The Nigerian economy has displayed a healthy growth for some years now, as shown by its increasing industrial output, the growing number of businesses as well as consumer demand. In addition, due to Nigeria’s still limited industrial infrastructure, there is always a high demand for imports, especially of automobiles. This means that there are many opportunities in the international automobile market in Nigeria. Exporting cars to Nigeria is becoming increasingly common, and presents a growing opportunity for investment.
What is the Market Like?
As reported by Export.gov, the automotive market in Nigeria is growing. In 2015, demand for automobiles was over 675,000 units. In 2017, demand rose to 880,000 units in 2017. The current estimate is between 500,000 to 1,000,000 cars per year. Automobile imports made up to 11.5% of all international imports in 2017. The total economic value of automobiles imported into Nigeria in 2017 was 6.9 billion dollars, with 2.9 billion dollars just from passenger vehicles.
This is due to the lack of capacity by local companies to mass produce automobiles at a rate that can meet consumer demand. However, the Nigerian government has plans to change this situation.
As a matter of fact, since 2014, the government pushed for local production of vehicles. Such efforts involved increasing import tariffs, huge investments and funding. The government also established the NAIDP (Nigerian Automotive Industry Development Plan). The resulting plan involved major funding for 35 companies with the objective of producing around roughly 400,000 units in 2017. The result, however, was far lower than expected. The current production rate per year is estimated to be roughly 10,000-50,000 units.
As a result, consumer demand for automobiles continues to be met by international makes like Toyota, Honda, Kia, Ford, and others. These brands take up most of the market in Nigeria.
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What are the Pros and Cons of Exporting Cars to Nigeria?
As mentioned in the Export.gov report, Nigeria depends heavily on car imports to meet consumer demand. Although tariffs have driven prices up substantially, and there are local car makers producing for the public, the demand is still very strong for cars and car parts from the USA.
However, there has been a 60% drop in sales of vehicles imported from the US since 2014. Moreover, the average income per household is not enough to allow consumers to buy brand new cars regularly. As a result, the majority of the public has a strong preference for used cars, which are also imported.
The effect of the tariffs has led large corporations, the major buyers of automobiles, to spend less on vehicles. Large corporations that would buy cars on a 4-year cycle before the tariffs are now cycling cars every 7 years to save money on the high costs of new cars.
Low Local Competition
As the industrial infrastructure in Nigeria cannot satisfy domestic demand, private consumers and companies still prefer international brands. Both new and used Toyotas, Hondas, and Kias are greatly in demand despite their higher price. This is due to their renowned reliability. Brands like Toyota, Honda, and Kia are currently dominant Nigeria, with new vehicles from these companies holding 1/3 of the automobile market.
This means that exporting automotive products and car parts for these major brands is a lucrative and low-competition market. The public has long favored car-related products imported from the USA. However, not many consumers will be able to afford these products due to the low average income.
The Rising Values of Cars in Nigeria
In addition to the low competition, as Export.gov points out, the value of new vehicles is rising in Nigeria. This is due to various factors, from the depreciation of the Naira, the currency in Nigeria, to the tariffs placed on imports to promote local developments and industrialization.
This means that products related to these cars will have more value and business will be lucrative as long as people are buying those cars. On the other hand, the consistent rise in car values will make individuals begin to favor locally produced vehicles rather than the much more expensive imports.
The Opportunity in Exporting Car Parts
On top of all the products that can be sold for car care, the export of car parts for used cars is a very good market. In 2014, the United States exported more than 80 million dollars worth of vehicle parts and accessories to Nigeria, according to U.S. Census Bureau figures. Those numbers are still growing because used cars continue to be heavily preferred to new cars in Nigeria.
The Future Outlook of the Nigerian Automotive Market?
At the moment, there are significant limitations to industrial production in Nigeria. But there are plans in motion to increase the quantity and quality of mass-produced car-related products. The Nigerian Automobile Council expects to create the capacity to build components such as batteries, belts, lights, and tires in Nigeria. These products will serve as the key to efficiently mass-produce automobiles in Nigeria.
This means that the international market will continue to exist, but the limitations on importing automobiles from outside sources like the USA will become stronger as internal industrialization continues to grow, and Nigeria produces more cars. But, as export.gov points out, there will be other business opportunities. These will include the supply of equipment to domestic assemblers, spare parts and the setting up of local component manufacturing plants.