NADDC DG: Nigeria Must Have Home-Grown Used Vehicle Market, Stop Depending on Tokunbo Imports

By Daphne Uduneje

Nigeria’s automotive industry may be on the cusp of a structural shift as the National Automotive Design and Development Council (NADDC) moves to reduce the country’s longstanding dependence on imported used vehicles and foster a domestic market where vehicles bought new in Nigeria can circulate through successive owners.

The Director General of the NADDC, Otunba Oluwemimo Joseph Osanipin, said the country’s continued reliance on imported used vehicles, popularly known as tokunbo, was weakening the development of local automotive manufacturing, draining foreign exchange and limiting the growth of a sustainable domestic vehicle ecosystem.

Speaking at the Council’s headquarters in Abuja, Osanipin argued that used vehicles were not inherently detrimental to the economy. Rather, the fundamental problem was that Nigeria’s used-vehicle market was largely supplied from outside the country instead of being generated internally.

According to him, countries with more developed automotive ecosystems have succeeded in creating domestic secondary markets in which vehicles purchased new are eventually resold and continue to generate economic value within the same market.

“Used vehicles flourish in South Africa, but all the used vehicles in South Africa are generated internally. In most of the other countries too, their used vehicles are generated internally,” he said.

“In Nigeria, the difference is that ours come from outside, and that is where the problem lies.”

The position reflects a broader challenge facing Nigeria’s automotive sector, where large volumes of imported used vehicles compete with a relatively small number of vehicles produced or assembled locally.

Osanipin said the situation had become particularly concerning because substantial foreign exchange continued to leave the country to finance the importation of hundreds of thousands of used vehicles, including some that arrive in poor mechanical condition.

He maintained that Nigeria needed to move towards a system where vehicles purchased new locally could remain within the domestic market for several years, changing hands and creating economic value at each stage.

“If we buy a new vehicle, use it for two or three years, and you think a new version is out, you sell it,” he explained. “Another person that can buy a three-year-old vehicle buys it, uses it for two years and then sells it to a third user.

“So, this way, new vehicles circulate within the same system as used vehicles.”

Such a model, he said, would expand access to vehicle ownership while simultaneously creating a more sustainable market for locally assembled and manufactured vehicles.

Three Structural Barriers

Osanipin said that when he assumed office as NADDC Director General in October 2023, the Council identified three major structural constraints holding back the automotive industry: legislation, consumer credit and the structure of the used-vehicle market.

He acknowledged that the challenges could not be resolved within a few years, but stressed that the priority was to begin laying the foundation for long-term transformation.

“When we came in, we knew that we were facing a lot of challenges in the automobile industry. And we knew that we could not surmount the challenges in the next three, four, five years, or even 10 years,” he said.

“But we knew we had to start from somewhere and start laying the foundation towards tackling the challenges.”

Policy Stability Critical to Investment

For an industry that requires substantial capital and long investment cycles, Osanipin identified policy instability as one of the biggest deterrents to investment.

He noted that establishing a modern automotive assembly plant could require billions of naira in capital expenditure, making policy consistency essential to giving investors confidence that their investments would remain viable over time.

“The automotive sector requires a lot of funding. It is very competitive. So, it is not something that you can say you want to just leisurely try; if it works out, fine, and if it does not work out, fine,” he said.

He cited the second factory being developed by Innoson Vehicle Manufacturing Company Ltd in Nnewi as an illustration of the scale of capital required to establish automotive production capacity.

Osanipin said policy changes capable of undermining such investments could result in billions of naira being put at risk.

To address the challenge, the NADDC has been working on strengthening the Nigerian Automotive Industry Development Plan (NAIDP), a framework developed with industry stakeholders to provide greater predictability and direction for the sector.

He disclosed that a new draft of the NAIDP was already being reviewed and would undergo further stakeholder consultations before being forwarded to the Ministry of Justice.

According to him, the Council had also engaged the National Assembly, the Presidency and the Chief of Staff on the proposed framework.

