Aminu Jalal is the Director General of National Automotive Council. In this interview with ITUNU AJAYI of our Abuja Bureau, he discussed efforts being made to revive the nation’s automotive industry. Excerpts.THERE are three laboratories for testing of vehicles under construction in the country. What is their level of completion?
They are on the average about 90 per cent complete, that is, the actual construction. There are three laboratories, the first one is the emission test laboratory, being built in Ikorodu, Lagos State. This facility is important because when vehicle emission pollutes the air, it can cause serious health hazards due to such contents like carbon-dioxide, carbon-monoxide and nitrogen oxide. All these can lead to sicknesses like bronchitis and high blood pressure. That is why for a long time, many countries have regulated emission standards for vehicles and this started in the USA in the 1970s but many countries followed suit in the 1990s. For instance in Europe, they have what is called Euro1 which is 1992 standards. Right now, they are going to Euro six. In America, they have the equivalent standards which is to reduce emission for vehicles and these standards are backed by law in the sense that when you go for MOT test, the test they do is to ensure that your vehicle meets standards and if not, you have to go to a mechanic and get it fixed. And if such vehicle cannot be fixed, then you need to scrap it.
Road worthiness too is another key area but unfortunately, a lot of the vehicles that are brought into Nigeria cannot meet these standards because in Europe and America, you have to pay to scrap your vehicle and so people pay little money to buy such vehicles and import them into Nigeria. But I think last year, the Standards Organization of Nigeria (SON) has signed an agreement with some companies to ensure that all vehicles coming to Nigeria must have a certificate of road worthiness before they are allowed to come in, so that those vehicles that are not road worthy in their countries will not be able to come into Nigeria again.
We have developed our own emission standards for vehicles and it was equivalent to Euro II, which was 1996 standards in Europe. Now we are moving on to Euro III, which is 1998 standards. The reason we chose to lower the standards is that our fuel has too much sulphur to support Euro IV and V. The vehicles being brought into Nigeria have to be degraded because of the high concentration of sulphur in our fuel but we are working with SON and other relevant agencies to see that we reduce this sulphur content. We are working with NESREA on emission control. In fact, it was NESREA that set up the emission standards and we only developed it. The agency has a technical committee of which we are member and SON.
The other laboratory is the component testing laboratory in Enugu. It is for the testing of safety items like tyres, seat belts, glasses, brakes and all that.
Then in Zaria, we have the materials and vehicle evaluation laboratory.
So, the construction work in the laboratories is about 90 per cent complete and we hope that they would be completed by the middle of this year and then the equipment will come in.
We would soon ask government for approval on the equipment, due process has to be done before approval. What these laboratories will do is test both imported and vehicles manufactured in the country before they would be allowed into the market. The testing here in Nigeria will also improve and develop local content, boost employment and also save time and resources.
Now that the laboratories are not ready, how are the vehicles manufactured in Nigeria being tested.
For now, we accept the testing from the country of origin. Already we are working with SON, they have what we call SONCAP. Since we are yet to have testing facility for goods that come in, Nigeria has to rely on the test conducted by similar standards bodies in their own countries of origin. So, if they have this, we accept it. In fact, all over the world, standards bodies accept each other’s certifications. By the time our laboratories are ready, complete and working, the tests we do here will also be recognised by other accreditation bodies anywhere in the world. If our laboratories issue certification for export, nobody has to query such certificate overseas. One important reason why we need to test here is for us to do random testing of parts. For instance, someone may bring in a good part and test it but subsequently decide to bring in substandard ones, so what we do is that at intervals, we would buy parts in the market periodically and test them so that we can ensure compliance with standards and again those parts manufactured here too would be tested instead of relying on overseas facilities.
There is an issue out there that vehicles are only being assembled in Nigeria and not manufactured. Can you let us know the difference between assembled and manufactured ones, because what people are saying is that automobile companies only import parts and then couple them together here and then present such vehicles as made in Nigeria.
