Low Patronage, Expensive Credit, Used-Car Imports Cripple Local Automotive Industry
Nigeria’s automotive industry is operating far below its potential, with the country’s nearly 40 licensed vehicle assembly plants producing less than five per cent of their combined installed capacity of more than 600,000 vehicles annually, the National Automotive Design and Development Council (NADDC) has disclosed.
The revelation underscores the deep disconnect between Nigeria’s capacity to manufacture and assemble vehicles locally and the size of the domestic market, which is estimated to require about 800,000 vehicles every year.
The Director-General of the NADDC, Joseph Osanipin, made the disclosure in a statement on Friday, identifying weak vehicle financing, low patronage of locally assembled vehicles, grey imports, foreign exchange pressures and inconsistent policy enforcement as major obstacles to the industry's growth.
According to him, the country has built significant vehicle assembly capacity over the years, but manufacturers have been unable to operate at commercially sustainable levels because demand has largely been captured by imported used vehicles.
“Nigeria features an installed assembly capacity exceeding 600,000 units per year across almost 40 licensed assembly plants. Actual local output hovers around five per cent of capacity. Plants operate well below optimal efficiency due to low patronage, grey imports and macroeconomic pressures,” Osanipin said.
Used Vehicles Dominate Market
The NADDC boss said the scale of Nigeria’s dependence on imported used vehicles remained one of the biggest challenges confronting local manufacturers.
He disclosed that between 85 and 90 per cent of the country's annual vehicle demand was still being met by imported used vehicles, popularly known as Tokunbo, rather than new vehicles assembled locally.
For Osanipin, the fundamental problem is therefore not a shortage of consumers or production facilities, but the absence of a sufficiently strong ecosystem to connect local production with affordable financing, competitive pricing and reliable demand.
“Nigeria is not short of demand or installed capacity. We are short of an ecosystem that makes locally assembled vehicles affordable and accessible,” he said.
The situation has left manufacturers with substantial idle capacity while consumers continue to rely heavily on imported used cars that are often more accessible because of lower upfront costs.
High Production Costs, Weak Local Content
Osanipin also pointed to the limited depth of local manufacturing within the automotive sector.
Although assembly plants operate in Nigeria, many remain heavily dependent on Semi-Knocked Down (SKD) kits, limiting the amount of value created domestically.
The industry is also facing high production costs, foreign exchange volatility, expensive logistics, port charges and uncertainty arising from inconsistent fiscal policies.
These factors, according to the NADDC, make locally assembled vehicles less competitive against imported alternatives.
The government’s ambition of achieving 40 per cent local content through activities including stamping, welding, body building and the integration of engines and transmissions also remains largely unmet.
Increasing local content would reduce dependence on imported components, create additional manufacturing opportunities and potentially make the domestic automotive industry more resilient to foreign exchange shocks.
Expensive Credit Limits Vehicle Ownership
Beyond production challenges, the NADDC identified access to affordable vehicle financing as one of the industry's most critical weaknesses.
Osanipin said fewer than five per cent of vehicle buyers currently had access to formal retail vehicle credit, largely because of high interest rates and stringent collateral requirements imposed by lenders.
The limited availability of affordable financing effectively excludes a large proportion of potential buyers from the new-vehicle market, making cheaper used imports more attractive.
To address the problem, he called for the establishment of a National Automotive Credit Guarantee Fund that would reduce lending risks for financial institutions and enable more Nigerians to purchase locally assembled vehicles through affordable financing arrangements.
Such a mechanism, he argued, could simultaneously stimulate demand, improve factory utilisation and support the development of a stronger domestic automotive value chain.
Government Procurement Could Create Demand
The NADDC also identified government procurement as a potentially powerful tool for supporting local vehicle manufacturers.
Osanipin said the public sector, as one of the largest potential buyers of vehicles, could provide a stable source of demand for local assembly plants if existing procurement policies were fully implemented.
“Nigeria First Procurement: The public sector is the largest potential buyer. Full operationalisation of the NADDC-BPP policy framework mandating MDAs to prioritise locally assembled vehicles before considering FBUs is critical to guarantee demand,” he said.
The policy seeks to encourage ministries, departments and agencies to purchase locally assembled vehicles before opting for Fully Built Units (FBUs) imported from abroad.
Effective implementation, the NADDC said, would give local manufacturers the predictable demand needed to increase production, invest in equipment and deepen local sourcing.
CNG, EVs Offer New Growth Opportunities
As the automotive sector grapples with its longstanding challenges, the NADDC is also looking towards emerging vehicle technologies, particularly compressed natural gas (CNG) and electric vehicles (EVs).
Osanipin described both segments as immediate opportunities for investment and industrial development.
He said CNG-powered vehicles could provide a more affordable transportation option following the removal of the petrol subsidy, while electric vehicles could find significant opportunities in Nigeria’s two- and three-wheeler markets as well as urban transportation.
“EVs have high potential for two/three-wheelers and urban transit, but will require localised charging infrastructure, battery swapping networks, and specialised technical training,” he said.
The transition towards electric mobility, however, would require substantial investment in supporting infrastructure.
Charging Network Requires Private Capital
Osanipin said the NADDC had already piloted electric vehicle charging stations at selected high-end outlets but acknowledged that such initiatives would not be sufficient to support widespread EV adoption.
He stressed that private investors would have to take the lead in building a nationwide charging network.
“There is no way you can travel with an electric vehicle now in Nigeria if investors don’t come in and start putting charging stations all over,” he said.
The NADDC director-general emphasised that government could provide the policy environment and regulatory framework, but private capital would be essential to develop the infrastructure required for a viable electric mobility ecosystem.
“The automotive industry is not a government industry. It is for individual investors to come in and take up from where we stop and invest, especially in the new trend of CNG and electric vehicles.”
From Import Dependence to Manufacturing
The NADDC, the Federal Government agency charged with promoting Nigeria’s automotive industry under the Nigerian Automotive Industry Development Plan, said it would continue engaging manufacturers, financial institutions and state governments to address the structural challenges facing the sector.
The Council's broader objective is to move Nigeria away from an import-dependent vehicle market towards a manufacturing-based automotive economy capable of meeting domestic demand and eventually serving export markets.
For an industry with more than 600,000 units of installed annual assembly capacity but actual production of less than five per cent, the scale of the opportunity is considerable.
The immediate challenge, however, is turning that dormant capacity into productive investment by making locally assembled vehicles more affordable, expanding access to credit, discouraging unfair competition from grey imports, deepening local content and creating reliable demand.
If those gaps are addressed, the NADDC believes Nigeria can begin to transform its automotive sector from a collection of underutilised assembly plants into a broader manufacturing ecosystem capable of generating jobs, attracting investment, reducing import dependence and positioning the country as a potential automotive production and export hub.