Auto Policy: So I Spoke To Aganga…

I got a message a couple of days from someone who’s worked with Olusegun Aganga in the past. He said he had read my blog posts on the auto policy and wanted to put me in touch with the Minister so I could hear his own side of the story.

Long story short – the Minister rang and we spoke for exactly 1 hour 3 minutes. If he’s ready my previous blog posts abusing him, he certainly didn’t show it. He was polite and answered all the questions I asked him. I expected a much more arrogant person but the person I spoke to sounded somewhat chastened or tired even.

I took notes so here goes.

Policy

I asked why the policy document itself had not been released and he said the ‘implementation document’ will be released by the end of January. This confused me a bit – It appears that he submitted his plans to the FEC without knowing when they would be approved. In any case, they are working on a document to bring together the ‘7 points’ of the policy and how they will be implemented. So we will keep an eye out for that.

Tariffs

This was probably the most interesting part of the conversation. He said that any manufacturer or dealer or whatever that is on ‘the programme’ will pay tariffs at 35% not 70%. I asked him to explain ‘the programme’ and he wasn’t quite clear on this, but I took this to mean they have signed up to the policy in one way or the other. According to him, the 70% tariff is a disincentive to encourage people to do some kind of assembly in Nigeria. According to him, those on ‘the programme’ who take advantage of all the incentives can actually end up paying 20%, less than they currently pay.

He said for every SKD (Semi Knocked Down) car assembled in Nigeria, the manufacturer will be allowed to bring in 2 FBUs (Fully Built Units) at 35%. Long story short, this policy will not increase prices according to him. In fact it might reduce prices.

This is all fun and games of course as there is plenty of money to be made from ignorance and misinformation in Nigeria. I told him I had heard some dealers already putting up prices and he said the National Automotive Council (part of his ministry) have a team that is monitoring prices weekly. It’s unclear what powers they have if they find dealers taking Nigerians for a ride but he said someone already tried it and Stallion Motors quickly released more cars into the market at the normal prices. According to him, Stallion were able to sell 1,500 cars by undercutting their competitors greed who then had to drop their prices.

The obvious problem here is therefore Tokunbo cars (and luxury cars which wont be assembled or manufactured in Nigeria). There is nothing for them in the policy so the full 70% tariff will hit such cars. Given that this is where the market currently is in Nigeria, people are going to feel the pain indeed. It might end up closing the gap between new and used cars to the point where people feel it’s better to simply go for new cars but then this doesn’t make cars any more affordable.

I am not allowed to disclose a particular change to the policy that will be announced next week but look out for it.

Finance

A Vanguard journalist mentioned to me a couple of weeks ago that the Minister had mentioned to them that there will be a ‘finance package’ in the policy. So I asked about this. He said that NAC, the OEMs and banks have been working together on some car loan schemes. He said that Rand Merchant Bank currently finances 1 in 3 cars bought in South Africa and they have said signed up to the policy and will be announcing some car loan schemes soon.

Innoson

We got talking about Innoson and he mentioned that he currently uses an Innoson Jeep – the IVM G5 which he said costs N4m-N5m. According to him ‘when you enter it, you will know you are in a Nigerian car but it is our own’. He listed various problems with the car and also mentioned that the car was given to him by Governor Peter Obi who bought a few of the Jeeps when it was released in September 2013 to distribute to royal fathers in Anambra. This was in response to my question on using export discipline to get the cars to be improved quickly. He said all their complaints have been sent to Innoson who will be releasing the next model of the Jeep in the first half of this year and he hopes those problems will be fixed.

He said Innoson is currently at 40% local content in its vehicles and employs 7,000 people of which 4,500 of those work in its plastics business. He said that since cars are mainly made with plastic these days he reckons Nigeria can get round the fact we don’t currently have a steel industry (although he later mentioned part of the policy is to make iron ore more accessible to those who want to turn it into steel).

Question: South Korea or Mexico? Answer: South Africa

I asked what the vision of this policy is i.e. what do we want to become? I spoke about how Mexico manufactures over 3 million cars annually (even though there is no ‘Mexican car’) but exports more than 80% of them creating 500k jobs. I then mentioned how South Korea grew its car industry and we now have Hyundai and Kia. So do we want a Made in Nigeria car and be South Korea or do we want to be a manufacturing hub to create jobs and be Mexico. He said we can be both.

He kept going back to the South African industry for his examples which reflects the fact that most of this policy has been based on the South African market and input from the former South African minister for transport. He said his target market is the ECOWAS region of 300million people of which half is of course Nigeria hence why he thinks we can do both.

‘Look at Dangote. When we first started it was simply to address the local market, now we are at 28 million metric tonnes per annum which is more than local demand so we can export. I believe we can replicate this with sugar and cars’ he said.

FRSC and Customs

To tackle smuggling, he said that FRSC and Customs are currently working together on a computerised system of some sorts. According to him, before a car is registered, FRSC will be able to check immediately with Customs if the correct amount of duty was paid on the car. If the correct duty wasn’t paid, then FRSC wont register it. Presumably this will mean that any car smuggled in through Benin Republic and other such places wont be registered.

I asked when this system will be up and running and he said ‘soon’.