There is no difference. Vehicle manufacturing is also assembling. Let me explain. Right now, the major ones like Toyota, Ford, Honda and so on, do designs and assembling and testing. They only make about 30 percent of the parts, the rest they buy from other companies. That is why during the recall issue of airbags, all those companies that bought from the company had to recall when there was a fault. So, the companies do the designs, assembling and testing and provide after sales service. No single vehicle company can produce all its parts from start to finish and there are about 2000 components that make up a complete vehicle. That is why we want to encourage as many companies as possible, so that when the assembling companies are here, then we can develop local content. We have done it before and it can be achieved again. When the Peugeot 504 was here, they were able to achieve more than 40 per cent local content. The glasses, seats, carpets, batteries, radiators, wiring, bumpers, plastic parts and some others were produced locally; different companies were bringing these parts to Peugeot while they assembled. We are working to develop the local content now, we are working with investors to start assembling operations.
The components companies we had before had to close down when the assembly plants shut down as a result of unfavourable government policy. But now, we have started to discuss with them on how to improve their services in order to supply the assembly plants. The other one is to get those who are already supplying assembly plants overseas and encourage them to come and set up in Nigeria. It is easier. Part of the agreements signed in 1972 to set up Peugeot and Volkswagen was actually for the assembly plants to bring their suppliers to Nigeria so that they can supply them in the country. So, the assembly plants themselves would bring some of their suppliers because they don’t want their parts to be delayed or destroyed in the process of shipments, because in the case of broken parts like glasses for instance, such would have to be returned to wherever they were being brought from for replacement and it may take another three months for another one to arrive. But if you are getting supply for glasses say from Ibadan and there are broken ones, it would just take few hours or days to get another one, so the plants too don’t want long logistic chain because if something is missing or held up at the port, their production line is already affected. So, they would prefer to have all they need in Nigeria. Consequently, we are working round the clock to achieve this. Already, the India automotive procurement association has concluded plans to come to the country this year to meet our company manufacturers. They members would have come last year, but there was visa issue, so they could not come. We already have automotive operations in Ibadan, Lagos, Kaduna, Enugu, Anambra and Kano states, where we already have some ongoing works.
So, what is the percentage of local content now?
Like bus for instance, only the engine and chassis come in. The body is built here in Nigeria. So, the value added is about 40 to 50 per cent. So, it is building and not just simple assembling. Local content usually takes time, the policy of 1975 took about six years before 40 per cent local content could be achieved, because all these companies have to be set up. Somebody has to build the factory, bring equipment and start and that takes time. Some companies that closed down back then too have to be re-equipped. We are already talking to them. We are concentrating on the development of some plastic plants this year for the industry. Things like engine oil, paints can be sourced locally and of course, we are working to see that we lay the foundation now, so that other things will fall in place in the future.
It has to be stressed that these assembly plants only resumed in July last year. They are just about six months old. Before then, nobody was doing anything. We are hoping that more will start this year. Components companies will begin to set up the moment the assembly plants are on ground and they are sure of purchase of their components. So, developing local content is a gradual thing but we are hopeful that we can reach 40 per cent in the next five years.
What is the plan of your agency to ensure sourcing of materials locally?
For plastics, we have solved the problem already because we have Eleme Petrochemicals Company that would supply companies. The rest is iron and steel, which is a problem that can be surmounted. The Ajaokuta Steel Company only needs to be revived and put to use.
Some axillary companies like tyre manufacturers, left for Ghana due to the lowering of tariff on imported tyres back then. What is your agency doing to bring them back?
Tyres were being made in Nigeria from 1962 when Dunlop and Michelin set up their businesses. They had rubber plantations to supply the rubber and we were getting carbon black from the Warri refinery, which is one of the components. So, most of the things that were imported then were the steel, wire and a few chemicals, but the bulk of the materials were sourced locally. Unfortunately the tariff on imported tyres was reduced in 2005 and they couldn’t compete with tyres being imported, especially from China and India, considering that they had to rely on their own power generation during production, because any break in power supply would result in waste of the materials, so there must not be any break at all during production. You will recall that America raised tariff on Chinese tyres so that their indigenous companies could compete but in our own case, we lowered the tariff. What they are doing now is exporting the rubber from their plantations and then send tyres to us. We have interest to intervene but the difference with tyre is that setting up has to be done at once, unlike assembly plants that can afford gradual setting up. Currently, what is required to set up a tyre plant would not be less than $500 million. Seeing what our policy inconsistency caused them with the closing down and in less than 10 years, we are saying they should come back, they are afraid that what if they come with this kind of money and then we change the policy again. So, that is why we have some interests and that is why they are waiting to see what happens especially after the elections before they move in.
