Nigeria. Adverse economic conditions hit the 2019 car market

Nigerian Cars Market

Nigerian Cars Market in the 2019 is again in a negative mood with year to date sales at 11.600 (-13.6%) following the robust recovery reported in the previous year. The market is not supported by the economic environment, considering Nigeria is hit by the low global crude oil price and the non-oil sector is disappointing.

Economic Environment

Nigerian economy economy gathered momentum somewhat in Q3, after growth slowed in Q2 on disappointing non-oil sector activity. Bank lending remained strong in July–August and the PMI hit a 15-month high in September, hinting at improved private-sector dynamics. Moreover, preliminary OPEC data showed that oil output averaged higher in Q3 than in Q2, spelling good news for the vital oil industry. That said, lower global crude prices may have capped some of the gains. In late September, the Central Bank raised the minimum loan-to-deposit ratio to 65% from 60%, the second increase in three months, to further pressure banks to boost credit to SMEs and consumers.

Economic activity is seen gaining speed next year amid the ongoing recovery. The full implementation of the minimum wage hike and increased credit provision to the private sector should support domestic demand. However, the outlook is weighed on by elevated unemployment, high dependence on the oil sector, power shortages, insecurity, and a bleaker global economic backdrop.

Market Trend

Nigerian market – placed 8th worldwide as population and natural resources – was the “gold mine” of the African automotive industry while actually is a market with just few new models sold and a huge bulk of pre-owned imported vehicles

Indeed, until the 2014 the market grew steady, eventually hitting the 57.000 units record for new vehicles, when the Government decided to fix two targets for the industry, aiming to boost local production at over half million annual units, creating the hub for the entire region, while support the development of domestic market, projected to grow four times in the following 5 years to hit the 200.000 annual sales in the 2020.

At the end of that year the Nigerian Automotive Industry Development Plan was created matching the Brazilian’s one in which the government rather than “invite” to produce locally, “forced” car-makers to appoint local facilities wishing to be part of the “party”.

In the first two following years the government released almost 30 licenses, while the domestic market collapsed falling down at 11.743 units (including HCVs and bus) in the 2017, due to the deep economic crisis generated by the fall in oil price and the poor domestic demand. So, despite the released licences, no-one started to create local plant, waiting for better times.

In the 2018 the market started to recovery, considering the level was near 20% of the 2014 level. Sales grew up at 19.545 (including near 2k of HCVs) and a first group of car manufacturer started to open – in same cases to reopen – small local plant to supply the domestic market. This is the case of Mitsubishi Motors, Peugeot, Nissan, Byd. Volkswagen recently announced the desire to re-opening the local plant closed 40 years ago.

A local Joint-venture, Innosov, started the production with huge difficulties both in terms of financing and production skills. However they started to deliver the first models in the 2018.

In the 2019 the light vehicles market is back struggling with year to date September sales down 13.7% at 11.608 units, while the HCVs grew up 30% at near 2.000 units.

With near 25% of market share, Toyota is the leader ahead of Hyundai and Ford.

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