Nigeria’s Automotive Industry: A key engine of economic growth

BY TEMITOPE ADEBAYO

Nigeria’s automotive industry has evolved over the past century from colonial-era luxury to a vital economic driver. With over 14 million registered vehicles, the sector supports mobility, commerce, and logistics across the country, while also reflecting infrastructure gaps and opportunities for sustainable growth.

From Colonial Cars to Indigenous Assembly

The introduction of cars in Nigeria dates back to the early 20th century during British colonial rule, when vehicles were limited to the elite. Post-independence, partnerships with global manufacturers led to the establishment of local assembly plants by brands like Peugeot and Volkswagen, creating jobs and spurring industrial development.

By the 1980s, Nigeria emerged as a key automobile market. However, years of economic instability, policy inconsistencies, and reliance on oil revenues stifled local production. Today, only a few manufacturers like Innoson Vehicle Manufacturing (IVM) maintain assembly operations. IVM, Nigeria’s first indigenous carmaker, continues to produce vehicles while contending with the dominance of imported used cars.

Poor Roads Undermine Progress

Despite the growing number of vehicles, road infrastructure remains a major challenge. Potholes, congestion, and poor maintenance are widespread, especially in cities like Lagos and Abuja, where traffic delays reduce productivity and increase fuel consumption.

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Though projects like the completed Second Niger Bridge and Lagos-Ibadan Expressway rehabilitation offer some improvement, overall progress is slow. Governments at all levels have boosted investment in roadworks, but many question whether it matches the demands of a growing population and economy.

Tokunbo Cars Dominate the Market

Nigeria’s automobile sector is heavily dependent on imported second-hand vehicles, locally known as “Tokunbo.” These used cars, which account for over 70% of vehicles on the road, are popular for their affordability but raise concerns about emissions and safety.

Attempts to curb Tokunbo imports through higher tariffs and promote local assembly via the National Automotive Industry Development Plan (NAIDP), introduced in 2014, have yielded limited success. Challenges such as inconsistent policy enforcement and high production costs continue to hinder local manufacturers like Innoson Motors.

Fuel Subsidy Removal Reshapes Commuting

The removal of fuel subsidies in mid-2023 marked a turning point for Nigeria’s motoring landscape. Petrol prices have risen above ₦900 per litre in many areas, driving up transportation and logistics costs. This has led to reduced personal vehicle use and increased demand for public transport and ride-hailing services.

Platforms like Uber, Bolt, and InDrive have reported surges in bookings, while Lagos’ Bus Rapid Transit (BRT) system plays an increasingly vital role in daily commuting.

The Shift to CNG and Cleaner Fuels

To reduce fuel costs and dependence on imports, the federal government has intensified efforts to convert petrol and diesel vehicles to Compressed Natural Gas (CNG). As part of the National Gas Expansion Programme (NGEP), this initiative promotes the use of Nigeria’s abundant gas reserves for transportation.

CNG is significantly cheaper and cleaner, appealing especially to commercial drivers. Thousands of vehicles have already been converted under a government-subsidised scheme. However, inadequate refuelling infrastructure remains a barrier, particularly outside major cities. To address this, the government has committed to expanding CNG stations and offering incentives to private investors.

Conversion costs also remain high for many drivers, prompting the introduction of financing options like low-interest loans and payment plans. Despite the hurdles, the adoption rate is growing steadily, especially among taxi and bus operators.

Electric Vehicles Slowly Emerge

Although still rare, electric vehicles (EVs) are gradually entering the Nigerian market. Companies like Stallion Motors have introduced EV models, and charging stations are beginning to appear in Lagos and Abuja. However, unreliable electricity supply and high upfront costs hinder widespread adoption.

For EVs to gain traction, Nigeria will need to improve its power infrastructure, invest in renewable energy, and offer incentives to early adopters. The global transition toward greener transport makes this shift increasingly necessary, though progress will likely be gradual.

Technology Enhances Mobility

Technology is playing a growing role in Nigeria’s transport ecosystem. Ride-hailing apps, vehicle tracking systems, and digital tolling are becoming more widespread. In 2023, Lagos launched an AI-powered smart traffic management system to reduce congestion in key areas. Early results have shown promise, though broader implementation is needed.

New ride-sharing features, electric motorcycles, and app-based carpooling are also helping reduce emissions and improve efficiency. These innovations, driven largely by the private sector, are reshaping urban transport in Nigeria.

Looking Ahead

Nigeria’s motoring industry reflects the country’s economic complexity—marked by resilience, high demand, and structural challenges. The reliance on Tokunbo vehicles, the strain on infrastructure, and the environmental impact of fossil fuels are pressing issues. Still, the shift to CNG, early steps toward EV adoption, and rising use of smart technologies offer hope for a more sustainable and efficient future.

Continued investment, policy stability, and innovation will be critical as Nigeria navigates the next phase of its motoring journey.