EZREL TABIOWO in this piece replays the position of the senate on the automotive industry bill and examines the fate of President Goodluck Jonathan on the conditions for its passage
Arguments for passage
Against the backdrop of moves by President Goodluck Jonathan to revive and develop the automotive industry in the country, the senate last Thursday gave its backing to the President when the Nigeria Automotive Industry Development bill scaled second reading on the floor.
The bill which is an executive one was sponsored by the Senate Majority Leader, Senator Victor Ndoma-Egba.
Leading debate on the bill, Senator Ndoma-Egba said same is designed to confer pioneer status, provide tariff incentives and income tax reliefs on automobile and automotive components as well as specify federal government’s assurances and guarantees to the automobile and tyre enterprises under the Nigerian Automotive Industry Development plan.
According to him, the Nigerian automotive industry represented by Peugeot of Nigeria, Volkwagen of Nigeria Lagos, Styre Nigeria Bauchi, Leyland Nigeria Ibadan, ANAMCO Enugu, NTM kano etc at its peak had a combined annual output of well over 150,000 automobiles at an estimated value of N450 billion.
He pointed that in many countries of the world, the automotive industry plays both a strategic and catalytic role in economic development in respect of employment creation, GDP generation, Economic linkages which serves as veritable platform for Small, Medium and Micro-Enterprises development, innovation, skills and technology development.
According to the international organization of Motor Vehicle Manufacturers (OICA), the auto industry directly employs over nine million people, which represents five percent of the world’s total manufacturing employment. In South Africa for instance, the automotive industry alone contributes seven percent of GDP and twelve percent of exports, and is the second largest employer of labour in that country.
The Majority Leader stated that employment by the automotive sector in Nigeria when functional hovered around 20,000 Nigerians and local value added exceeded 27 percent on the average.
Similarly, he noted that the country had local capacity to meet all its tyre needs way back in the 1960s but by mid 1980s, the government took some policy decisions that compromised the fortune of the industry so it crashed. Consequently, capital utilization in all the assembly plants collapsed as new and second hand vehicles were freely imported.
Senator Ndoma-Egba disclosed that in 2012 for instance, N600 billion worth of automobiles were imported into Nigeria, with three quarters of the figure second hand ones.
He lamented the disappearance of Nigeria’s tyre plants along with all the quality jobs, a development whose outcome has led to the exportation of rubber and importation of tyres worth over N100 billion annually.
The Majority leader said the objective of the bill amongst other things therefore was aimed at developing a sustainable and competitive automotive industry in Nigeria; Creating an environment to allow existing assembly plants to survive and attract other original equipment manufacturers; as well as facilitating a sustainable automotive industry that encourages the formation of joint ventures between multinationals and local companies through foreign direct investments.
The bill accordingly also seeks to institute incentives for the development of a Nigerian automotive component industry, and facilitate Nigeria’s Industrial Revolution Plan using the Automotive sector as a key component to diversify the economy and generate revenues through industry and manufacturing.
The bill which has 10 clauses specify amongst others, the objectives, Institutions, Pioneer status, Income Tax Relief, Tariff re-adjustment, Administration and Assurances that will enhance the prospects of a viable automotive development in the country.
According to Senator Ndoma-Egba, the Nigerian Automotive Industry if revived has the potential to create 70,000 skilled and semi-skilled jobs along with 210,000 indirect jobs in the Small Medium Enterprises that will supply the assembly plants.
Besides, he added that Nigeria is well positioned to be a major assembly hub for international auto companies due to the country’s existing installed auto capacity, large labour force, significant local demand, and strategic location for exports.
“The National Automotive Council established under the National Automotive Council Act is charged with the administration of this bill thus the bill has no consequential financial implication on government.
“A viable automotive industry which this bill seeks to establish is a win-win situation for the country. There is a huge market for vehicles in the country and in the sub-region and this bill will enable the country key into the opportunities presented by the automotive industry, which will in turn enhance the standard of living of citizens, reduce social vices and earn revenue for the country,” Ndoma-Egba stressed.
Senate’s Position
But the Senate President, Senator David Mark, while commenting on the bill said Nigeria is yet to be ready for reviving its automotive industry.
According to him, unless government ensures that it puts in place the necessary factors needed for hitch-free production, such as uninterrupted power supply and resuscitation of the steel industry, the purpose of reviving the automated industry will be defeated on the long run.
“On paper this is an excellent bill and there is absolutely no doubt about it, but what is more important is that it is not just this bill alone that will solve the problem of the automotive industry.
“Beyond this bill, practically on ground we are not just prepared because no investor is going to put his money here if you cannot guarantee him power.
“It is not a matter of producing rubber for Michelin, it is beyond that. DICON, which is in Kaduna today was established the same time with the one in Brazil and India. Today the equivalent in Brazil is building ships, aircrafts, armoured cars, DICON in Nigeria is producing furniture.
