How 28% interest rates stall Nigeria’s car ownership dreams

Nigeria’s ambitious automotive industry development plan, designed to boost local production and reduce reliance on imports, faces significant challenges from high-interest rates. Enitan Dolapo-Badru, Chairman of the House Committee on Industry, has called out deposit money banks for undermining the National Automotive Industry Development Plan (NAIDP) 2013, frustrating efforts to grow the sector.

“The policy was meant to work with banks, but they demanded interest rates of up to 28%, making car ownership unattainable,” Dolapo-Badru said during a tour of the Coscharis Automobile Company in Lagos. He stressed the financial burden such rates place on Nigerians. “You cannot ask someone struggling to feed their family to pay 35% interest on a car loan. It’s impossible,” he added.

NAIDP aimed to increase Nigeria’s industrial capacity, leveraging local resources and fostering job creation. The National Assembly approved ₦10 billion for the National Automotive Design and Development Council to support the plan, but the initiative faltered when high-interest rates deterred potential buyers. Dolapo-Badru proposed a new framework excluding banks and instead relying on collaboration between auto assembly plants and the government to create accessible financing schemes.

Josiah Samuel, Group Managing Director of Coscharis Group, highlighted the industry’s readiness to bridge these gaps. “Ten years ago, we praised the auto policy and quickly engaged partners like Ford Motor Company. We even launched a Semi Knock-Down plant in Ikeja,” he said. Despite these efforts, high costs and limited incentives have hindered progress.

The original plan included measures to discourage the importation of used cars and introduce single-digit financing for new vehicles. “It’s a numbers game. Without affordable financing, local demand cannot drive production,” Samuel said. Coscharis has since invested in assembly plants nationwide, creating jobs and maintaining optimism about the sector’s potential.

Dolapo-Badru’s call to action underscores the urgency for reform. “The way forward is for assembly plants to collaborate with the National Assembly. Together, we must devise schemes that guarantee affordability and longevity for buyers,” he said, emphasizing the need for a sustainable auto industry to uplift Nigeria’s economy.

Read more on Nigeria aims to slash $1 bn import bill with auto spare parts production