Paucity of funds derails FG’s single digit interest car purchase scheme

Paucity of funds occasioned by non-collection of levies on imported Full Built Units (FBUs) of vehicles and non participation of local banks may be affecting the single digit interest rate consumer credit scheme for the purchase of new cars, BusinessDay investigations have shown.

Consequently, the National Automotive Council (NAC) is currently discussing with the African Development Bank, (ADB) for funding, a development that will lead to double digit interest credit facility.

The scheme is to be administered by WesBank of South Africa in collaboration with Nigeria’s National Automotive Council (NAC).

The volte face comes on the heels of a memorandum of understanding (MOU) signed between WesBank, a South Africa’s market leader in vehicle and asset finance (yet-to-be-licensed by CBN to operate in Nigeria) and NAC, to offer vehicle finance to retail and corporate buyers at single digit interest rate.

The essence is to stimulate the sale of locally assembled vehicles in Nigeria.

The development may hamper the dream of the  Mid-income earners who wish to purchase new cars under the proposed single digit interest rate consumer credit finance scheme.

Olusegun Aganga, minister of industry, trade and investment, said that, “while approval for operational licence from the Central Bank of Nigeria to WesBank of South Africa is being awaited, the idea is that the Federal Government wants to provide financing options to new car buyers.”

The buyers will pay back over between  four and five years. Aganga further said, “I had wanted single digit, but am told I will not get single digit interest rate.”

Luqman Mamudu, director of policy and planning, NAC, responding to our reporter’s questions said “Council still aspires for a single digit cost, but this is based on the cost of funds, especially if we are able to collect levies placed on imported Full Built Units (FBUs) and channel them to the to buyers.

“Till date, the levy account at CBN is not funded. Given this circumstance, we are looking at the worst case scenario of reliance on development finance funds and senior debts, which come at a cost. In this case, we can hope for a two digit interest which will definitely be below market rate.”

The Federal Government had earlier proposed that prospective retail and fleet buyers of new vehicles assembled in Nigeria, under the new car consumer purchase scheme would be charged a single digit interest rate.

Speaking to BusinessDay on telephone,  Aminu Jalal, director-general, NAC disclosed that, “at the initial stage, the single digit interest rate may not be feasible as a result of a number of factors.

Jalal assured that whenever the car credit finance scheme takes-off as a pilot phase, retail and fleet buyers would get vehicles at an affordable interest rate, compared with standard charges offered by banks.

He added,“if the maximum single digit is nine, locally assembled vehicles can be acquired under the scheme based on 10 percent to 12 percent, as against 20 percent to 25 percent charged by some financial institutions.

Jalal explained that with time, such interest rate might be reviewed downwards, when more banks would have keyed into the scheme, which would be largely determined by  competition in the system, complemented by the interplay of demand and supply when many of  the automotive assembly plants would have been in full production.

“WesBank, a division of FirstRand Bank Limited, provides consumer credit financing for one out of every three vehicles produced in South Africa. The Federal Government hopes to replicate the same model in Nigeria,” he said.

Recently, there was another round in the series of consultations and negotiations between the visiting WesBank  team and the FG, represented by teams from the NAC, Nigeria Customs Service (NCS), the Federal Ministry of Finance and other stakeholders.

Olusegun Aganga, minister of industry, trade and investment, said that, “while approval for operational licence from the Central Bank of Nigeria to WesBank of South Africa is being awaited, the idea is that the Federal Government wants to provide financing options to new car buyers.”

The buyers will pay back over between  four and five years. Aganga further said

The Nigerian government recently restructured the local economy to attract investment from vehicle manufacturers and grow the supply of locally-manufactured ones.

The agreement with the NAC allows WesBank to work closely with the NAC to develop vehicle financing solutions specifically for  vehicles built in Nigeria, with the aim to make them more affordable for the average Nigerian consumer.

“We are delighted that the Nigerian government and NAC have chosen WesBank as their partner of choice,” said Chris de Kock, the WesBank Chief Executive Officer (CEO). “Nigeria is the largest economy in Africa and this is an excellent opportunity to grow our footprint on the continent, in line with the FirstRand strategy.

“The bank is represented in other African markets like Botswana, Lesotho, Namibia, Mozambique, Swaziland, and Zambia.

“The move to Nigeria will extend its reach to the northern parts of the continent, presenting an opportunity to participate in some of the larger African economies where, over time, vehicles sales are expected to experience substantial growth,” he said.

MIKE OCHONMA