The Carmakers Are Coming

‘You know when we go to the FEC, you never know if your proposal is going to be approved that day or not. So when my policy got approved on October 2nd, I called the Nissan Chairman that same night to tell him. One week later on the 9th, they made their announcement that they were going to start car assembly in Nigeria’.

He went on to say that Toyota have said they will get back to him in March while Hyundai and Volkswagen are also coming based on this policy. Also TATA are coming to continue their partnership with Stallion motors for the assembly of trucks. He however said that the Japanese have requested him to put legislation in place

Ministry Funding

So I asked how all of these plans were going to be funded given that there is a big role for the government to play and his whole ministry only gets N15bn (N13bn recurrent) in the annual budget. He said ‘we have no money but the good thing is that our work in my ministry requires more brain than money because our job is to design policies’.

He mentioned how the US and Japanese embassies have committed to funding the construction of some of the auto parks they are looking to build across the country. He said NAC is funded by some levies so to an extent they are independent. His ministry has 17 agencies under it and everyone just fights for their survival basically. He mentioned that being a former Finance Minister gave him an understanding of how tight money is across the board so it is what it is basically.

CBN Governorship

I asked to try my luck with one last question and told him I have heard President Jonathan is going to name him as the new CBN Governor. He gave the boilerplate answer of how he is focused on his job and doesn’t concern himself with such things. I tried again by asking what will happen to all his policies if he gets moved to the CBN especially as he hasn’t legislated any of them. Same response. Finally I told him that surely if President Jonathan asks him to go to the CBN he couldn’t possibly say no. Same response.

National Industrial Revolution Plan (NIRP)

He kept mentioning the NIRP and I told him I have actually been looking for the document but I couldn’t find it anywhere. He said the document wasnt ready yet but he had started implementing it. According to him President Jonathan will be launching the document later this month. He said he has been working on it for a year and also implementing it in that time.

And The Rest

He talked about how Stallion couldn’t have imported 3 years worth of cars given that they have signed a deal to start assembling cars in Nigeria soon. He spoke about how everyone was carried along from the beginning of the policy design in 2011 and how it is expected that people will make noise now that their business model is about to change. Spoke about how the vested interests against the policy are well-funded and connected but he expects all the noise to die down soon.

On two different occasions he said ‘I don’t want consumers to suffer’ and ‘consumers must not suffer’. He also said he wants to be able to sleep at night after making policy. He also spoke about the different aspects of the policy from boosting skills to manufacturing parts and international standard accreditation for anything we make. The policy is also about tyres and he restated the well-worn line about how Nigeria’s rubber is the highest quality in the world so we should be making tyres and international tyre manufacturers have indicated their interest in coming to set up in Nigeria.

Conclusion

These are not my views. I have tried as much as possible to restate the Minister’s position as best as I heard and wrote them down. I think I have written about 4 times on this auto policy already and that is more than enough.

I am hoping you read between the lines of the above and come to your own conclusions.

FF

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15 thoughts on “Auto Policy: So I Spoke To Aganga…

  1. Lets assume he’s a nice guy – are his policies nice to Nigerian consumers? I’m by no stretch of the imagination a “financial person”, but it seems to me from this conversation that his long term aims remain unclear and unsustainable. Yes, we want to manufacture more cars, but to what end, and how do we get there?

  2. Pingback: Auto Policy: So I Spoke To Aganga… – Y! Opinion

  3. I commend your effort for a better Nigeria well done., One thing though I have seen this auto policy where does it leave commercial trucks? You see i plan to start a small scale logistics business in the not so distant future and I intend to import trucks for this does it affect big haulage trucks too? Please enlighten me more on this.

  4. Nice one here… Oh cmon, we all know it wont be the last. The policy document is getting a brash review. And then a review of the review… And of course the implementation framework. And its own review of review! In anyway, our eyes, and brain are absolutely not complaining one bit!
    Regards!

    1. I am still not convinced this policy is going to improve our lives. In this country,theory is usually brillant while the execution or reality is another. Apparently,when u get appointed as a minister,you get no briefs. Just do what will enhance your presidents political market and you get to upgrade within the system. I once heard even ministers are like bank marketers. You just got to find something to market to the president since the populace doesn’t really matter.
      This note alone proves that Aganga is only finding relevance in the system. I won’t take his words to the bank and I feel should Jonathan move him to CBN,he won’t say No.

  5. So the honorable minister thinks the linkage between FRSC and customs will discourage smuggling of cars..He does not seem to know naija .The customs guys will simply charge more as bribe since part of the bribe will now have to be shared with the guys at the IT or data dept or whatever it is called.And if that fails,the FRSC guys in charge of registration are also human beings,they can be bribed.and they will be bribed.Am not a pessimist but I don’t see this policy working at all.The very first thing the minister should av worked on is the financing aspect.If the banks are willing to give out auto loans at single digit interest rate to be repaid back over 8 years on new cars as it is done in most countries where there is a thriving auto market,a quarter of the job has been done.

  6. Superb comments from Fab and Tunde Jimoh. It’s astonishing how badly planned this policy is – this is not the cart before the horse, but the cart without the horse and the recipients of a cart with no horse are the docile and often clueless Nigerian populace.

  7. LOL! I just know you had a bag of salt in your mouth the whole time you were listening to him, and maybe another bag as you were typing this note.

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