Autos Production Adds To Diversification

As the re-calculating of Nigeria's GDP throws light on the diverse industries contributing to the economy, the roll-out of the first Nigerian-built Nissan Patrol emphasises the rise of manufacturing. Although intended to cut down on the country's considerable vehicle import bill, BMI sees the new Nigerian Automotive Industrial Development Plan (NAIDP) as a natural expansion of the manufacturing sector, which actually makes up a much bigger share of GDP than first estimated, at 6.8% of GDP in 2013, compared with the 1.9% shown in the old data ( see 'Larger, More Diversified Economy To Continue Robust Growth', April 9).

Although there has been vehicle assembly in Nigeria before, a lack of clear-cut policy and support for domestic manufacturing saw output collapse from 2003 onward with just a small number of low-volume operations still active. In this respect, the implementation of the new industry policy and the positive take-up by automakers can be seen as the real starting point for a national vehicle production industry.

Manufacturing On The Rise
Nigeria - Contribution Of Total Manufacturing To GDP (%)

That said, the previous wave of production in the country informed our view that the remaining few assemblers with facilities in the country would capitalise on the speed with which carmakers have sought to set up production operations. Nissan's partner Stallion Group is a prime example, partnering not only the Japanese firm but also Indian commercial vehicle manufacturer Ashok Leyland and South Korea's Hyundai Motor. This relationship has enabled Nissan to get its first model to market just seven months after the NAIDP was announced.

This is a marked contrast to some other projects announced more recently. Local firm Globe Motors Holdings Nigeria has reached an agreement with China's Higer Bus Company to establish a new USD120mn plant. However, it is estimated to take 18 months to come onstream. Among its competitors, Ashok Leyland already had two models assembled locally by Stallion on the market and its extended partnership will expand this range, while Nigerian firm Innoson Vehicle Manufacturing Company also produces domestically-designed buses.

According to the Director General of the National Automotive Council, Aminu Jalal, more than 10 carmakers have expressed an interest in establishing local production operations, including some who are returning to the country as a result of better government policy. This is also a good time to be supplying the market as a growing middle class has boosted demand for vehicles. BMI data shows car ownership has increased from 1.7 cars per 1,000 people to 6.9/1,000 in the decade from 2003 to 2013, and will top 9/1,000 by the end of our forecast period in 2018.

This has prompted the speed with which carmakers are addressing the market. Nissan says Nigeria is pivotal to its growth plan for the region, which envisages the brand's sales in Africa doubling by FY2016 from 110,000 units in FY2012. Nissan's head of the Sub-Saharan Africa region, Mike Whitfield also said the company wants to play its part 'in the economic growth of Nigeria and Africa', which underlines the importance of manufacturing in the increasingly diverse economy.

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Related sectors of this article: Autos, Production - Autos
Geography: Nigeria

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