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That Pact With Volkswagen For Automobile Hub



As a way of boosting the nation’s fledgling automotive industry, the Federal Government has just signed a Memorandum of Understanding, MoU, with Volkswagen Group to develop an automobile hub in Nigeria.

The agreement specifies that Volkswagen is to implement a phased approach in relation to the assembly of vehicles, initially from assembly kits with the long-term view of establishing Nigeria as an automotive hub for the West Coast of Africa.

Interestingly, under the agreement, Volkswagen will establish a training academy in conjunction with the German government so as to develop the capacity of the initial employees.

Another fascinating aspect of the agreement is that the academy to be established will also provide broader technical training in automotive skills.

The pact also aims to provide for a comprehensive Volkswagen vehicle and service network to be developed in Nigeria, subject to commercial viability.

In 2017, Volkswagen sold around 10.8 million vehicles and generated about 231 billion euros in revenue. With an impressive performance like this, the decision to partner Volkswagen cannot be easily faulted as it couldn’t have come at a better time.

But then, there is no point reasserting the fact that if dutifully executed, the agreement will enable the automobile sector to achieve its potential of contributing to the development of the Nigerian economy.

All over the globe, the automotive industry plays strategic and catalytic role of strengthening  any economy and in Nigeria, the current administration’s diversification drive, which aims to reposition the economy away from an unhealthy dependence and reliance on oil, has a lot to tap from the agreement.

At the last count, it is estimated that Nigeria has no fewer than 11.7 million vehicles plying its roads. Sadly, none of this is manufactured locally, as the nation doesn’t have a manufacturing plant.

We recall that Peugeot Automobile Nigeria and Volkswagen Assembly plants, among others, used to be vibrant. But bad economic management by successive administrations  turned the hands of the clock and unfortunately converted Nigeria into a home and dumping ground for used and substandard vehicles.

With the benefit of hindsight, current efforts at turning the fortunes of the sector, if dutifully implemented, will change the narrative.

Good enough, the automobile firm has assured of its commitment to sticking to the terms and conditions of the agreement.

But more reassuring is the point raised by Enelamah who said: “We will meet our commitments and look forward to welcoming other Original Equipment Manufacturers interested in working with us to increase local production, local procurement, and exports.”

Certainly, as Africa’s largest economy and most populous country, Nigeria will offer not only a significant domestic market, but also the opportunity of a gateway to the West African market.

Indeed, the gains of this engagement to Nigeria cannot be overemphasised as it will ultimately provide opportunities for employment and boost the nation’s balance of trade.

While applauding government for this initiative, which ought to have come into effect long time ago, we wish to stress the need for parties to adhere strictly to the terms and conditions of the agreement for the mutual benefit of all.

But even as we laud the initiative, there is the need to take a critical look at the nation’s automotive policy, which is described by stakeholders as unstructured and incomplete.

The automotive policy was introduced in October 2013 by the GoodluckJonathan administration to revive the ailing auto industry.

The objective of the policy was to encourage local manufacturing of vehicles and discourage importation of cars as well as gradually phase out used cars popularly known as ‘Tokunbo.’

However, stakeholders in the sector have argued that the policy is just one of a three-part approach to rekindling the auto industry, just as they expressed regret that the other initiatives like fiscal provisions and a support programme, have been neglected.

With this sheer neglect comes a missing link in the policy in spite of the good intentions of the federal government. Good enough, things appear to be changing for the better.

As at the last count, existing assembly plants like Peugeot Automobile Nigeria Limited (PAN), Innoson Vehicle Manufacturing Co. (IVM), Anambra Motor Manufacturing Company (ANAMMCO) and Leyland-Busanhave started assembling new products and new ones have been established.

However, government must move steps further by ensuring dutiful implementation of the recovery and growth plan.

As far as the implementation of the plan in the automobile sector is concerned, there is the need to take another look at vehicle financing by banks.

It is estimated that less than 10 of the nation’s 27 banks offer vehicle financing with conditions that make it practically impossible for salary earners to access the loans.

Consequent upon this, individuals and companies turn to the cheaper vehicle market, the used vehicle market, or the smuggled vehicle market.

It is worrisome that at 58, Nigeria still does not manufacture, but barely assemble and most of the finance and technology is foreign.

We share the views of critical stakeholders that as a sector responsible for over 90 per cent of passenger and freight movement, government needs to accord top most priority to the automobile sector.