufacturing centre for the Economic Community of West African States (ECOWAS).

allowance 9. Industries with high labour to capital ratios are entitled

to

the

following

concessions:

Those

For further information contact:

employing 1,000 people or more will enjoy a 15

The Director-General

percent tax concession, those employing 200 or

National Automotive Council

more will have a 7 percent tax concession and those employing 100 persons or more have a 6 percent tax

23, Parakou Crescent

concession

Off Aminu Kano Crescent, Wuse II

10. Engineering industries with high ‘local value added’

P.M.B 320, Garki, Abuja.

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

Tel: +234 (0) 707 220 6911-3 E-mail: a minujalal@yahoo.com aminujalal@nac.gov.ng luqmanmamudu@yahoo.co.uk

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

www.nac.gov.ng

CREDITS Editor Sylvia Powell for Henley Media Group Ltd.


The National Automotive Council, Nigeria