CEO of Autogig International Resources Limited, Tope Ojo, tells JUSTICE OKAMGBA that the new auto policy, which is yet to be passed into law, must prioritise local production of car parts
How would you assess the current state of the Nigerian automotive industry?
The industry is loaded with lots of potential but dealing with a lot of challenges. It has been experiencing a lack of direction for years. There is also limited awareness among Nigerians concerning the true potential of the industry.
Our policies for development are not speaking to each other; they do not align with other aiding policies. If you want to drive an automobile sector in the country, you do not need policies that will rival or limit the industry.
We have seen a situation where some policies were jettisoned just to push another industry entirely. The industry has the capacity for employment, increasing the GDP of the country.
Interestingly, Nigerians consume automobile products in large quantities. Unfortunately, we depend majorly on importation. The tokunbo vehicles, the new vehicles and even down spare parts markets are all imported. We just need to start location production of spare parts in Nigeria.
I have been in this industry for close to two decades. When I saw the National Automotive Industry Development Plan, I felt like there were a lot of opportunities in this space and what we could do to assist the sector. It is one of the major reasons I started Autogig.
Do you think Nigeria’s automotive policy will address the critical issues affecting the sector?
The auto policy (2014- 2024) is too ambiguous, which is why we could not get something from it. There is another one (updated policy) that is being rolled out. And if you analyse the previous one, you will discover that there is not much difference.
The policy states that if you bring in a completely knocked-down (CKD) vehicle, you pay import duty. If you import a semi-knocked-down (SKD) vehicle, you pay five per cent. If you bring in a completely built-in vehicle, you pay 70 per cent. At some point, the government was just focusing on the 70 per cent they get.
Again, the people who have licenses to assemble cars that claim to be doing SKD are just bringing in vehicles, probably removing the other parts and assembling them here. That is one of the reasons we need to move from SKD to CKD. Under the SKD, we have two disassembled knock-downs and medium knock-downs.
What we have here is the former, meaning these vehicles have been built somewhere else and some components parts are removed and shipped to Nigeria. The latter means the vehicle does not have to be fully built in another country. So, the automobile company will just have to get it shipped to Nigeria, and then people who can supply the engine and other parts can do the supply. You are building more supply chains with this. There are a lot of lessons to learn, lots of jobs to create, etc.
It is not just about bringing vehicles cheaper and selling them; it is about how it affects the industry. The government should not also feel relaxed because they are just okay with getting the duties from the importers. Whatever 70 per cent they are getting now cannot be up to 10 per cent of what they will get from a booming automobile sector.
We can also focus on the semi-knocked-down spare parts instead of vehicles. I have taken time to see most of the locally assembled vehicles, and most of them come in the components from the same manufacturer.
We still have the same thing with tokunbo cars that are using the same parts from the same company. What stops us from asking them to come set up their plants here and manufacture their car parts? It will be easier for local manufacturers to buy from them.
How do we develop the local manufacturing sector?
There is also another aspect that Nigeria is not exploring. Here, when your alternator is bad, you throw it away and buy another one. When your compressor is bad, you buy another one, whereas these parts can be rebuilt. In fact, one of our plans for this year is to train about 400 people for free on how to rebuild these parts. We have developed the capacity to do so. Now, imagine having these plants here, it will take care of accessory repairs. Why can’t we develop capacity for this?
Let’s imagine having local assemblers produce 40,000 to 50,000 cars in Nigeria in a year. Let’s say those vehicles have one alternator and one compressor. But for tokunbo cars that are still below 10 years old that are shipped into the country would be about five times the number of new vehicles that are assembled here. They also come with those components. For them, it is a replacement part. We have to go beyond assembling vehicles in Nigeria. We need to look at the whole value chain.
In every policy, there should be written goals and step-by-step on how to achieve them. I was opportune to see the UK’s policy on electric vehicles because it states clearly how to get it achieved. The policy should have incorporated much more about vehicle ownership, and spare part development. The component development is what we need to take seriously. That is where the entire value chain is. If you know how to establish spare parts, you can easily improve it. You can’t grow if you just continue to assemble vehicles. These are some of the things that should be elaborately spelt out.
We need to encourage vehicle ownership and get the support of financial institutions. Do you know how many people will benefit from the value chain? That is a big market. It will drive employment, unlike a rail system that probably runs interstate. That’s why our policies need to be speaking to each other.
If you have a vibrant automobile industry, every other sector will fall in line. A vehicle has at least 2,000 components. You can see the different chains. By the time you develop industries for some of these car parts, you will have driven the industrialisation we are clamouring for. It is also a sector that demands more on our forex yearly.
Is the Nigerian market ready for electric vehicles?
There are still lots of debates going on around this. Some big auto firms are building electric cars while some have not. I had the opportunity to speak with a senior executive in the US and I asked him which area of investment Toyota is focusing on looking at EVs, internal combustion engines, or hydro-powered vehicles. He just laughed and said they are not even sure of the future yet, but the development is just cutting across. They are increasing capacity for all segments. So, that tells you a lot.
The lithium you use to manufacture batteries for electric vehicles is mined somewhere, which is also causing some challenges. But for Nigeria’s auto market, it is not ready for EVs. We need to focus on our competitive advantage and not play second fiddle. There are factors to look at.
How many certified EV technicians do we have in the country? If you want to work on BMW vehicles, for example, you need to be BMW EV certified. To work on Ford, you have to be Ford certified. Our industry is still far behind in that space. We have lots of natural resources such as tin, and lithium that need to be harnessed. If you are not there, you are not there. Let us focus and master our competitive strength. It is better to harness it to develop our economy.
Whoever says he wants to develop EV will probably have buyers from somewhere else. But Nigeria is a funny market. I have seen a couple of Tesla vehicles here. Yes, there will be lots of campaigns for EVs maybe due to subsidy removal and all that.
What is the current demand for automotive skills in the sector?
The gap in terms of skills needs serious attention. One of our cores is training. It is so expensive that an average Nigerian can’t afford it. That is why we have to seek grants and train for free. The industry needs well-trained professionals. A couple of technicians with secondary school qualifications got job offers in Canada and Germany.
Denmark as we speak is looking for mechanics. So, the demand is not only in Nigeria but globally. The biggest issue is seeing mechanics as a profession for low lives. So, that perception has affected the psyche of the people. We need to start making vocational skills a big deal. We need to develop our mechanics as world-class.
How can the country do to reduce the importation of fairly used vehicles?
It is just our desire for luxury cars here. People prefer to buy a luxury car that is 10 years old rather than a new car that is not luxurious. When you have many people with this thought, there will always be a market for it and the importation will continue. The reality of the exchange rate is now having a rethink. It is now more expensive.
Clearing costs within the last one year have increased by over 80 per cent. So, it is not even helping the situation. As long as we have more imported used vehicles, which has made vehicle ownership simpler, it will be difficult for demand for new vehicles to thrive until we find a way to encourage vehicle ownership for new vehicles.
How can the industry take advantage of the African Continental Free Trade Area?
The AfCFTA was borne out of the desire of African states to foster intra-African trade and blur certain trade barriers that have over the years inhibited the smooth flow of business transactions across different countries within Africa.
Kenya and Ghana have started the test run of that agreement. A battery manufacturing company in Kenya shipped its battery to Ghana, that same battery can be shipped to Nigeria. We just need to be deliberate and position ourselves to take advantage of the agreement.
We are a lot more advanced than many African countries but we don’t just do what we need to do. That is why I said our policies must be speaking to each other.
