Moses Akaigwe
AS one of the longest players in Nigeria’s auto industry, and Managing Director of DVC Limited and DVC Plastics Limited (local content supplier to the vehicle plants), Dr. David Obi, has participated actively in the formulation of many policies, some of which led to the creation of relevant agencies, including the National Automotive Design and Development Council (NADDC) in the early 90s.
He is currently a board member representing Manufacturers Association of Nigeria (MAN) in the NADDC and Chairman, Motor Vehicles & Miscellaneous Assembly Sectoral Group of MAN. In this interview, the ardent believer in auto policy (the Nigerian Automotive Industry Development Plan, NAIDP), said the long delay by the Presidency in giving as- sent to the bill that will give legal backing to the policy is impeding its implementation. Chief Obi argues that many big auto makers would not like to invest in the country if there is no law sup- porting NAIDP.
Excerpts:
DVC Ltd and the first generation of auto plants
It is really a pity because those early starters, like PAN, ANAMMCO, Volkswagen, Leyland and Steyr, meant well and all of them started with Completely Knocked Down (CKD) assembly. Let me make that point clear because it is now being abused with Semi Knocked Down (SKD) 1 and SKD 2. As I have always said, auto manufacturing is not a job for boys. It is for men that are capable. How can you venture into car manufacturing when you cannot afford an oven? It is absurd. The job of manufacturing is when you have to weld the parts together. After welding, you do thorough cleaning because there are lots of rust particles surround- ing the vehicle under production. You cannot paint a car, for example, without having a virgin cleaning of the entire car. That cleaning involves a lot of process. You first do acidic cleaning and you remove all the alkaline properties. You rinse and again, clean with alkaline to remove the acidic components and then you rinse again. After that, you use sterilised water to clean. At that point, the car is virgin clean and ready to accept any paint. Then you apply sealants before you do a full paint.
That is why in those days, if you are not DVC-compliant, you are seen as not operating an assembly plant because all the assembly plants were using sealants made by my company, DVC Limited. The government was very serious about local content then and there were incentives created at that time. There was this policy then, that when you apply certain percentage of the local content, you get reward for that. So many things were granted and it be- came very attractive. I remember when I went to my hometown in Nnewi. I was in a restaurant and I ran into a young man from Kaduna. When I discussed with him, he told me that Peugeot Automobile Nigeria Limited (PAN Nigeria today) where he worked was looking for local content suppliers because of the incentives they would get from the local content. In fact, there was a policy of lo- cal content substitution. It came to a point that Peugeot achieved 40 per cent local content substitution at that time before the industry collapsed. The industry collapsed because of policy somersault. If you as government gives somebody opportunity to set up a factory and after building the factory and buying capital- intensive heavy duty machines, and the factory is about to start production, you remove import duty on the finished product, you have killed the local factory even before its take-off.
In Nigeria, you work without electricity, roads are bad, there is no water supply and so many other things are not provided. Banking rates are very high here. Whereas in Japan, interest rates are less than 1 per cent, here we pay 20 to 30 per cent. How can you compare such two scenarios? These are the incentives others get which we don’t and that is why the industry collapsed. No Original Equipment Manufacturer (OEM) such as Mercedes Benz and others will come to Nigeria if they are not sure agreements signed would be honoured. That is why many of them closed and left. If not for this situation, Nigeria is a place everybody wants to do business because of our population. Our leadership is the problem.
Auto policy
Of course, I supported the auto policy. I was in the group that started the technical committee on the National Automotive Industry (NAI). The auto industry policy has many benefits to the country and its economy. It creates jobs. When we talk about jobs, I mean skilled jobs and not just labourer jobs. It brings about transfer of technology because everything is based on technology. It also gives room for creation of wealth. I think Bangladesh and Nigeria are the only two countries in the 10 most populated countries, that do not have viable auto industry. There is no country with high population in the world that does not have a viable auto industry because the industry creates wealth. The multiplier effect of the auto industry is such that, if you do local content substitution, a lot of cottage industries, companies and manufacturers will be supplying items. This is because auto industry is an assembly job and not only manufacturing.
