How Crippling Policy Gaps Threaten Nigeria’s Auto Industry Future

Nigeria’s automotive industry was once envisioned as a symbol of industrial pride, a sector that could create jobs, conserve scarce foreign exchange, and boost national competitiveness. That vision was given structure through the National Automotive Industry Development Plan (NAIDP), first rolled out in 2013/2014 and renewed in 2023 with fresh promises for the next decade.

The policy, also known as the “Automotive Plan,” set out bold targets: 200,000 locally manufactured vehicles annually, 40 per cent local content, a regional market share of 26 per cent, and the creation of nearly one million direct and indirect jobs by 2033. Yet, more than a decade after the policy’s introduction, the gulf between ambition and reality remains glaring.

While the framework has attracted investment and laid some foundations, inconsistent policy enforcement, weak demand, and regulatory lapses have left the industry teetering between potential and paralysis. The sector today faces a decisive question: will NAIDP become a turning point for Nigeria’s industrialisation, or another unfulfilled dream?

Lofty Promises of NAIDP

The automotive policy was designed to transform Nigeria from a dumping ground for used vehicles into a hub of modern vehicle manufacturing and assembly. Beyond assembling vehicles, NAIDP aimed to create a full supply chain linking steel, rubber, plastics, glass, electronics, and battery production, thereby embedding industrial value addition.

The revised 2023–2033 plan added ambitious sustainability elements, including a target of 30 per cent electric vehicle production by the end of the period. The government also promised a framework of incentives—tax breaks, tariffs on imported vehicles, and access to affordable finance—to attract global and local assemblers.

The intent was clear: an automotive sector that could generate jobs, reduce pressure on foreign reserves, and open export markets across West Africa under the African Continental Free Trade Area (AfCFTA).

Early Progress and Investments

In its first years, NAIDP appeared to make modest progress. By 2019, 58 firms had made investment commitments worth over US$756 million (around N1.15 trillion in current exchange rates). As of today, 79 companies are registered under the scheme, with 34 commencing commercial operations.

At its peak, the industry built an installed capacity of over 500,000 vehicles per year. Global and local brands, from Peugeot and Innoson to Stallion and Honda, lined up to explore opportunities. The National Automotive Design and Development Council (NADDC) also initiated supportive measures, such as N12 billion in soft loans for 35 companies through the Bank of Industry, and plans for testing centres, maintenance hubs, and even end-of-life vehicle recycling.

For a brief moment, Nigeria appeared to be on track to reclaim its lost industrial momentum in vehicle assembly.

Where the Wheels Fell Off

Despite the promising start, output has consistently lagged far behind installed capacity. Production remains stuck at below 5–10 per cent utilisation, with many plants turning out only a few thousand units a year.

Policy inconsistency is the biggest culprit. Crucial incentives such as duty waivers for completely knocked down (CKD) kits were reversed or weakened by the Finance Act of 2020, which slashed tariffs on fully built commercial vehicles. This gave importers an edge over local assemblers, discouraging expansion.

The policy has yet to secure the force of law. While the Federal Executive Council approved the revised NAIDP in May 2023, the absence of legislation means the plan lacks binding authority. Investors remain wary, fearing that incentives could be altered at will by successive governments.

The Nigerian market has further undermined the policy. Used imports—popularly known as “tokunbo” cars—continue to dominate sales, often costing less than half the price of a new locally assembled vehicle. Weak enforcement of age and emissions restrictions has made the playing field even more uneven.

In addition, financing schemes for consumers remain scarce. Without affordable credit or leasing options, few Nigerians can afford new vehicles, no matter how proudly “made-in-Nigeria” they are.

The Cost of Inaction

The price of this policy drift is high. Stalled investments alone are estimated at N136 billion (US$89.6 million) from 20 companies that have either shut down or suspended operations. The jobs that NAIDP promised—nearly a million across the value chain—have materialised only partially, mostly in small-scale assembly, dealerships, and logistics.

Meanwhile, Nigeria continues to bleed foreign exchange importing fully built units and used vehicles. The lack of competitive local output has also robbed the country of potential AfCFTA advantages. Nigerian-assembled vehicles cannot yet qualify for regional export under rules of origin, locking the country out of an emerging continental market.

Above all, the sector risks reputational damage. Investors who came in on the strength of government assurances now face uncertainty, while local manufacturers complain of an uneven and unpredictable operating environment.

What Must Change

For NAIDP to succeed, experts argue that decisive corrective action is needed. The most urgent step is passing the Automotive Industry Bill into law. Legal backing would provide stability and enforceability, ensuring that incentives cannot be easily reversed.

Fiscal measures must also be restored and protected. Import tariffs should be structured to encourage CKD and semi-knocked down (SKD) assembly while discouraging the flood of used imports. At the same time, the government must strengthen demand by implementing affordable vehicle financing schemes, mandating procurement of locally assembled vehicles by MDAs, and incentivising businesses to buy Nigerian-made cars.

Infrastructure remains another weak link. Without reliable power, supply chain networks, and accredited testing facilities, local assemblers will remain uncompetitive. Developing upstream industries such as steel, plastics, and battery production is equally crucial to increasing local content to the targeted 40 per cent.

Finally, consistent monitoring and evaluation are required. NADDC and relevant ministries must adopt transparent reporting frameworks, with clear timelines and measurable milestones, to restore confidence among industry players.

Looking Ahead

Nigeria’s automotive industry is at a crossroads. The foundations—installed capacity, investor interest, and policy frameworks—already exist. The potential benefits are equally clear: jobs, industrial growth, reduced forex outflows, and regional export opportunities.

Yet, without urgent reforms, much of this promise will remain trapped in policy papers and boardroom presentations. For the NAIDP to become more than rhetoric, the government must demonstrate the political will to implement and enforce its commitments.

If the revised plan delivers even half of its targets—200,000 vehicles a year, nearly one million jobs, and 40 per cent local content—the transformation could ripple across the economy, positioning Nigeria not just as a consumer of vehicles, but as a true industrial player.

But time is running short. Ten years may sound long, but in industrial development, it is barely enough to build the ecosystem needed. Unless action begins now, the NAIDP risks becoming another missed opportunity in Nigeria’s long history of industrial policy missteps.