The Nigerian automotive industry has long faced significant barriers to growth. While the country has been a major player in Africa’s consumer market, the automotive sector has struggled to keep pace with the rest of the continent. Imported vehicles have dominated Nigerian roads for decades, creating an environment in which local manufacturers find it difficult to gain traction. The challenge is not only one of competition with global brands, but also of structural and financial constraints that limit the ability of indigenous companies to scale.
Nigeria’s automotive industry has always faced steep hurdles: from the high cost of raw materials to the lack of consistent infrastructure, and the more subtle, yet impactful, burden of expensive financing. Banks have traditionally been unwilling to offer affordable loans to manufacturers, especially those in nascent industries like local vehicle assembly. The high interest rates, sometimes exceeding 30%, make it nearly impossible for startups and mid-sized companies to thrive.
Moreover, import tariffs on completely built-up (CBU) vehicles can be as high as 70%, compounding the challenge for local manufacturers. On the flip side, imported used cars (known as “Tokunbo”) flood the market, providing Nigerians with cheaper alternatives to locally assembled cars. The result is a skewed market where local manufacturers struggle to compete with the affordability and availability of imports.
The Impact of Inconsistent Power Supply
The lack of a stable energy infrastructure in Nigeria also affects manufacturers. Power outages are frequent, making it difficult for manufacturers to operate at full capacity. The increased operational costs from relying on generators and other backup systems add another layer of complexity. For a country that aims to build a thriving automotive sector, this is a significant hindrance.
It’s not just the production side of things; even sales and distribution are affected. Car dealerships, which rely on consistent delivery schedules, find themselves at odds with the uncertainty in the supply chain. Vehicles that could have been sold in a timely manner are delayed, leaving consumers frustrated and more likely to turn to alternatives.
The Solution: Non-Interest Financing
Against this backdrop of challenges, Nord Automobiles, one of the few indigenous players in Nigeria’s car assembly sector, found itself at a critical juncture. Founded in 2017 by Oluwatobi Ajayi, Nord’s mission was clear: to create a locally produced vehicle line that could compete with the foreign imports on Nigerian roads. But like many startups, Nord struggled to secure the working capital needed to meet demand and expand its manufacturing base. With no stable financing options, the company was caught in a bind – unable to scale up production, meet customer demand, and at risk of losing its foothold in the market.
That was until The Alternative Bank (AltBank) stepped in with a solution that would change Nord’s trajectory and, by extension, the future of local auto manufacturing in Nigeria.
A New Model for Financing
What set AltBank apart from traditional financial institutions was its non-interest ethical financing model. Recognising the unique challenges faced by local manufacturers, AltBank offered a combination of debt and equity financing through a mezzanine facility. This approach allowed Nord to gain the necessary working capital to resume operations without being burdened by high-interest debt.
The agreement was took the form of an equity partnership. AltBank didn’t just lend Nord money, it took an active role in the company’s growth, becoming a partner in wealth creation for the organisation and its stakeholders. AltBank’s stake in the company created a shared commitment to growing the brand and ensuring its long-term success.
In addition to the financing, AltBank also offered advisory services, helping Nord develop better corporate governance structures and strategies for managing its expanded production capacity. The financial institution’s intervention gave Nord the tools it needed to scale responsibly and sustainably, ensuring that its growth wasn’t just short-term but built for the future.
Overcoming Barriers to Growth
The result was transformative. Nord Automobiles was able to expand its vehicle lineup and ramp up production. Previously idling production lines sprang back to life, and Nord’s workforce was able to ramp up efforts to meet the growing demand. The mezzanine financing allowed the company to increase its inventory of essential parts and components, ensuring that vehicles were available for immediate delivery, rather than customers having to wait weeks or even months for their orders.
By 2024, Nord’s product offerings had expanded from five models to eleven, including the launch of the Nord A3 sedan and Nord A9 luxury SUV, which attracted attention from both Nigerian consumers and industry watchers. The company was able to produce up to 10 cars per day across two manufacturing plants, giving it the capacity to compete with both imports and established foreign brands.
The impact of AltBank’s support was felt across the entire supply chain. By stabilising production, Nord was able to foster stronger relationships with its suppliers, who were now assured that their payments would be made on time. Similarly, dealerships that had been wary of selling Nord’s vehicles now saw the brand’s credibility solidified and, in turn, expanded their sales efforts. Customers who had once been hesitant to buy from a local manufacturer began choosing Nord’s affordable, locally-made vehicles, helping to shift sentiment away from Tokunbo imports to homegrown solutions.
A New Era for Local Manufacturing
The collaboration between Nord Automobiles and AltBank is a significant milestone for the entire Nigerian manufacturing sector. By investing in local content, both companies have demonstrated that ethical banking and local manufacturing can thrive together, creating jobs, boosting local industries, and positioning Nigeria as a self-sufficient economy.
Moreover, the partnership has provided a template for other local manufacturers looking to scale their operations. Many of the challenges that Nord faced are shared by countless others in the country’s manufacturing sector. However, with the right kind of support, these barriers can be overcome. AltBank’s role in offering equity-based financing and its willingness to partner for long-term growth sets a precedent for how banks can invest in Nigeria’s industrial future.
The story of Nord and AltBank is a reminder that Nigeria’s economic growth doesn’t have to be reliant on foreign imports. It’s about empowering local entrepreneurs and investing in homegrown solutions. With the right financial backing, Nigerian manufacturers can rise to meet the country’s demand for high-quality products, creating jobs and driving the nation’s industrial future forward.
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