To alleviate the hardship caused by the removal of the petrol subsidy, the Federal Government promised to introduce Compressed Natural Gas-powered vehicles for the public. In this interview with DAMILOLA AINA, the Director-General of the National Automotive Design and Development Council, Joseph Osanipin, discusses the reasons behind the phased rollout of these vehicles and outlines various policy initiatives aimed at enhancing the production and adoption of Nigerian-made vehicles. Excerpts
The government has said it will soon roll out CNG-powered vehicles to cushion the effect of the fuel subsidy removal. Why is it delayed?
We all are aware of the decision by the current administration to stop the payment of the fuel subsidy and allow petroleum products to reflect their competitive price, which unfortunately increased fuel costs. However, the government, thinking of solutions, proposed the rollout of Compressed Natural Gas-powered vehicles to reduce the cost of transportation. We have been working assiduously on this project and are now at the final stage. The committee involved has set a rollout date and I think it is something that will benefit the majority of Nigerians. The vehicles to be rolled out will be transit buses in major cities first. Of course, it will be in a staggered form, meaning that the buses will come out in phases, but we also want to enlighten Nigerians to adopt these CNG buses. It is part of efforts to ensure that Nigerians should no longer have to depend on importing cars from foreign countries for their auto needs. The same thing is also planned for electric vehicles. Nigeria is capable of manufacturing these things and we are prepared to ensure that all these objectives are achieved. The rollout is not delayed and we are on track to achieve our objectives.
The decision by the government to invest in this initiative is to break the ice and show support for the policy, making it easy to attract investments. We have to thank the government and especially the President for that directive to Ministries, Department and Agencies concerning the Compressed Natural Gas adoption.
Yes, people would ask about the cost and I will say for conversion, if you are a fleet operator or a transporter, the cheap cost is a no-brainer because what is going to be your savings for one month or a maximum of six weeks will cover the cost of conversion. To convert a vehicle now costs between N500,000 and N800,000 for private cars, depending on the model and above N1m for transporters, but the amount to be saved from buying CNG will repay whatever was borrowed easily.
Even if you approach a bank for loans for it, the money can be paid back in months. We have also urged the banks to consider this funding model and I know a lot of banks are already involved in this. So it’s far better for you to do that and then be able to save a lot because what accounts for the cost of transport majorly is the cost of maintenance and the cost of fuelling and in CNG, the cost of fuelling is about 30 per cent to 35 per cent of the cost of using Premium Motor Spirit. For example, if an interstate transport company spends N100,000 per trip for a petrol vehicle when it converts to CNG, that cost will reduce to N30,000.
So the savings will influence and drive down the price of the cost of running a fleet or running a transport company, thereby bringing down the transport cost of goods and services in Nigeria.
We also talked about the conversion centres, our responsibility as a regulatory agency is to ensure that the auto industry is booming and we have to come up with initiatives that will lead to the growth of that industry.
Would the government consider the buy now pay later option for conversion?
I really can’t answer that question because; it is purely at the discretion of the business owners. This sector is mainly managed by the private sector and the government is only there to provide the right policies and environment for investments.
Now we are talking of CNG, most of our assemblers now can assemble CNG as well as vehicles using fuel, the same way they can convert existing PMS vehicles to CNG. So that’s where we are starting from. We are using them first to ensure we do the conversion and, at the same time, start the production of CNG vehicles.
Also, we are very concerned about safety and when we talk about safety, I will start by saying that the NADDC is collaborating with a lot of agencies as well as the Presidential CNG Initiative. And how do we do this? First of all, we have to address the safety side and, in doing that, we all have a role to play. NADDC, Standards Organisation of Nigeria have roles to play, and the Nigerian Midstream and Downstream Petroleum Regulatory Authority play a role in the safety precautions.
Let me start with SON, to produce or convert a vehicle, you would need a lot of kits to be coupled together. Take a cylinder, for example, an installed cylinder has to be certified. It has to be ISO-certified as well as SON-certified because most of these standards are domesticated already. For them to ascertain this process, they must also confirm that your cylinder passes the material test and also passes the heat test. If it passes these two tests, it is approved for usage and its kits are labelled with a unique number. That means the kits are okay and fit.
For the conversion centres, the council conducts the accreditation process. In accrediting the conversion centre, NADDC is looking at the facility in place as well as the personnel. The two have to work together to get the accreditation. Without the kits or facility, the individual will not be able to work well. And without the personnel, the facility cannot work on its own. So, we make sure that we have these two major ingredients in place before accreditation. Remember that the staff must be specially trained to handle the tasks and carry out the process. We have also stated that anyone who falls short of the required staff number may forfeit their license. It is even funny that some industry players have started complaining that the trained personnel are leaving their companies to establish their firms.
