1. Overview of 2020 Nigeria’s economy - GDP contraction due to COVID-19 and fall in oil prices

It is no news that the advent of the deadly coronavirus shook the foundation of the world. Nigerian economy like several other economies in the globe wasn’t prepared for the devastating effect of such a virus.

The automotive industry, which is undoubtedly one of the most thriving sectors of the economy, took a massive hit in the course of the nation trying to curb the spread of the virus through limited human contact and cancellation of social events.

The emergence of COVID-19 has negatively impacted the auto industry in Nigeria

Before the advent of the pandemic, Nigeria as a country was just recovering from the effect of oil price shock in 2014, with the Gross Domestic Product (GDP) dropping as low as less than 3% in 2019. Due to limited fiscal space and a fall in oil prices, the International Monetary Fund (IMF) had to examine and revise the GDP growth rate in 2020, especially from 2.5% to 2%. Nigeria entered a recession due to the impact of COVID-19, the reduction in oil price and the devaluation of the Naira.

Quarterly GDP growth rate

Unit: %

Source: NBS,  Central bank of Nigeria

Another area of discourse is that: Nigeria has a huge debt hovering around her neck, due to constant borrowing by different governments in power. This has been a major worry for development practitioners and policymakers. This becomes more of an issue since there isn’t much improvement with the revenue coming in from the drop in oil price. Nigeria’s inflation rate hit 15.75% in December 2020, the highest in 3 years, which means that consumers spent more month-on-month.

Monthly inflation rate in 2020

 

Unit: %

Source: NBS,  Central bank of Nigeria

While all these are still in play, the emergence of COVID-19 came at a time the country is still trying to find its way out of impending economic disaster. The Government imposed an 8-week lockdown (March-June) to respond to the impacts of COVID-19. This led to a reduction in household income and a 9% points increase in the national poverty rate.

Total COVID-19 cases in Nigeria

Source: Worldmeters.info

• How does the government and auto industry play their parts in revamping the state of the economy in Nigeria?

Like we earlier mentioned, the auto industry and the government have collective roles to play in making sure the country gets back on her feet. First, the government has to make sure some of its policies favour the auto industry, one of which is encouraging more people to buy cars. The reduction in import duties could lead to a drop in the cost of vehicles and the cost of transportation in Nigeria.

Positive growth in the auto industry will help bolster the nation's economy and put an end to the recession

There’s a new clause in Nigeria’s Finance Bill for 2021 that will drive down import duties on foreign vehicles as follows:

• Tractors: from 35% to 10%

• Motor vehicles for the transportation of goods: from 35% to 10%

• Motor vehicles for the transportation of persons (cars): from 35% to 5%

They intend to reduce the cost of vehicles and, by extension, cut down on the cost of transportation in Nigeria.

Progression from basic SKD assembly to CKD or manufacturing is highly dependent on the growth of auxiliary industries and supporting infrastructure such as electricity. Therefore, building capacity for components such as batteries, belts, lights and tires, is key to the success of Nigeria’s auto policy.

>>> Related market review post: Why Nigerian made cars are more expensive than foreign built cars?

In local, fewer numbers are produced due to huge funding. We understand there are few indigenous car companies in Nigeria showcasing their products on all platforms. While we applaud such development, we shouldn’t forget that their production capacity cannot meet the growing demands of Nigerians. This is why the reduction in import tax is a big step in making cars available to more Nigerians.

Here is an experts' review of the effects of COVID-19 on the global auto industry. Watch the clip below.

Auto Industry Under Pressure Amid COVID-19

2. Performance overview of the automotive industry in Nigeria in 2020

Sales of new cars in Nigeria fluctuated sharply after 2014 and 2020 became the most challenging year than ever, due to the Coronavirus and the fall in the oil prices. Consequently, new car sales in 2020 decreased by 36.1% compared to 2019.

Source: OICA, Focus2move

Yearly new car sales in Nigeria

However, new cars have high prices and much lower demand than used cars in Nigeria. Since most people cannot afford the price tag placed on new cars, they often resort to acquiring locally used or foreign used vehicles, which are considered cheaper.

Innoson and other indigenous carmakers will make new cars available to more Nigerians

Some OEMs import both new cars and used cars called Tokunbo. New cars are almost bought by corporations and the government. Tokunbo cars have high prices and high consumption rates. In 2019, Nigeria imported at least 400,000 used cars (Tokunbo) as against 68,000 brand new vehicles.

