Cartel frustrating Nigeria’s auto policy – NAMA Executive Director, Olaofe

 

Mr Remi Olaofe is the Executive Director, Nigerian Automotive Manufacturers Association (NAMA). He speaks with the Nigeria Auto Journal’s team on the auto policy, the impediments and how the nation can achieve a viable and sustainable auto industry

What is your view on the failure of President Buhari to sign the Auto Bill and returning it to the National Assembly for review?

I think the issue of Auto Bill has been over-flogged.
Some people don’t even know that we don’t have Auto Bill. This is because some elements of the Auto Bill are already being implemented. For example, it says we would license some assembly plants to encourage them to assemble vehicles in Nigeria; we would give them XYZ concessions. At the onset, they would bring in one Fully Built Unit (FBU) and they would be allowed to bring in this number of Semi Knocked Down (SKD) vehicles. It happened. We would tell Bank of Industry (BoI) to extend some facilities to some of them. Based on the National Automotive Industry Development Plan (NAIDP), such facilities were granted. There would be tax concessions; training facilities, emission centres and all those things.

The National Automotive Design and Development Council (NADDC) did that and those facilities were set up. The government would support the local assemblers and the Vice President, Prof Yemi Osinbajo, gave an Executive Order to support local assembly products. We are all in this country and we are aware that the implementation could be a big question. Of all these things that we have raised, you could have a challenge of implementation. The issue is what exactly do you want to achieve with auto policy? What is delaying our celebrating the auto policy, that is devoid of any disguise? The only thing that is delaying the real auto policy is lack of political power. There must be a commitment by the government. That commitment will only be derived from their appreciation of what that policy seeks to achieve. It does not augur well if we say that we are having an auto policy and all we are doing is just on paper. We must look at the macro implications of the auto policy. Is it just to make some people rich? We import vehicles and figures are being lost. Don’t let anybody deceive you with data because data must be derived from source. But the kind of figures we have from Customs, NADDC, assemblers, importers are quite different. That makes it very difficult for us to work with any figure. But the fact remains that the population of this country is not what anybody globally can take for granted. You can’t discuss Africa without Nigeria. If you now recognise Nigeria as important and we know that volume of business that we are talking about in this automobile industry, I believe it is enough for government to look at it from that perspective and put the necessary infrastructural framework in place for us to have this, which is what I believe auto policy should achieve. We are aware that President Jonathan approved this and the new government moved in. The issue was like that; it was already approved. Now, they said it would move from policy and that it has to be something with a legal backing. How long does it take to put a legal backing to anything? We have been on this. How many times do we even sit in the National Assembly, with the excuse of COVID-19? We don’t see it as a priority issue as far as I am concerned. The government of this country doesn’t see this auto policy as a thing of priority. We seem to continue to enjoy using our own scarce resources to support other economies to thrive, which is unfortunate. When you go into vehicle assembly, the stream of industries is unimaginable and you can’t just put a figure to it; from the person that makes the seat, mirror, steering, windscreen, tyres, brake pads, etc. There are many parts that you have in a single vehicle. What are we doing about it? Nothing. Last year, when the issue of Finance Bill came up, we met with the Minister of Industry, Trade and Investment, Otunba Niyi Adebayo, and he assured us that something would be done about it.

There are allegations that some people are frustrating the auto policy from being fully implemented. Do you share this view?

Absolutely; there a cartel. For every decision taken, there will always be pro and those against it. It favours some and it does not favour others. Some people don’t like it. I will say to you point blank that it is easier to trade than to manufacture. When you bring in your vehicle fully built, all you need is your showroom. You know the cost from the beginning in terms of clearing, duty, keeping it and the profit margin. You can’t do that in manufacturing because there, you have many things to contend with. For example, the personnel issue, raw materials, capital outlay, infrastructure and others. All these will go into assembling of a vehicle. But a vehicle that has already been assembled that you are just bringing in is different. So, will those people be happy with auto policy? The answer is capital no. Interestingly, these people are very strong; they have the wherewithal. Don’t forget that the people importing vehicles before are largely the ones going into vehicle assembly. So when they are having seven, eight, nine, ten lines of vehicles that they import, they are just using one line for the purpose of auto policy to assemble. And the assembly they are doing here is not the high-end of their products. It is the one that requires minimal resources to just test because nobody brings in money to any economy without being sure of the policy that supports and protects their investment. There is bound to be a cartel and we know the role they are playing.

Some auto assemblers are accused of short-changing government using the auto policy window by not paying the right duty on imported vehicles. How do you think this can be addressed?

