Senate moves to mandate MDAs to patronise local manufacturers

…As bill scales second reading

By Henry Umoru, ABUJA

A bill to make it mandatory for Ministries, Departments and Agencies (MDAs) to give priority to local manufacturers and indigenous companies in the procurement of goods and services has scaled the second reading in the Senate.

According to the Senate, the move is to prohibit the exclusion of locally produced goods in the procurement process.

The Senate said that the bill became imperative because, according to news reports, 28 assembly plants began operations out of the 54 auto assembly licences issued, but only 6 remain operational and are producing at very low capacity due to forex challenges, infrastructure, and capacity gaps, adding that following these challenges, several automakers moved to nearby Ghana and are setting up assembly plants there with plans to export the vehicles to Nigeria.

The bill seeks to make it mandatory for ministries, departments and agencies to give priority to local automobile manufacturers and indigenous companies in the procurement process and for related matters, 2025 (SB. 613).

The bill was sponsored by Senator Patrick Ndubueze, APC, Imo North.

In his presentation of the general principles of the bill, Senator Ndubueze said, “The bill seeks to make it mandatory for MDAs to give priority to local manufacturers and indigenous companies in the procurement of goods and services and to prohibit the exclusion of locally produced goods in the procurement process and for related matters.

The Bill was read for the first time in this hallowed chamber on Wednesday, 16th October, 2024.

“Any country that aims to achieve steady economic growth and development must have a policy that encourages and provides a framework for local production. It is also important that goods and services are produced locally, as its ripple effect is a reduction in imports and a rise in exports (balance of trade).

“Unfortunately, over the years, we have failed to institutionalise the use of indigenous products, brands, and services in Nigeria and have instead glorified foreign goods of no particular superior quality. This failure has been and is being felt in no less a sector than our economy. Today we see the seesawing of the Naira, and with every plunge, inflation bites harder.

“Nigeria must at this stage of our history enforce a sustainable policy on made-in-Nigeria automobiles. Why? Imported cars continue to account for billions of dollars in forex outflow. Also, one of the biggest expenses of both the public and civil service is the procurement of foreign automobiles. How do we stem the free fall of the naira if we cannot address our appetite for foreign goods? How do we support the development of indigenous brands if the biggest spender, year on year (the government), refuses to buy made-in-Nigeria goods?

“In the past, due to insufficient domestic vehicle production, Nigeria was heavily dependent on imports to meet local demand. And since the rise of a local brand such as local vehicle manufacturers, we are still heavily dependent on imports of automobiles.

“In 2021, passenger cars constituted the largest export dollar value from the United States to Nigeria (more than $1 billion), according to the U.N. confirmed figures. The launch of the National Automotive Industry Development Plan (NAIDP) in 2014 attracted the interest of leading international carmakers and led to the resumption of small-scale vehicle assembly in the country.

“According to news reports, 28 assembly plants began operations out of the 54 auto assembly licences issued, but only 6 remain operational and are producing at very low capacity due to forex challenges, infrastructure, and capacity gaps. Due to these challenges, several automakers moved to nearby Ghana and are setting up assembly plants there with plans to export the vehicles to Nigeria.

“In February 2021, the National Automotive Design and Development Council (NADDC), in collaboration with the Stallion Group, unveiled the first locally made electric car. The director of NADDC stated the goal is that by 2025, 30% of passenger cars driven in the country will be electric-powered. Innoson Vehicle Manufacturing Company Limited started automobile manufacturing in 2007 and are now producing both orthodox vehicles and electric vehicles and CNG vehicles of all shapes and manners: luxury buses, minibuses, SUVs, saloons, bulletproof vehicles, etc.

“His Excellency, President Goodluck Jonathan GCFR, commissioned ten thousand (10,000) units of their vehicles in one day, 15th October, 2010. Under a new tax law, effective on June 1, 2023, imported vehicles with engines ranging in size from 2000cc (2 litres) to 3999cc (3.9 litres) will be subject to an additional tax known as Import Adjustment Tax (IAT), which is levied at a rate of 2 per cent of the vehicle’s value for engines ranging in size from 4000cc (4 litres) and above. The new charge is in addition to the 35% import duty and 35% levy that car importers already pay.

