Less Than 60 Days To Deadline: Self-sufficiency Target For Nigeria’s Automotive Sector Still A Mirage

With less than 60 days remaining until the deadline for achieving self-sufficiency in local vehicle production, the Nigerian automotive industry faces an uphill battle. Despite ambitious plans and commitments to reduce dependence on imports and boost domestic manufacturing, the industry’s target of becoming self-sufficient in vehicle production remains a distant dream.
A combination of factors, including ongoing foreign exchange (FX) scarcity, dwindling consumer demand, and inconsistent government policies, has severely hindered progress.
Some analysts said government’s policies, such as import regulations, tax regimes, and automotive standards, are constantly changing. This creates uncertainty and makes it difficult to invest in the long term.
Then the issue of alleged corruption in the Nigeria Customs Service has led to the smuggling of tokunbo vehicles into Nigeria. The federal government recently announced that it will launch a batch of electric and compressed natural gas (CNG) vehicles using the SKD assembly method. This method is similar to importing the vehicles fully built and then “coupling” them locally. Some automakers are questioning why the government didn’t choose to have local manufacturers build the vehicles instead.
Consequently, despite the sector’s potential to stimulate economic growth, create jobs, and reduce the country’s dependency on imports, repeated shifts in government policies and a lack of cohesive strategy have created an unstable foundation for investment. These issues have hindered both local and foreign investors from making long-term commitments, while limiting the sector’s capacity to meet the nation’s automotive needs.
“One of the biggest challenges is that policies keep changing midstream, which makes it almost impossible to plan long-term investments,” an automotive executive, Gbenga Asher, commented.
Initiatives like the National Automotive Industry Development Plan (NAIDP), introduced in 2013, aimed to encourage local manufacturing by increasing tariffs on fully built imported vehicles and incentivising local assembly. However, enforcement has been erratic, and exemptions to tariffs have sometimes undermined the policy’s objectives. “Investors want stability,” Asher noted, adding that without clear, long-term policy signals, companies hesitate to establish manufacturing facilities. Many investors have expressed concerns about this lack of continuity, noting that they are unable to plan or scale their operations without clarity.
It is noteworthy that when Volkswagen came prepared to invest in an auto assembly plant in 2016, that companies most important concerns were the non-existence of a law restricting the importation of used cars into the country, and the ubiquity of dirty fuel that is imported into the country.
Nigeria’s high import dependency has further weakened the automotive industry. The country continues to rely heavily on imported components, a situation exacerbated by the absence of a developed local supply chain. The managing director of HAWA, Takashi Nakajima, lamented, “We are still importing most of our parts, which is a major hurdle when it comes to reducing costs. Inconsistent tariffs and a volatile exchange rate have made importing parts and raw materials more expensive, directly impacting the cost of locally assembled vehicles. With higher costs of production, Nigeria’s auto manufacturers struggle to compete with cheaper, fully built imports from other countries. As a result, local production remains low, and the country remains a net importer of automobiles, a status that drains foreign exchange and keeps the industry underdeveloped.
Adding to these challenges is the high cost of doing business in Nigeria. Poor infrastructure, particularly unreliable electricity and inadequate transport systems, drives up operational costs for manufacturers. “Manufacturing vehicles requires a stable power supply, which we don’t have. This pushes up costs significantly,” a factory manager, Henry Asemota, shared. The country’s erratic power supply forces companies to depend on costly diesel generators, which increases production expenses. Additionally, Nigeria’s transportation infrastructure is underdeveloped, with poorly maintained roads and limited rail options making it difficult to transport vehicles and parts across the country. These logistical challenges further reduce profitability and discourage investments in domestic production.
Security issues also pose a significant threat to Nigeria’s automotive plans. Frequent reports of unrest and attacks in different parts of the country create an environment of risk for both businesses and their workforce. According to Professor of Development Economics, Tayo Bello, “The security situation makes it difficult to attract skilled labour to certain areas, and foreign investors are war. The automotive industry, like other sectors, suffers from these insecurities, which disrupt supply chains, discourage skilled labour from remaining in affected regions, and deter international investors from entering the market. Addressing security concerns is essential for fostering a business climate in which local production facilities can thrive.”
A weak technical skill base presents an additional challenge. The automotive industry requires a specialised workforce, from engineers and technicians to machine operators. However, Nigeria’s education system has struggled to provide adequately trained personnel to meet these demands. In response, the government and private sector have introduced training programmes, but these efforts remain fragmented and insufficient. Bello continued, “We have the people, but they need training. There’s a lot of potential, but also a lot of work to be done in skills development. The lack of technical expertise affects production quality and reduces Nigeria’s competitiveness in the global automotive market. Investing in education and vocational training could help bridge this skills gap, but consistent support from both the public and private sectors is crucial.”
Also speaking, a mechanical engineer, Livinus Ogamba, cited that the enforcement of standards and regulations in the automotive industry is uneven. He said while the (National Automotive Design and Dvelopment Council (NADDC) has made strides in developing standards, challenges in implementation persist. He stressed that low-quality, unsafe vehicles often enter the Nigerian market due to lax enforcement of safety and environmental standards, diminishing consumer confidence in locally produced vehicles.
“Without consistent enforcement of standards, it’s hard to compete with established foreign brands. This inconsistency undermines the reputation of Nigeria’s auto sector, making it difficult for manufacturers to compete against foreign brands with established quality assurances,” he said.
The FX crisis has been particularly damaging, as it restricts access to the much-needed foreign currency to import critical components and raw materials required for vehicle assembly. For automakers who rely on these imports, the scarcity of FX has increased costs, disrupted production schedules, and led to delays in the delivery of finished products. As a result, many plants have had to reduce or halt operations, severely impacting production output.
In addition to FX shortages, demand for locally produced vehicles has dwindled due to rising costs and lower purchasing power among consumers. Economic instability and inflation have made it increasingly difficult for Nigerians to afford new cars, further curbing sales and weakening the overall market. Automakers are finding it hard to meet their sales targets, and as a result, the expected growth in the local industry has stalled.
Despite these hurdles, there is significant potential for growth if Nigeria can establish a stable, supportive environment for automotive development. The federal government has recently taken steps to encourage compressed natural gas (CNG) as an alternative fuel for vehicles, an initiative that could reduce Nigeria’s reliance on imported petroleum products. “This is a big step forward, but it has to be matched with coherent policies that support local manufacturing of CNG components and training for technicians,” a government official stated.
To unlock the potential of Nigeria’s automotive sector, the government must take a long-term, consistent approach to policy formulation and implementation. Establishing a clear, stable framework that protects local manufacturers while promoting competition would encourage investments and reduce import dependency. Improving infrastructure, particularly in power and transportation, would make local manufacturing more cost-effective. Furthermore, addressing security and developing a skilled workforce through targeted training programmes are essential for a sustainable automotive industry.