So, after this is done, we will give you an operating licence and then you can start the conversion of vehicles. We did this to ensure that those kits could be identified. And the way to know is that there is going to be a system called the Nigerian Gas Vehicle Management System. The NGVMS is a resource that will be accessible by NADDC, Standards Organisation of Nigeria, Federal Road Safety Corps and the Nigerian Midstream and Downstream Petroleum Regulatory Authority, where they will be feeding data into that system that would be used by all and shared by all.
For example, if I want to start a conversion centre, we will, first of all, go through the system to confirm whether the kits they want to use have met the standards and they can know by inputting the number into that system. Then after the conversion is done, we will put a label, which is going to come with a QR code, on the vehicle to state that this vehicle has been converted properly and meets all the required standards.
So from that code, we can get primary information of where and when it was converted. This can be traced. It will also enable the gas station dispensing the gas to know whether the normal process has been followed. So from there, safety officials on the road will be able to know also that this vehicle is a CNG vehicle and the proper thing has been done, just by scanning through the label showing the details and every other thing and the date of maintenance and to know whether they have been maintained well or not.
All these things put together will ensure safety, which means all of us, everyone involved will also carry out monitoring activities to ensure that this process is being followed.
Meanwhile, this system as I mentioned is going to be managed by PCNGI but with the input of all the agencies connected to provide asset information and provide information. So, this is to safeguard and take care of safety.
I have talked about the advantages, number one remains that it is cheaper to use and apart from being cheaper, which is the economic side of it, it makes our environment cleaner. The CNG reduces greenhouse emissions and makes it cleaner because the emissions are so low.
There is a plan to roll out one million CNG vehicles in three years. Can’t we do more than that?
We plan to roll out one million CNG vehicles in three years, but we can achieve more than that. What we are looking at is not only one million CNG vehicles. We are looking at increasing the local content production of those vehicles. We want a situation where we increase the local content by producing spare parts. The spare part is where the real economy is. When you look at vehicle manufacturing, the revenue is in component manufacturing, because they employ more. In terms of value addition, they do more than the manufacturers. So, in three years, what we want to see is progress in the adoption of CNG and the production of these kinds of vehicles which will reduce our dependence on the importation of cars.
The Monetary Committee of the Central Bank of Nigeria has announced that the cost of transportation remains the biggest contributor to our headline inflation.
How soon should Nigerians expect the cost of transportation to reduce, following the adoption of CNG?
The adoption of CNG will gradually drive down the cost of transportation because the two major factors that influence the price of transport cost are the cost of maintaining the vehicles and secondly, the cost of fuelling. With CNG, the engine works better, so the cost of maintenance will drop. With CNG, the cost of fueling will be reduced by 65 per cent to 70 per cent. Gradually, the cost of transportation will start reducing and then it’s going to have multiplier effects on the economy. It may not be immediate but we should start seeing the result in three months after the launch.
But we have to develop our local content to stop the importation of tyres or any other spare parts. The difference between semi-knocked down and completely knocked down is just the component you manufacture locally. Our aim at NADDC is to gradually move and climb from SKD to CKD. It’s going to be a very huge job. But we have taken that step in identifying what we can start doing.
Let’s look for low-hanging fruits. We can start the production of leather, foam, batteries or even tyres. There are about 10 to 12 million vehicles on the road daily and if every vehicle is required to change its tyres once a year, we would need around 25 million tyres annually. Even if it is just one company that comes up with an investment to meet this demand, we would be better off, saving our naira from tyre importation. This is what we are looking at to bring in more investors.
There are going to be lots of investments in manufacturing nuts, bolts, and little things like plastic parts if we can resolve this small issue of manufacturing spare parts in our country.
And then for tricycles, we can be looking at the steel, the flat sheet that is going to be used for the body form. All these can be done in this country. Gradually, we can get to painting and battery manufacturing. One of our indigenous companies unveiled electric tricycles in Kano State, showing that we can make this work.
Immediately, we can start achieving all these by increasing the local content and growing component production, because it employs more than four times what the assembly plants need and then both will have times ten multiplier effects. This means that if the assembly employs 50,000, the producer of the part will employ 200,000 and then, we will have a two million multiplier effect on that.