The cartel we are talking about are not just those bringing in FBU. There is a different market, which is difficult to appraise. They are called the dealers of “Tokunbo” cars but when you see some so called Grade A Tokunbo, there is no difference between them and a brand new car; maybe because they have just done about 50 miles or 100 miles in America and they ship them to the country under various platforms. When those vehicles arrive in this country and when you open their bonnet, everything is intact. Nothing has been touched and some still have the nylon inside. These vehicles are classified as tokunbo cars but they are not. They are brand new vehicles. And that is the most difficult market. These people have guidelines that new vehicles must come into the country through company X. Now what they do in the US is that when they buy a new car, you drive it around to achieve a particular mileage. When you go to the history of that vehicle, you will notice that it was bought, parked and kept for some time and they ship it out. So they are called Tokunbo because it is not coming as brand new vehicles. But when they want to sell them, they don’t price it as Tokunbo. They price them as brand new vehicles because they know they are buying new cars. They are the people we are concerned with. There is no statistics. There is no barrier of entrance.

So we have a major issue as it relates to this category of people. What we could have done is for the government to be decisive. Government can decide to shut its borders to these vehicles. But in doing that, it must put certain infrastructure in place. The transport system must be okay and the assembly plants. You can give them specific models that they can manufacture or assemble. Let’s say 1.2-litre to 1.5-litre cars. And that is where the majority of our population is. How many Nigerians can afford a V8 vehicle? They will be very scanty. They want to have 1.2-litre to 1.6-litre cars. Let them produce these cars. Let the NADDC come up with a Nigerian design which we have asked for. Let them come up with a Nigerian design of vehicle specifying the kind of wheel, tyre and rim so that whoever that is manufacturing the equipment can have the full advantage of economy of scale.

What is your view on the recent slash in import duty on Tokunbo vehicles?

The issue of the Finance Bill is rather unfortunate. We did everything as NAMA working with the NADDC up to the minister’s level to let them know that these things would not address what they claim to address. We engaged a consultant to go out there and bring the take off of that Finance Bill. What was the cost of intra and inter transportation? What does it cost to take a cab from CMS to Orile or to Mile 2? We asked the cost now; in three months and six months after. What was the cost of travelling from here to Abuja and Onitsha prior to the Finance Bill? If the core objective of the Finance Bill is to lower the cost of transportation, has that really materialised? The answer is no. So, it is a failure. If that is the whole idea of reducing duty to bring those vehicles, then it has failed. There are so many variables that interplay for you to agree on what is the cost of transportation – the state of our roads; the cost spare parts; security in the system and the cost of fuelling the vehicles. So what has happened? The cost of transportation remains very high. The reduction in duty of vehicles was very political. It was not properly thought out and it was rushed into. What data informed the decision they took?

What input did NAMA make to the reviewed auto bill after it was returned to the NASS from the President?

Chairman of NAMA is on the board of the NADDC. We have other members representing spare parts and other sectors. When this came up, it gave us the opportunity to listen to some of our members. We tried to find out their agitations and the shortcomings in the earlier arrangement. It was not so significant because when you go through that Auto Bill, there are minimal amendments coming into it; just the addition of some operators not properly captured before like the three-wheelers. We participated in the first draft of the bill and in the review. We were adequately represented via the NADDC platform on the modification that took place.

Is Nigerian auto industry truly ready for the opportunities in the AfCFTA?

We are currently going to be at a loss because we are not ready for it. When it was about to be signed, we suggested through the Manufacturers Association of Nigeria that we should have it on a segment basis. It was expected that some would start immediately and you would give some people two to three years to join. We pushed that time to allow automobile come in, in the second phase. What we had in mind was that the second phase would give us enough room. Unfortunately, we have been static. That would have given us enough room to move from SKD to CKD and let us provide requisite infrastructure like an industrial zone where we can have free trade zone; where we can have automobiles assembled; bring in the OEMs because they are not in yet. So, all these are not going to be to our advantage. In Ghana, people keep saying it. Nigeria is the source of auto bill in Ghana. Auto bill written here, packaged here was taken away by somebody and was taken by a country that knows what it wants to do. And it is already implemented. I know a number of major players in the automobile assembly in this country that are supposed to be in Nigeria but are now in Ghana. So we are creating an automobile hub in Ghana. And Ghana will now assemble vehicles and be shipping to Nigeria.

Nothing will go well without us coming together. A house that is divided cannot stand. The Nigerian auto assemblers need to come together. NAMA is supposed to be the platform to achieve that. But we understand that majority of them prefer to go their way. So, when everybody chooses to go individually to fight a course, they end up being taken advantage of. We are not speaking the same language. The voice lacks unity. And when the voice lacks unity, it will equally lack effectiveness. This is the core challenge we are facing. I sincerely pray that NAMA will come up to this realisation to occupy its rightful place and the members will see the need for them to play what they are supposed to play towards getting these things done.

-Nigeria Auto Journal, 2021.