No one company manufactures an airplane all alone. Airplanes are assembled with components produced by different component manufacturers/suppliers. You simply commission the makers
of those parts to produce for you to assemble. Do you know how many thousands of parts there are in a vehicle? How can you have industry for each one of them? Again, there is no material that is not involved in the auto industry. Is it metal, glass, plastic, rubber, electronics, automotive chemicals, paints, textiles and so on? So, everything is involved in making vehicles and it is a wide- spread. A vibrant auto industry impacts on many sub-sectors. But we lost that opportunity. We are the 7th most populous economy in the world with a growing middle class. With one million vehicles per annum, there are lots of things we can gain from a healthy auto industry.
Implementation
Well, from what we are seeing today, it will be difficult to rate the auto policy implementation, because it has always been one step forward, two steps back- ward. And that has to do with reversal of policy and policy somersault. But the truth is that, we are not getting it right. I still don’t understand what is happening. But I must tell you that the percentage of local content substitution is the yardstick to measure the success of the auto policy. Unless we are able to ascertain that this is the percentage of the local content substitution, we may not be getting it right. For example, in the past, we had glass and vehicle windscreens made here; we had seat belts produced in Asaba, while tyres, paints and many others were locally made. Michelin was here at a time but they had to leave because you put a high duty on imported tyres today and when the local industry starts manufacturing, the government will remove the duty, thereby put- ting the local manufacturers at risk. Where are the auto component makers today? They have all gone. I have always said that any importation translates to job ex- ported. If you import any finished product, you are exporting jobs. If you produce something here, you are creating jobs. In all the documents we worked with before the final revised auto policy, there was nothing like SKD 1 and SKD 2 assembly. It was when SKD 1 and SKD 2 came in that things changed. In the early days of auto assembly, when we were doing it, we were all doing CKD assembly and we started from the scratch. That was when you had to do painting because if you are not doing painting, that means you have not done any job. That was why in those days, the cliché in the auto industry was that if you are not DVC-compliant, you are not assembling, because if you are truly assembling, you must need and use the necessary chemicals from DVC Limited. Ask any of the assembly plants today if they are DVC-compliant. I don’t know of any who buys our sealants to do jobs before painting. They don’t paint anything. Even those who have paint shops and ovens don’t use them anymore because they are looking at others who are cheating. So they have all joined in the cheating arrangement. I call it screwdriver assembly. They go to Japan, Korea, China or any- where and bring in finished cars, thereby helping to create jobs in foreign land. They remove some few things and put them in the container and bring it here and screw them together again. There is no chemical applied, no brush, no spraying and nothing done. I call them whitewash assembly plants and it is not good for the country because jobs are not created.
Review of the policy
The person who introduced SKD 1 and SKD 2 should be blamed for that. I said it, that in all the documents I saw when we were doing the spade work for the setting up of the National Automotive Council (now National Automotive Design and Development Council, NADDC), CKD was used everywhere. I never saw SKD since the regulatory authority was established until it became NADDC. It was later on they introduced SKD 1 and SKD 2 that created all these loopholes for people now to cheat. Peugeot, for example, which had a full auto line had to join, apparently because they have not asked me for years now about sealant. No assembly plant has come here to ask for sealant; so how do they assemble, if they actually do? Do they import it? So, the government can review the policy so long as they correct the SKD 1/ SKD 2 anomaly. If government says now that there is no SKD
1 to 2; that it will just be CKD, everything will return to normal and it will be like in the 90s when PAN, Volkswagen, ANAMMCO, among others, did real CKD assembly. That is what others do
in other parts of the world. You cannot produce without sealants and painting. Why should you not paint the vehicles? No painting
is done here; all those cars they claim to assemble in this country are all painted abroad.
There is a provision that says if you assemble one unit locally, you can import two fully built units (FBU) and pay concessionary duty.