Oluseun Olawore, the founder of Olawore Motor Company (OMC Automobiles) has said that Nigeria’s automotive ambitions is stalled by production costs and skill shortages.

He said this during an exclusive interview with Autojournal Africa, stating that “there are three key bottlenecks slowing the pace of car manufacturing in the country namely shortage of skilled talents, high cost of production and unreliable power supply”

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Nigeria’s automotive industry holds immense potential, driven by a population exceeding 200 million and a growing middle class eager for personal mobility.

However, despite these promising demographics, the country’s automotive sector faces significant challenges that hinder its growth and development.

According to the Nigerian Bureau of Statistics, less than 10% of the 11.8 million vehicles on Nigerian roads are manufactured locally, underscoring a heavy reliance on imports. This situation highlights three critical bottlenecks: high production costs, inadequate technical skills, and unreliable power supply.

High Production Costs

High production costs are arguably the most pressing barrier for local manufacturers in Nigeria. The automotive sector is grappling with rising expenses due to several factors, including the depreciation of the naira against major currencies and increased import duties on raw materials. According to the Organization for Economic Cooperation and Development (OECD), vehicle imports reached approximately $2.3 billion in 2021, with passenger cars accounting for 60% of this figure. This heavy reliance on imported vehicles creates an uneven playing field for local manufacturers who struggle to compete with the lower prices of foreign brands.

The cost structure in Nigeria is further complicated by logistical challenges. Transporting raw materials within the country can be expensive and inefficient due to poor infrastructure. As a result, local manufacturers face higher operational costs that make it difficult to offer competitive pricing for their vehicles. This situation has led to a market dominated by foreign brands such as Toyota and Hyundai, which can leverage economies of scale and established supply chains.

Inadequate Technical Skills

Inadequate technical skills present another significant challenge for Nigeria’s automotive industry. The country has a wealth of engineering graduates; however, many lack practical experience in automotive manufacturing processes. Oluseun Olawore, CEO of OMC Automobiles, highlighted this issue during a recent interview: “We need to cultivate technical know-how if we want this industry to thrive.” He pointed out that many engineers trained in Nigeria are not equipped with the hands-on skills necessary for effective vehicle assembly and production.

This skills gap forces local manufacturers to rely on foreign expertise, which adds to production costs and limits innovation. For instance, many companies must hire expatriates or consultants from countries with more developed automotive industries, which can be financially burdensome. Furthermore, without a robust training framework or apprenticeship programs, the industry struggles to develop a workforce capable of meeting its needs.

Unreliable Power Supply

Lastly, unreliable power supply remains a significant bottleneck for car manufacturing in Nigeria. Frequent power outages disrupt production schedules and force manufacturers to rely on costly generators to maintain operations. Olawore explained this predicament succinctly: “Power means I’m going to have a generator; whether there’s electricity available or not.” The high cost of fuel for generators further exacerbates operational expenses, making it difficult for local manufacturers to maintain profitability.

According to the World Bank, Nigeria loses about $29 billion annually due to inadequate power supply and infrastructure issues. This energy crisis not only affects manufacturing but also discourages potential investors from entering the market. Without reliable electricity, manufacturers cannot operate at full capacity or invest in advanced technologies that could improve efficiency and reduce costs.

Despite these formidable challenges, there is hope for Nigeria’s automotive industry. The government has initiated policies like the National Automotive Industry Development Plan (NAIDP), aimed at promoting local assembly and increasing vehicle production capacity. These policies include incentives for manufacturers who establish assembly plants in Nigeria and support for local suppliers.

Recent data shows that new vehicle sales in Nigeria reached 13,304 units in 2023, marking an 18.9% increase from previous years. This growth suggests a rising demand for locally manufactured vehicles as consumers become more aware of domestic options. With continued investment and support from both the government and private sector stakeholders, Nigeria has the potential to transform its automotive ecosystem into a thriving hub of vehicle manufacturing.