Africa’s Next Automotive Hub: Reality Check…

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Nigeria has the potential to become the hub of Africa’s automotive industry. Home to an estimated 170 million people, over 40 million of who are in the growing middle class, the continent’s largest economy is increasingly seen as an attractive destination for investors across all sectors. The largely import dependent automotive industry has become the focus of this attention in recent times

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The global automotive industry is looking for new growth opportunities and those opportunities reside in Africa. Nigeria, the continent’s largest economy and by far the most populated presents huge opportunities for investors in the automotive space. The new auto industry plan which raises import duties on imported cars makes the used car market less attractive. While this encourages the setting up of assembly plants in the country to serve the domestic market, the country may also become a regional hub for West Africa.

The Nigerian government introduced the Nigerian Automotive Industry Development Plan (NAIDP) in 2013 to revitalisethe auto industry. Last year, the policy came into full effect. PwC developed scenarios to capture the potential effects of the policy and identified Nigeria as a future automotive hub driven by its large economy, population and government’s intent to revive the industry. With the policy in active existence for over a year, we discuss the current situation in the industry.

The Economy
The current economic climate has been challenging for businesses as the decline in global oil prices (to $40 -$50/bbl.) and significant production shortages (from 2.2 mbpdin Q2 2015 to 1.4 mbpdin Q2 2016) has put immense pressure on government revenues and foreign reserves. Nigeria is officially in a recession following negative growth of -0.4% in Q1’2016 and -2.1% in Q2’2016. Consequently, the general and automotive manufacturing industry were worst hit with growth at -7% in Q1’ 2016.

Click here to download the full publication: https://www.pwc.com/ng/en/assets/pdf/automotive-hub-one-year-on.pdf

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