Vehicle Production Plans Supported By Port Projects
As South Korean carmakers Hyundai Motor and Kia Motors join the list of companies planning vehicle production projects in Nigeria, BMI believes the work being carried out to tackle congestion at the main port terminals in Lagos is timely and will be supportive of the autos sector's increased trade activity. Hyundai has reportedly already commenced imports of semi knocked down kits for assembly, while it has also spoken of serving customers around Africa, which suggests possible export plans.
The government's Auto Policy ( see 'Automotive Policy Seeks To Lure First Movers', October 4 2013) has already attracted major carmakers such as Nissan Motor, which will begin production in April, and Ashok Leyland, which will expand its existing assembly agreement with local partner Stallion Group. However, given the ambition of the policy to create a new production hub, BMI has previously highlighted the country's transport network as a potential risk to fully achieving this aim, particularly if the industry is aiming to develop export capabilities ( see 'Transport Poses Risk To Nissan's Regional Strategy', October 10 2013).
However, another aim of the policy, according to the government, is to address the development of the industry with a 'holistic approach', which 'takes care of the entire automotive value chain', as stated by Nigeria's Minister of Industry, Trade and Investment, Olusegun Aganga. We believe the recent strategies introduced to increase the throughput of containers at the main Lagos ports will be an advantage as increased volumes of kits and components enter the country ( see 'NPA Tackling Port Congestion As Throughput Growth Continues' February 17).
|Autos Sector Will Drive Up Throughput|
|Port Of Lagos Throughout Tonnage And Vehicle Sales Growth|
Stallion, which has based its assembly plant in Lagos should be a key beneficiary of this work at its nearest port facilities. Having secured contracts with Nissan, Hyundai and Ashok Leyland, which is in line with BMI's view that it stands to be one of the biggest beneficiaries of the automotive policy as a firm with existing capacity, its proximity to the port will also be a plus.
BMI's Logistics Index, which is made up of scores for quality of transport network, trade procedures and governance, and market size and connectivity, sees Nigeria ranking below average for all components of the index. Its congestion issues are best highlighted by the time it takes for goods to move from a port to their import destination - it takes 39 days for imported containers to reach their destination. Despite the measures in place to ease congestion, we believe that actually being based in Lagos will help Stallion and its partners to cut down some of this delivery time.
In the longer term, however, BMI believes more needs to be done to fully alleviate congestion, as it remains an issue, and this could have an impact on carmakers that set up production operations in the country later on if first mover rivals are already importing kits and components and port capacity is still a problem. Another longer term risk comes from the underdeveloped inland transport network when the sector evolves to the point of becoming an export hub, which is an issue BMI has previously flagged as a threat to the country's hub potential ( see 'Nigeria: Assembly Potential To Create New Logistics Demands', July 11 2013).