>>> Read also: Nigeria auto market experienced a difficult 2020

Despite the harsh reality, Nigeria received a couple of gains as auto companies opened more assembly plants. This could lead to reduced new car prices, making it possible for more Nigerians to buy new cars.

NORD Automobiles opened an assembly plant recently in Nigeria

Not long ago, NORD Automobiles opened an assembly plant for a range of vehicles, including buses, SUV and sedan. This is laudable and beneficial to the growth of the national economy. Also, Mikano opened a multi-product assembly plant for Geely passenger cars, Dongfeng pickups, Kama and CAMC Commercial vehicles. Another event was when Coscharis launched its Renault vehicle line at its multi-product plant in Lagos.

Coscharis's multi-product plant for Renault cars in Lagos

Just recently, the Hyundai Kona EV, the first-ever locally-assembled electric car was launched in Nigeria, courtesy of Stallion Motors. The company is the official distributor of exciting car brands in the country, such as Honda, Volkswagen, Skoda, Nissan, Hyundai, Ashok Leyland, Nissan, Porsche and Audi.

The Hyundai Kona EV is the first electric car to be locally-assembled in Nigeria

All these are the indications that the Nigerian auto industry is growing but needs all the help from the government since it is still at an infant stage. The launch of an electric car in the country means Nigeria is beginning to join the train boarded by the rest of the world going towards the era of electric cars.

3. Overview of car listing report on Naijauto in 2020

According to the 2020 report, used cars with the age of over 9 years were listed the most on Naijauto. Total listings in 2020 increased by 6.5% compared to 2019.

Year of used cars on Naijauto in 2020

The average price of used SUVs fluctuated. All body types witnessed a decrease in the average price in the last two months of the year. The average price of used cars in each body type showed a sign of rising in 2020 before rapidly decreasing in the 2 remaining months.

Average price of used cars on Naijauto in 2020

From the charts displayed below, we could see the overwhelming power held by Toyota and Lexus in Nigeria, both in 2019 and 2020, proving the fact that our car listings in the last 2 years were dominated by Japanese brands. This should also indicate stability in the choice of brands among Nigerians. Nigerians usually stick to a brand based on trust, which is earned over the years. 

Top listed used car by brands on Naijauto in 2020

Top listed used cars on Naijauto by brands in 2019

The chart below shows the specific Toyota models and other models from other Japanese brands that people mostly went for in 2020. 

Top 10 listed  used models on Naijauto in 2020

The image below shows the types of vehicle most Nigerians went for in 2020. We could see that most users preferred SUV/crossover, while many still went for saloon. Wagon/Estate models had the lowest patronage in 2020.

Proportion of used car listings by body type on Naijauto in 2020

4. Why safe driving is the top user’s concern

Safe driving has always been the top concern of users on Naijauto. Buyers are usually interested in knowing the importance of keeping themselves safe on the road. This is why our safe driving section recorded the highest number of pageviews in the year 2020.

User’s concern on Naijauto in 2020

Whether you are behind the wheel of a vehicle alone or you are with people, safe driving should be of utmost importance. This is a time when people are more distracted than ever. We understand why our readers take this section very important.

5. Outlook for Nigeria economy in 2021 and the forecast for new car sales in 2021

It is a new dawn for the Nigerian automotive industry. We cannot begin to overemphasize the pivotal roles the domestic auto industry will play in national economic growth. More so, we expect the production capacity of indigenous car companies to improve.

This will make more new cars available to potential owners in the country. According to Naijauto, Nigeria auto market in 2021 is forecasted to bounce back, thanks to more assembly plants and the reduction in imported vehicle tax.

There is high hope for the Nigerian automotive market to improve tremendously

Note: Historical data is based on OICA, Fast2move

>>> See also: FG warns citizens of looming hike in petrol fuel price

In case of moderate recovery, the trajectory is that Nigeria economy is expected to return to positive growth in 2021.

Many people already considered 2020 as a ‘lost’ year since many activities were placed on hold due to the global pandemic. We hope for a rise in oil price and restoration to the normalcy of what we were accustomed to before the advent of this deadly virus in the global space.

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