One of their major concerns now is power supply. They are demanding for a 24-hour uninterrupted power supply. Can Nigeria meet this demand?
They can generate their own power. Even before they left, I know they invested in gas generating plants especially Michelin. Yes, power is a challenge but we are confident that with time, things will normalise. The sector has been privatised and I am sure the same revolution experienced in the telecommunications sector will be replicated in the power sector too. Power requires a lot of investment and that is why we seem not to have noticed any change. They have to invest in new power plants, new generating and transmitting systems and that will take some time but we are on the right track and definitely, in the next two to three years, things would normalise. Don’t forget in the cement sector, in the last 10 years, we moved from two million tonnes to 40 million tonnes and in the meantime, those years witnessed power deterioration but we are able to do it and we are now exporting cement instead of importing. So, the power is what they would take into account in their business plans.
When is the South African bank coming in for the vehicle loan scheme and what is the arrangement? Does it mean Nigerians would be able to access loans in order to purchase vehicles?
They have already recruited people and have also rented offices and there are people already doing the groundwork. The challenge of the Ebola virus last year prevented them from coming but we are hoping that by April, they would be able to roll out. We have signed a MoU with the bank and there are people working on the take-off now. Yes, Nigerians would be able to access loans at a reasonable lending rate but we want to start with the formal sector.
Assembly plants are hiding under this policy to import used vehicles. What have you found out and what is the punishment for such activities?
For automobile dealers, they already know the tariff on used vehicles but with assembly plants bringing in semi knocked down (SKD) in order to evade tariff or bringing in CKD and claiming that they are spare parts , the Customs are already aware of that and they are working on it. There have always been some misinterpretations especially when a new policy comes into existence but we are meeting regularly with the Customs. We need to ensure that some people do not engage in sharp practices.
Another concern though on the larger scale is the exportation of crude and one of the major by-products of petroleum is plastic. Is it not an indictment on the government to continue to export crude when there is an automobile policy that requires plastic for survival.
Already, there is the Eleme petrochemical plant that is producing the plastics that can meet the requirement of the automobile plants. The Eleme plant has been privatized, so we expect optimum production. Yes, you are right that it is an indictment on Nigeria that we are exporting crude and importing finished products but you must have heard of Dangote’s plan to invest about $9 billion to set up a petrochemical company in Lagos where there would be refinery to refine our crude. Ideally we should not be exporting crude, we should be processing it here and adding value, then we can export to other countries. But with time, things are bound to change.
The auto policy have mainly two objectives, the first one is to bring back assembly companies and the second is to develop local content for these companies. The benefits to the Nigeria economy are many, of course, as it would create jobs and we would also save foreign exchange. It may be small initially but later, it would be a huge saving. Although, we cannot be self-sufficient in the automotive industry, no country is so. We would still continue to import some of the components. If we reach a point where half of the whole vehicle is made locally, the cost will definitely drop and money that should have been sent abroad will continue to circulate within Nigeria. This is a huge economic value to us. Vehicles and their spare parts are already the second largest users of foreign exchange, that is from the Bureau of Statistics, so if we can do something reduce the volume of foreign exchange required by developing local content, it would be to our own advantage and benefit and then we can export to other neighbouring countries.
Already the Proforce Armour Industries in Ogun State, which produces armoured vehicles has started exporting. Also, the vehicles are being used for peace operations in Sudan and the Central Africa Republic and the company has also exported to Rwanda. Innoson too is already exporting to Ghana. So, we can also earn foreign exchange. Normally the industries are in clusters in the sense that the central plant supplies the region. In Africa right now, we have two clusters- South Africa and Egypt. These are used to produce and sell to neighbouring countries. To a lesser extent, there is a smaller assembly operation in Kenya, which is also for Kenya’s use and the East Africa region. For West Africa, there is no assembly plant cluster. So, we can be the hub for vehicle manufacturing for our use and others. For instance, if Toyota is producing here and they want to sell to Ghana, it doesn’t make sense for them to send such vehicle from their plant in America. It’s just a matter of sending it from here.
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