Because, when you look at it, you start thinking of who is going to provide other backward integration. Let’s say we are looking at leather. Some people are going to sew that leather. Some people are going to sell and transport the hide. The business will encourage more people to start growing cattle. Some people are not going to be processing it from cattle skin to preserve it until the time it turns to the needed raw materials.
Then compare with the number of persons that are now going to be employed in that value chain. So that’s why we will focus more on part development, even more than assembling because this is organic. Immediately you are growing this, the cost of production will come down because of the relatively cheaper means of getting it.
Most of the manufacturers don’t even store parts. They have the people who will supply them and then put them on the system.
Tell them this is what we are producing, and every day, we want it by 10:00 am. This is the kind of thing you need and you have to meet it for them to be able to produce at that efficient rate with all their products. You need this part to be in place, and then we can have more investment coming into the auto industry. And that’s why we are focusing on auto part development.
What is the progress report on the Nigeria automotive design plan?
The automotive design plan currently implemented by the NADDC stands on seven pillars. The first one is market expansion, where we have investment promotion, followed by skills acquisition then local content development. Currently, we have about 35 accredited local manufacturing assemblies in the country just to boost our local production.
We have safety standards. And then we have technology development and innovation. And lastly cost competitiveness. You will see somehow that those seven pillars are related.
For you to develop the local component, you have to develop the technology. As you are developing the technology, you have to develop the skills acquisition. As you are developing the skills, the local components are developing. And then for you to now develop local components, we have to put in place some policies and measures that will make them cost-competitive.
A practical example is our efforts to help part production in Nnewi, Anambra State. A lot of traders there produce a lot of parts from small bolts, wire harnesses, and different types of brake pads. We have identified them and asked what we could do to improve their standards and also reduce the costs of production.
What can we do to increase the component you are doing and even train them, expanding their exposure to technology and skills acquisitions?
To solve these issues, we built an industrial park in Nnewi and brought all of them together to share the facility. Now they don’t need to bother about buying power generators. It is going to reduce the cost. They don’t need to bother about looking for security. They don’t need to be bothered by anything because there is a centralised logistics.
So if I need to transport 50 cartons of batteries to Kano and another person needs to send 50 cartons of other spare parts to Kano, we can collaborate using the same vehicle, thus reducing the costs. Again, for us to do that, we now need to set up a material testing centre, and component testing centre. We have a component testing centre in Enugu State, where we can test components produced to meet international standards. Immediately we do that, it means we have taken care of the standards; we have taken care of cost competitiveness too.
We have to train people, and then take care of skills acquisition. The technology part of it is because we are going to provide a lot of facilities that are going to be shared. Also, there are some technologies and equipment one may not be able to buy, but we can provide. So, we can have a company that may not even produce anything but would provide the equipment. So you come, use the equipment and go, so you don’t need to buy your own.
This is going to improve technology, skills acquisition, and competitiveness, increase local production and ensure safety standards.
Then, back to investment promotion, we have come up with policies to make sure that we promote investment. If all these things we mentioned are put in place, it will encourage people to invest more. Not only foreigners, but even local investors will put more effort, put more money into this and then we have market expansion.
You were in the private sector before your appointment, how has the experience been for you in the public sector?
The funny thing is I had always seen the sector as ineffective but, since I joined, my goal has been to bring the effectiveness of the private sector and inculcate it into the public sector. I have a background in the financial sector and the automobile sector and that has equipped me to perform my duties optimally. I have studied the mandate of the council and set to ensure that the council comes up with policies and initiatives that will lead to the growth of the automotive sector. It is not just to say we want to have a Nigerian-made vehicle. I don’t think that is an appropriate way to put it. Growing the automotive sector is a different way you look at it. There are different indices to know that someone is growing, the same with different indices to know whether an entity is growing and it applies to us.
There are different parameters you can use to measure whether the industry is growing or not. You can use the number of employment the sector is generating. Apart from that, you can find out the volume compared to the Gross Domestic Product, the volume of transactions taking place in the industry and then the volume of exports the industry is generating, as well as the volume of the foreign exchange the industry is concerned.
Where do you see the automotive sector in the next four years?
We hope to, in the next four years, grow our local content and produce more cars to grow the industry. In terms of employment, the volume of the number of vehicles being assembled in Nigeria and then the kind of volume of transactions taking place within the sector, everything should be in place in terms of manufacturing spare parts and kits for CNG vehicles. One major thing I want to be remembered for is driving the production of parts. There are over 3,000 parts in a vehicle and Nigeria should be able to produce a good number of those items, considering our capacity..