“It is our firm belief that rescuing the Naira must begin with the adoption of more sustainable economic practices, the first of which must be the institutionalisation of buying made-in-Nigeria vehicles.

“Nigeria used French-manufactured vehicles, “Peugeot, as official vehicles from the late 1960s, and their assembly plant was commissioned by former Head of State Gen. Yakubu Gowon in 1973. Peugeot served till 2007. Togo has adopted Nigerian-made Innoson vehicles.

When China, India, Malaysia, etc., started automobile manufacturing, they banned the use of imported vehicles in their countries. Today, these countries have perfected their local processes, and we are now importing their products, some of which cannot compete with our locally manufactured vehicles.

“For instance, Innoson supplied to the Federal Airport Authority of Nigeria (FAAN), while China Manufacturing supplied 30 units. The Innoson products are still functioning effectively, while the Chinese-made vehicles have all packed up. This shows that in spite of the late foray of our local manufacturers, their products are already at par with international brands. I firmly believe that we must endorse these local ingenities with greater patronage.

“As such, we wish to propose a bill for the enactment of an act to adopt the use of Innoson Vehicles and any other locally manufactured vehicles in Nigeria as the official vehicle for the public and civil service in Nigeria. This means that 75% of vehicles used by public officers and civil servants in Nigeria for official purposes should be locally manufactured, not assembled.

“In terms of properly defining or distinguishing between assemblers and manufacturers, we believe that the following considerations are pertinent: those who have factories and whose workforce is made up of at least 70% Nigerians; those who invest in research and development and 75% of their budget is spent on Nigerians in Nigeria; and ⁠companies incorporated in Nigeria with Nigerians making up at least 50% of the shareholders of the company.

“Those who have the following technology and innovations:

o Jigs, Robotic Painting Machines, and Electrophoresis mechanisms. Beyond the obvious benefits to patriotism and national pride, we believe that the following benefits will accrue to the nation immediately. Savings on yearly FX expenditure for the procurement and maintenance of foreign automobiles; Improved FX earnings: The creation of a new, government-backed FX earner for the country will be guaranteed with the adoption of local vehicle manufacturers as the official vehicle of both civil and public service. As it stands today, whatever Nigeria adopts becomes popular across Africa and indeed the world. It is our belief that other countries in Africa will follow the trend if we are brave enough to set it.

“Jobs: With the passage of this proposed bill, manufacturers will need to improve their production capacities and quality. In addition, spare parts factories and after-sales service stations licensed by local manufacturers will spring up, creating a robust ecosystem and after-sale economy. As such, our decision will have a directly proportional effect on an explosion in the job market.

“Encouragement to entrepreneurs and Nigerian innovators: If we pass this bill, we will succeed in sending a clear message to our innovators, entrepreneurs, and those who have kept faith in the Federal Republic of Nigeria. This message will inspire a whole new generation of inventors, industrialists, and doers. They will understand that their government is willing to be their off-taker and promoter. The multiplier effect of the passage of this bill will resonate far into the future.

“There are those who may argue that Innoson and other locally manufactured automobiles are inferior in quality or prestige. Those who make that argument will only reinforce the kind of thinking that has kept us as a race and a nation behind.

“Before the likes of Elon Musk started sending rockets to space, the Wright brothers attempted to make a plane. In both cases, these innovators who reshaped the world received support from their governments. As a matter of fact, these innovators can credit their success to their governments. Today, aerospace and aero-defence technology companies have become massive FX earners for the countries that supported their indigenous innovations.

“In essence, government support for local industry should be seen as both strategically important, a long-term investment, and a national security imperative.

“As we debate this bill, my most distinguished colleagues, let us remember that all the world powers of today have one thing in common: a thriving local industry that is supported by the government. This is the main differentiating factor between first-world and third-world countries. We have the skills, resilience and market. We must, therefore, take this bold step towards a more prosperous future.”

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