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 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 industryâ€™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 Nigeriaâ€™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 â€“ 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 CKDâ€™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 councilâ€™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 Nigeriaâ€™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 firstname.lastname@example.org email@example.com firstname.lastname@example.org 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.