Boston, MA -- (SBWIRE) -- 03/14/2013 -- It is possible that 2013 may come to be viewed as a significant turning point in the fortunes of Nigeria's auto industry and a moment of danger for auto importers. The Nigerian government seems as if it is finally beginning to shoulder a serious role in encouraging - and protecting - domestic production. This has been mainly prompted by figures showing that capacity utilisation rates in the domestic auto industry have fallen to 10%. Nigeria, which has an annual demand of around 300,000 vehicles (new and used) also has an auto production capacity of 140,000, a figure which greatly overshadows actual output.

The new auto policy as it currently stands rests on a few key pillars. First, the Nigerian government will begin to make it more difficult to import fully built units (FBUs). Second, the Nigerian government has issued a directive prohibiting federal ministries, departments and agencies from purchasing cars assembled outside of Nigeria. Finally, the government aims to provide assistance in securing reliable, low-interest credit lines. The Bank of Industry is set to be recapitalised by the federal government to allow such an expansion in credit for auto companies.

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It is, of course, too early to pass verdict on these policies that have only just begun to be implemented in early January 2013. The past history of Nigerian economic policies indicate that this may well be a fool's errand, yet this time the government seems to have a better sense of proportion and is focusing on incremental change, beginning with greater local assembly of imported vehicle kits.

For auto importers in Nigeria, this new policy could pose a serious threat. Higher tariffs on fully built units will eat into margins and drive up prices, inevitably putting some out of business. Should the policy fail this damage is likely to be temporary as the government slowly backtracks, but if it shows signs of promise the government is likely to double down on protection and local production supports, a move which could potentially more than half the size of the imported car market before the end of the decade.

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