‘How auto policy will boost GDP’

By IAfrica
In Nigeria
Aug 3rd, 2014
0 Comments
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Peugeot Automobile Nigeria (PAN) enjoyed a good run in the 70s and 80s, with its various brands of cars which outnumbered other brands on the road. Its Managing Director/Chief Executive Officer, Mr Ibrahim Boyi, believes the company can reenact that era with the coming of the auto policy. The policy, he says in this interview with Assistant Editor MUYIWA LUCAS, remains the best way to put the automobile industry back on track.

The automobile policy is everything mixed reactions. What  is PAN’s take on this?

Our take is simple. It is what we require to deploy our investment and infrastructure expertise and leadership in the automotive industry. It is also what Nigeria requires to develop its automobile, steel and petrochemicals industries towards providing massive employment and opportunities to Nigerians.

What if there is policy reversal?

All industry players have been concerned about that and also trust that the policy makers are conscious of that concern. At various levels, the subject has been raised and we have received sufficient assurances by the administration that it will not happen and that the policy will be enacted into a law by the parliament to reduce or mitigate the risk of arbitrary policy reversals.

How prepared is the auto industry for this policy? What are its attendant benefits?

From the perspective of PAN, we are ready for the policy and have since keyed into it. You will recall that we have over 40 years’ experience and have held leadership position of the sector for long.

We are far ahead of any other player in terms of our quality of assembly plant, quality processes and expertise. We have fed Nigeria’s automotive industry with technical skills for over 40 years. The benefits of policy to Nigerians are numerous. The policy will protect local automobile industry and enable them to resume activities.

This will lead to direct and indirect employment and other business opportunities in the areas of dealership networks, logistics provision and after sales service centers. The policy will also encourage other investors to set up in Nigeria as a result of the incentives and protection it provides.

Finally, the policy will benefit the consumers in terms of provision of new vehicle finance schemes at low interest rates as well as provision of affordable vehicles by the competing players in the industry.

What is the value addition of the automobile industry to the economy?

From the official statistics in 2013, total value of vehicles imported into Nigeria was in the region of $3.5billion. If your target is to domicile 25 per cent of that value locally, the impact on the economy will be tremendous. This will mean more jobs for Nigerians and more wealth creation.

The automobile industry contributes less than two per cent to the Gross Domestic Product (GDP) today, but it has the potential to contribute between five and seven per cent to the GDP if the policy becomes successful. The industry today employs less than 20,000 direct workers directly, but it has the potential of growing that number to over 500,000.

It has been argued that automobile production should have preceded the policy. Do you buy this argument?

People making this argument are either ignorant of the structure and development of the industry, or are just mischievous to protect some selfish gains. Automobile production in Nigeria can only occur within a protective policy. Without any defined incentive and benefit scheme to promote local production, no one will make the investments into the sector.

Even companies that had invested at the time the industry was protected, died once the protection was removed. Nigeria must create a competitive environment for industrial activity to take off, otherwise there will be capital flight, and so will be jobs and opportunities.

The policy as conceived, has provided for this transition and I am confident it will work out well without any of the skeptical projections of price hikes, or vehicles shortage.

Do you think the indigenous automobile makers have the capacity to cater for the country’s automobile needs? If not, how will the shortfall be bridged?

Nigeria’s new vehicle import at end of 2013 was only 49,000 vehicles. This is far lower than PAN’s manufacturing capacity of 90,000 cars per annum on single shift. Therefore capacity will not be the issue in the immediate term.

As we see a shift in the market structure between used and new vehicles, various players in the sector will certainly be responding to meet the new requirements from their various facilities.

How sustainable will automobile production be in view of the economic hardship being experienced in the country. Will these made-in-Nigeria vehicles be chaep?

As I mentioned earlier, a key component of the automobile development plan is the aspect of market development, which will promote the set up of vehicle finance acquisition scheme and also mandate the players to develop affordable vehicles. These will be the market challenges that will shape the strategy of every player that will need to survive and remain viable.

In PAN, we have already started acting in that direction by creating entry level vehicles that are quite affordable in their class. We will also continue to improve on the affordability of our vehicles without compromising the key elements of safety, reliability, durability and efficiency.

How prepared is PAN for this new dispensation? What have you put in place to compete?

We are already positioning and responding to the evolution of the market. Our constant value elements will be safety of our products, reliability and adaptability to our environment, efficiency and overall cost of ownership. As in the past, support for PAN’s products will be everywhere, with assurance to our customers of affordable after sales support and genuine spares. In the end, we intend to make our vehicles more competitive.

What will be the impact of the comatose Ajaokuta Steel rolling mill on automobile production considering that the plant is meant to supply the industry parts?

I believe that once we stabilise the auto industry and improve its performance, there will be a natural pressure to develop the composite parts’ industry, such as steel and petrochemicals.

The Auto industry, as the primary user of such inputs, must develop and create demand for those inputs. This will be the same with auto components manufacturers. Once the auto industry dies, all component manufactures will also perished.

Is the economy on course?

There has been consistent growth of our economy. However such growth needs to be more inclusive and diversified.This can be achieved through further diversification of the economy from oil to other productive sectors, such as agriculture and manufacturing.

Also certain economic reform elements are yet to take root, such as the power sector reform and fiscal responsibility. Once these reforms take root, the impact on the country and its populace will be enormous. It will help the inclusiveness of the growth and create a balanced and more sustainable economic model.

 


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