He explained that an earlier draft sent to the Ministry of Justice was returned for amendments, particularly in areas where provisions overlapped with existing legislation and the new tax law.

The latest review, he said, would also take into account developments that had occurred since the original document was prepared, including issues around pioneer status.

Consumer Credit: The Missing Engine of Vehicle Sales

Beyond policy, Osanipin identified the absence of affordable and specialised automotive financing as another major constraint on vehicle ownership and market expansion.

He argued that unlike mature automotive markets, where vehicle purchases are predominantly financed through specialised automotive finance institutions, Nigerians are often expected to pay for vehicles outright.

“In Nigeria, commercial banks will not do that,” he said, contrasting the situation with markets such as Japan, South Korea and China, where specialised automotive finance companies play major roles in vehicle purchases.

He said the cost of conventional bank financing in Nigeria also made vehicle loans largely unattractive, particularly when interest rates could reach 30 to 35 per cent.

“You cannot be paying interest at 30 to 35 per cent. It will not make any sense,” he said.

The NADDC subsequently engaged the Presidency and other stakeholders on the issue, leading to collaboration with the Nigerian Consumer Credit Corporation (CreditCorp).

Osanipin said the Council was working with CreditCorp to ensure that a significant portion of available consumer-credit funding could support automobile purchases.

He disclosed that discussions were also under way on additional funding beyond the initial N20 billion earmarked for automobile financing.

The development, he suggested, could become an important catalyst for expanding vehicle ownership and stimulating demand for locally assembled vehicles.

Building a Domestic Secondary Vehicle Market

At the heart of the NADDC’s strategy, however, is the creation of a credible domestic used-vehicle market.

For Osanipin, the objective is not to eliminate used vehicles from the Nigerian market but to change where those vehicles originate.

A vehicle purchased new in Nigeria should, in his view, be able to move from its first owner to a second and third owner without necessarily leaving the country and being replaced by another imported used vehicle.

Such a system could create a continuous domestic demand cycle while allowing Nigerians with different income levels to participate in the vehicle market.

But the development of such a market depends heavily on trust and transparency.

Osanipin said Nigeria currently lacked a comprehensive database that would allow prospective buyers to verify a vehicle’s ownership and maintenance history, accident record and other critical information before purchase.

“You want to know the date it was bought. You want to know the kind of maintenance done on it. You will like to know whether it has been involved in an accident before,” he said.

“That is part of what we are working on later on, to ensure that everything that happens to vehicles is captured so that we can have the history of the vehicles.”

NADDC Deploys Vehicle Data Infrastructure

In pursuit of that objective, the NADDC recently launched the National Automotive Repository Platform (NARP) in Lagos.

The platform is expected to be integrated with the National Vehicle Registry (VREG) of the Federal Ministry of Finance and the Nigeria Customs Service’s platform.

The objective is to establish a more comprehensive information trail around vehicles entering and operating in Nigeria, ultimately providing the foundation for a reliable vehicle-history system.

Osanipin said the system would enable authorities to monitor vehicles from the point of entry and ensure that relevant information is captured during registration and throughout their useful lives.

The development could prove significant for the growth of a domestic used-vehicle market, where vehicle history and condition are critical determinants of value.

Local Components as the Industrialisation Catalyst

While reducing tokunbo dependence remains important, Osanipin said the Council’s broader strategy extends beyond vehicle assembly to the development of a local automotive component manufacturing base.

He described components as the “engine room” of automotive industrialisation, arguing that Nigeria would not achieve meaningful automotive development simply by assembling vehicles while continuing to import most of the components required to produce them.

A modern vehicle, he noted, could contain between 2,000 and 3,000 individual parts, presenting significant opportunities for local manufacturers and job creation.

The NADDC has therefore been identifying companies and industrial clusters with the capacity to manufacture automotive components, particularly in Lagos, Anambra and other industrial locations.

Osanipin cited a plastics manufacturing facility in Emene, Enugu State, which he said has the capacity to produce a range of components for automobiles and other applications.

