A lack of proper enforcement and a culture of corruption at borders enables smugglers to sink Nigeria’s promising car hub dream, writes Dianna Games
Nigeria’s car industry is a good illustration of the embedded dysfunction of the country’s economy.
Policy interventions and incentives to date have not been sufficient for the sector to realise its potential. Despite some progress, the initiative has been undermined not only by the economic slump, but also by other problems that have dogged industrialisation for years, including smuggling across the country’s porous land borders.
The automotive sector was targeted by former president Goodluck Jonathan to drive industrialisation. Incentives were put in place to attract global car manufacturers to set up assembly operations in Nigeria as part of efforts to diversify the economy and reduce imports. It worked.
From 2014, big names such as Nissan, Ford and Renault began to import semiknocked-down kits for assembly in Nigeria with a view to full manufacturing down the line. Nissan planned to make Nigeria its Africa hub.
Analysts warned that SA’s manufacturing sector would eventually be overtaken by the giant of Africa.
In its carrot-and-stick approach, the government hiked tariffs on new car imports to 70% from 35%. This aimed to get Nigerians to buy cheaper, locally produced vehicles. The carrot was the fact that the manufacturers were household names. This would counter the Nigerian tendency to regard locally produced goods as inferior — a pervasive consumer attitude that has led to the country’s import dependency.
It was, some believed, a return to the 1960s when Nigeria last had a successful car industry. But it has not turned out that way. The new policy made all the right noises. But it was almost immediately undermined by smugglers bringing new and used cars to Nigeria from neighbouring Benin.
As tariffs rose in Nigeria, so the number of cars arriving at Cotonou’s port doubled. A lack of proper enforcement and a culture of corruption at borders and roadblocks along Nigeria’s highways have made smuggling easy. Thousands are employed in this enterprise; it represents entrenched interests.
The situation highlighted another longstanding problem – the inefficiency and high costs at Nigeria’s main port in Lagos. Even legitimate importers have found it was faster and cheaper to bring in cars via alternative routes.
More than 80% of vehicles arriving in nearby countries are destined for Nigeria. The aversion to Lagos has not only resulted in the diversion of imports for Nigeria and its landlocked neighbours to other countries’ ports, it has also affected the ability of new vehicle investors to timeously import kits and components. Surrounding countries have been eating Nigeria’s lunch.
In the past year, the economic climate has pushed up vehicles prices and pushed down demand. Imports have dropped 60% and vehicle sales in Nigeria about 50%.
In December, the cash-strapped government banned all vehicle imports across its land borders in an attempt to boost domestic port revenues.
It is also reviewing the tariffs, saying they are uncompetitive. The ban is contentious. It was recently rejected by the senate, which says it is affecting jobs and making life more difficult for ordinary Nigerians. Other critics say it will increase smuggling and corruption.
While it may have little control over the price of its key export — oil — many of Nigeria’s problems are homegrown. Years of neglecting official graft and failing to improve key areas relating to the country’s competitiveness and efficiency have led Nigeria here.
Even as the recession continues to bite, responses to challenges continue to be drastic and short-term, rather than part of a more nuanced and sustainable package of properly enforced interventions.