Naira scarcity forces Indian keke maker Bajaj to cut production

Indian motorcycle and three-wheeler maker Bajaj Auto is cutting down on its projected export due to Nigeria’s naira note redesign and demonetization policy that has resulted in a grinding cash scarcity.

Nigeria is the company’s biggest export market and receives up to a fourth of the company’s exports worldwide. The rickshaw is distributed in Nigeria by the Stallion Group.

– Key points to note

Bajaj plans to take a steep cut – probably up to 25% – in its motorcycle and three-wheeler production across its export-focused plants next month, reflecting uncertainties in Nigeria, Economic Times of India reported.

“Indeed, there is a lot of uncertainty in Nigeria – both civil and economic – on account of elections and demonetization. So, we have cut our shipments substantively until things settle,” Rakesh Sharma, executive director of Bajaj Auto was quoted as saying.

The company plans to reduce its production to between 250,000 and 270,000 units in March, compared to average production of 338,000 units in January, according to Economic Times.

– Why this matters

A cut in production will likely drive up the prices of the automobiles in Nigeria and could affect informal jobs. Bajaj is one of three top brands of tricycles sold in the country, the others being Paggio and Suzuki. The Bajaj brand sells for as high as N1.6 million a unit.

Nigeria’s intra-city transportation is heavily dependent on imported motorcycles and tricycles – popularly known as Keke-Napep. This is also a go-to daily income means that has become a lifeline for unemployed youths and graduates in the country’s cities.

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Nigeria is battling severe bank note scarcity since last month after an expiration of the use of old high denomination bank notes. Residents had until Feb. 10 to turn in old notes for replacements, but low supply of the new notes meant commercial banks rationed the few available.

The government has not responded since the Supreme Court on March 3 issued a ruling directing the central bank to allow the use of both the old and new notes till December.

In recent weeks, the piling effect of the naira note scarcity has slowed down economic activities in diverse sectors including transportation, stalling the nation’s estimated $220 billion informal economy.