“We are missing the point not by this bill but you know because we have not laid the foundation for which this bill can become sustainable.
“I agree that the Ajaokuta Iron Steel Company is very important and so are all the other steel mills.
“On paper the bill is good. The World Trade Organization will say it’s protectionist policy but China has protectionist policy, today everybody is going to China, India has protectionist policy, there is no country does not have the protectionist policy but we abandon our own because we have failed in several other areas.”
The Senate President therefore urged the executive arm of government to focus more on a practical implementation of its policy which seeks to revive the automotive industry in Nigeria.
He cautioned that ignoring the key elements that serve as backbone of the industry could mean a second economic disaster and setback for the nation, a challenge which even legislation will be unable to fix.
“I believe that the implementation is very important and unless we get these other factors together, this will remain absolutely good on paper but in practice it is going to be very difficult to get it right.
“Passing it is not the problem for anybody here, we can pass this though the first, second and third reading the same day, if we are guaranteed that all these other supporting agencies are going to be in place.
“My suggestion is, this is an excellent bill, we should pass it, we should commend government but we must let government know that for this bill to be meaningful, a few other things must be out in place, almost immediately along this bill,” Mark said.
The position of the Senate therefore puts before President Jonathan several questions which only his administration’s performance will answer.
The upper chamber by virtue its insistence that the executive arm of government pursue practical implementation of the policy stands in itself a challenge on the country’s power and steel sectors which at the moment suffer decay and are nothing to write about.
Power and Steel facts
In the power sector, the epileptic power problem faced by the country has always being blamed on he issue of inadequate gas supply.
Such inadequate supply of gas is severally excused to shortage of gas supply from the gas producers, to abrupt disruption of supply due to shutting down of gas plants for maintenance. Abrupt disruption in gas supply to the thermal stations had on a series of occasions resulted to the tripping of transmission lines during the period under review.
On several other instances, there were cases of closure of gas plants by the International Oil Companies (IOCs) for routine maintenance. Also most of the newly-completed power plants built under the National Integrated Power Project (NIPP) did not have gas supply.
Oil companies, which produce the gas that are piped to the power stations, are reluctant to invest in domestic supply because the current pricing template does not guarantee adequate return on investment.
Last week friday, The Federal Government announced new measures to address financing related issues in the power sector, including a N213 billion bailout facility to settle legacy gas debts.
The disclosure was made by the Minister of Petroleum Resources, Mrs Diezani Allison-Madueke at a joint press conference at the Presidential Villa, Abuja.
In attendance were the Governor of the Central Bank of Nigeria (CBN), Mr Godwin Emefiele, the Minister of Power, Prof. Chinedu Nebo, and the Chairman, Nigerian Electricity Regulatory Commission (NERC), Mr Sam Amadi.
Allison-Madueke said that the facility, which would be provided by the CBN in collaboration with deposit money banks, would also be used to address revenue shortfall in the power sector.
The minister noted that inadequate gas supply for power generation was one of the three major issues affecting the sector.
She said that up until August 2, 2014, the controlled price of gas used by power plants was unattractive to most gas suppliers, which led to an overhang of debts for gas supplied to the sector.
The second problem confronting the sector, according to her, is the misalignment between electricity tariff and the true cost of running electricity businesses.
said the situation led to a build-up of shortfalls in revenues along the electricity supply value chain.
“The third problem has been the ability of generation companies to reliably produce the electricity that is possible with reduced volumes of gas.
“With most of the operators having just acquired PHCN successor generation companies, they could hardly afford the reduced income due to the shortfall in revenues for reasons I have just set out.
“The newly privatised companies have borne the brunt of these and consequent revenue shortfalls in the sector, since handover last November.
“This is hampering much needed investment in the sector and has slowed down efforts to improve electricity supply,” she said.
Meanwhile, the federal government had early this year expressed doubt that the country might be unable to achieve the 15 million tonnes per annum capacity of local steel production set for the year 2020 in the nation’s drive to revamp the iron and steel industry.
The Minister of Mines and Steel Development, Mr. Musa Sada, stated this in Lagos while addressing stakeholders in the sector at a one-day forum organised by the Federal Ministry of Industry, Trade and Investment in collaboration with the Federal Ministry of Mines and Steel Development.
Sada explained that if activities in the iron and steel sector continued as it were currently being operated, it would certainly be unable to attain the 15 million tonnes per year target of locally manufactured steel, set for seven years from now.
Lamenting that Nigeria currently imports about 17 million tonnes of steel annually and produces only 2.5 million tonnes locally, the Mines and Steel Minister stressed that the situation was more wasteful because the country possesses over two billion tonnes of iron ore deposit, as well as over one trillion tonnes deposits of coal, a major ingredient in the production of steel.