He also pointed to local capacity in motorcycle and tricycle tyre manufacturing as evidence that Nigeria possesses industrial capabilities that could be scaled up with the right support.

According to him, some locally produced components are already competitive in quality with imported alternatives but suffer from limited public awareness and market acceptance.

He argued that greater patronage of locally manufactured components would help strengthen domestic production and reduce the country’s exposure to foreign exchange pressures.

Motorcycle Parts, Tyres and Batteries

The Council has also launched initiatives aimed at increasing local production of motorcycle components.

Osanipin said virtually every major component of a motorcycle, except the engine, could potentially be produced locally, prompting the NADDC to introduce a motorcycle parts deletion programme.

The initiative is intended to progressively replace imported components with locally manufactured alternatives while working with manufacturers to ensure compatibility with products and brands operating in Nigeria.

The Council has similarly undertaken sensitisation programmes focused on tyres and batteries.

The battery segment, he said, revealed a significant gap between domestic demand and local production.

“Nigeria is using about 120,000 batteries every month. But what we can produce in Nigeria as of today is less than 20,000,” he said.

The implication, according to Osanipin, is that local manufacturing capacity must first be expanded before aggressive policies are introduced to restrict imports.

AfCFTA Raises the Stakes

The push for local automotive content has become even more urgent with the implementation of the African Continental Free Trade Area (AfCFTA), which could provide Nigerian manufacturers with access to a much larger continental market.

Osanipin said Nigeria must strengthen its manufacturing base to take advantage of emerging opportunities under the continental trade framework.

He pointed specifically to the 40 per cent rule of origin, which determines eligibility for preferential trade treatment within the African market.

“The 40 per cent rule of origin emphasises that you have to have 40 per cent local content before they can allow you to move an item to another country without a trade barrier,” he said.

The implication is clear: without sufficient domestic content, Nigerian automotive manufacturers could struggle to fully exploit the opportunities presented by Africa’s integrated market.

Skills Certification to Complete the Value Chain

The NADDC’s industrial strategy also includes formal recognition and certification of automotive skills.

Osanipin said Nigeria has a substantial pool of people with practical automotive expertise, but many lack formal certification, limiting their ability to secure better remuneration and recognition.

“We have people that have different skills in automobiles, but they are not certified. And because of that, their skills are not well rewarded,” he said.

For the Council, therefore, automotive industrialisation must extend beyond factories to include the human capital required to operate and sustain the industry.

From Vehicle Imports to Automotive Ecosystem

The transformation envisaged by the NADDC goes beyond simply replacing imported vehicles with locally assembled alternatives.

It is an attempt to build an interconnected automotive ecosystem in which vehicles are assembled or manufactured locally, components are increasingly produced domestically, consumers can access affordable financing, vehicle histories are transparent, technical skills are certified and the vehicles themselves remain within the Nigerian economy through successive ownership cycles.

For Nigeria, the economic opportunity could be substantial.

A vehicle purchased new in the country could generate value for an assembler, component manufacturer, financier, dealer, technician, insurer and other service providers before eventually entering the domestic used-vehicle market.

Instead of foreign exchange continually leaving the country to purchase used vehicles discarded by motorists abroad, a larger share of that economic activity could be retained within Nigeria.

The challenge is that building such an ecosystem will require sustained policy consistency, significant investment, affordable credit, stronger local manufacturing capacity and consumer confidence.

Osanipin is under no illusion that the transformation will happen overnight.

But the NADDC’s emerging strategy suggests a deliberate attempt to shift Nigeria’s automotive industry from a predominantly import-dependent consumption model towards a circular domestic market—one in which a vehicle bought new in Nigeria can remain an economic asset long after its first owner has moved on.

For a country with one of Africa’s largest vehicle markets and a vast unmet demand for affordable mobility, turning the tokunbo challenge into a domestic automotive opportunity could ultimately prove to be one of the most consequential steps towards building a genuinely Nigerian automotive industry.