Nigeria pushes for local supply chains

From the newsletter

Nigeria is trying to take a major step towards boosting its automotive industry by starting local production of vehicle spare parts. A new initiative led by the National Automotive Design and Development Council (NADDC) aims to reduce the country's reliance on expensive imports, which currently cost $1 billion annually.

• To achieve this, NADDC has invested in training Nigerian engineers in advanced design and manufacturing techniques, with the goal of increasing the local content of assembled vehicles from less than 1% to 40%.

• Ogun State is leading the charge in Nigeria's EV sector. It plans to invest $40 million in an assembly plant for electric motorcycles, two-wheelers, tricycles, cars and buses. 

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• The NADDC initiative aims to replace fuel vehicles for public transportation with cleaner alternatives, a move driven by Nigeria's struggle with high fuel costs and shortages. Since fuel subsidies were removed in May of last year, prices have skyrocketed by over 450%, making EVs increasingly attractive, especially for gig workers.

• To jumpstart the transition, Ogun State partnered with Spiro, an African EV manufacturer, to deploy electric motorcycles. The first phase of the program began in July, with a target of selling 2,000 Spiro Commando bikes. The state also introduced 100 electric tricycles and buses and has set up battery-swapping stations in Abeokuta, the state capital. 

• To make EVs more affordable, the government is collaborating with the drivers' delivery union and banks to offer financing options. To date, they have sold over 1,000 motorcycles via hire purchase.

• Other states are also embracing EVs. In Rivers State, an MoU was signed with SIX EV, another vehicle company, to introduce electric three-wheelers and buses. At the national level, the government signed an agreement with Shenzhen LEMI Technology Development Company during COP28 to invest $150 million in a battery manufacturing plant for EVs and energy storage. Early this month, NADDC partnered with E-move, an electric vehicle company from Morocco, to establish local manufacturing in Nigeria.

• While Nigeria currently lags behind other African countries in EV adoption, the government is actively promoting local manufacturing and has set an ambitious goal of phasing out internal combustion engine vehicles by 2060. Incentives such as tax breaks, import duty exemptions for EVs, and VAT exemptions for charging infrastructure are being implemented to accelerate the transition.

Our take

• Nigeria is Africa's most populous country and has the highest number of vehicles on its roads, making it a prime market for electric vehicles. So the demand for vehicles is there – but the market needs cheaper vehicles. This could be attained through local manufacturing of EVs and their components.

• Localising supply chains goes beyond just assembly and extends to sourcing raw materials and key components domestically. First, Nigeria needs to create a supportive environment for local manufacturers to enable them to produce EV components at a lower cost to compete with imports. This includes investing in research and development, providing access to financing, and implementing policies that incentivise local production.

• Nigeria needs to go all-in if it wants to truly establish itself as an EV manufacturing hub and compete with African leaders like South Africa and Morocco. But it would need to learn from those ahead by partnering with other EV makers in Africa and beyond.