A joint venture comprising Africa’s richest man, Aliko Dangote and five Nigerian state governors will see the production and assembling of cars in Nigeria by French carmaker, PSA Peugeot Citroen in the first quarter of 2019. Peugeot Automobile Nigeria (PAN), a technical partner with Peugeot Citroen, will assemble 3,500 units in the first year and ramp up to 10,000 units later on at a plant that will be situated in Kaduna.
“The first vehicle should come out by the first quarter of next year. We are hoping that the factory will be completed by December. The land has been identified … we have advertised for a contractor that will build the factory,” Jimi Lawal, the adviser to the governor of Kaduna, told Reuters in an interview.
First, Peugeot will build its 301 sedans in small volumes from semi-assembled kits of parts shipped in from its plant in Vigo, Spain. Then the production of additional models such as the 308 compact and 508 may follow, the French carmaker said.
Dangote will hold a majority stake in the joint venture which is with five northern Nigerian states, Jigawa, Kebbi, Katsina and Kano. Peugeot Citroen will own a 10 percent stake in the local joint venture company and operate the plant, Lawal said. The northern states would provide offtake for cars built at the Kaduna plant.
Dangote, in alliance with two states and the Bank of Industry, made a bid to acquire a majority stake in PAN in the second quarter of 2017 after the state-bad bank AMCON sought to sell some of the assets it bought in the wake of the banking crisis in 2009.
Nigeria’s automobile market which dates back to the 50’s has great potential to thrive as it did before the recession of the 80’s, high production cost, the inconsistency and incompetence of the government and the market domination with imported used cars negatively affected it. Limited bank financing and the absence of an industrial policy has also stunted growth in the industry.
According to Lawal, PAN would start with 3.5 billion naira, an equivalent of 10 million dollars of equity, and working capital of about 5 million dollars. However, additional capital would be raised. Lawal also told Reuters that Dangote and the state governors have visited France to sign agreements.
PAN Limited was conceived in 1969 and set up in 1972 as a joint venture between the Nigerian government and Automobile Peugeot France, with an annual output of 60,000 cars which increased to 90,000 cars by the 1980s with over 2000 staff on its payroll.
The company’s role in Nigeria’s automobile market was greatly significant as it greatly relied on local suppliers who provided about 37 percent local content for production. But operations nosedived and debt racked up shortly after the government sold its stake to local core investors in 2006.
However, the Nigerian government has recently been pushing for local and indigenous production and assemblage of cars by automakers, ordering local car distributors in 2014 to come up with plans for new assembly plants while threatening to impose prohibitive import duties.