In late 2013, the administration of then-President Goodluck Jonathan made a bold bet: that it could jumpstart the country’s ailing automotive industry through a comprehensive—and controversial— industrial policy, known as the National Automotive Industry Development Plan (NAIDP). Although the policy is still young, there are now promising signs that these efforts to revive the once-vibrant industry are starting to pay off—which bodes well for the current administration’s drive to diversify the oil-focused Nigerian economy.

Nigeria is certainly no newcomer to the automotive industry: from the 1960s to the late 1980s, a number of private and government-owned vehicle assembly plants operated in the country, but production dwindled down to virtually nothing in the 1990s and 2000s as a result of protracted economic downturn and plummeting oil prices. As local assembly came to a gradual halt, vehicle imports in Nigeria flourished; today, most vehicles in Nigeria are imported—and largely used (so-called “tokunbo”) imports at that. Now, the NAIDP seeks to reverse this trend, most visibly by more than tripling import tariffs on cars (to 70%) and on commercial vehicles (to 35%).

These tariff hikes on imported vehicles, it is hoped, will (re-)incentivize local assembly of vehicles (from imported parts), with a view to full domestic manufacture in the medium to long term. To complement this hike, import tariffs on partially-assembled vehicles were set at discounted rates of 5 to 10%, whereas the tariffs on parts for full assembly were completely eliminated. Despite widespread backlash against the tariff increases, year-long delays, and a change in administration with the election of President Buhari last year, the new tariffs have nonetheless come into force (on new cars at least: there are reports that tokunbo cars are still subject to a lower tariff).

The results of this policy are just now starting to show, and they reveal early markers of success. According to recently-released data, imports of new cars into Nigeria decreased by 67% in 2015 relative to the prior year, exceeding the government’s 65% target. (The continued decline of the naira may also be a factor, as car imports have become more expensive). At the same time, domestic assembly appears to have picked up sharply. Prior to the NAIDP, 15 assembly plants remained in Nigeria, only three of which were operational. Now, barely two years later, nearly all of the dormant plants have become operational again, and the government has granted a number of licenses for new assembly plants, bringing the number of assembly plants in Nigeria to at least 35. A number of major international brands have begun assembly through local partners, as has at least one Nigerian company, the much-heralded Innoson.

If such trends continue, Nigeria’s automotive landscape could change rapidly: for instance, in a recent report, PricewaterhouseCoopers (PwC) forecasts that, in a best-case scenario, Nigeria could begin full automotive manufacturing in 2023, phase out all tokunbo vehicles by 2034, and achieve new car sales of over 1 million per year by 2035.

Rosy forecasts aside, several challenges must still be tackled for Nigeria’s automotive policy to be a long-term success. Despite the current investor enthusiasm buoying the sector, automotive manufacturers have been nervous about the policy direction for the NAIDP now that President Buhari is in the driver’s seat. Certainly, the Buhari administration has emphasized the importance of diversifying the economy away from reliance on oil revenues, and developing a robust domestic automotive industry falls squarely within this vision. Still, the new administration may take a different approach than its predecessor. For instance, in October, the government suspended issuance of licenses for new assembly plants, allegedly to focus on developing local content. Moreover, the government’s recently proposed 2016 budget has drawn criticism, because of all of the government vehicles proposed to be purchased for the presidency and the legislature, worth billions of nairas, none are models that are currently being assembled in Nigeria. (The car budget was subsequently revised substantially downward). The change in administration is also said to have factored in to the recent troubles of Innoson, which fired half its workers in the last few weeks. Beyond soothing investor concerns, the government will also need to address the very real risk to its auto policy that vehicle imports will be diverted to the ports of nearby countries and brought through Nigeria’s notoriously porous land borders in order to dodge the high tariffs.

The challenges to Nigeria’s automotive vision aren’t just supply-side issues. On the demand side, an important challenge will be to provide finance to enable Nigerians to purchase cars: PwC’s report identified that over 60% of Nigerians require some type of financial support to be able to purchase a car. On this front, there are encouraging signs: the country’s National Automotive Design and Development Council has recently announced that, as part of the NAIDP, it would be rolling out an affordable “Made-in-Nigeria” vehicle purchase scheme later this year for vehicles assembled in the country.

If it can manage these and other challenges, Nigeria is well positioned to emerge as a hub for Africa’s future automotive industry. The country is the most populous in Africa and boasts a growing middle class—all of which could drive high domestic demand for new cars. Better yet, the potential market for Made-in-Nigeria cars is not bounded by the country’s borders: with its favorable geographic location, Nigeria could be exporting to West Africa and beyond in the not-too-distant future.