In Nigeria, owning a car is regarded as a luxury that is often out of reach for the average citizen. The cost of new cars is exorbitant, and the local automotive industry is unable to meet demands. As a result, buyers increasingly turn to used imported vehicles. This is known locally as “tokunbo,” which loosely means “from overseas” in the Yoruba language. These cars are mostly imported from Europe and the United States, and they are often cheaper than new cars, serving as a good option for people looking for affordable vehicles.
Nigeria is said to be the third highest importer of used vehicles from the US, behind the United Arab Emirates (UAE), and China. According to the National Bureau of Statistics (NBS), the nation’s used vehicle market boomed in the second quarter (Q2) of 2023, with the value of imports reaching N728 billion. This is a rise by 708 percent from the same period in 2022. The country also imported 99 percent of its used vehicles from the US valued at N721.79 billion, followed by the UAE at N2.12 billion, and Belgium at N1.52 billion. Imports from Italy and Canada were valued at N1.41 billion and N1.18 billion, respectively.
Car import business has declined significantly.
But several stakeholders have decried the data. According to them, the spike in importation as reported by the NBS does not reflect the reality. A car importer at the Apapa port said that the prevailing economic situation is rendering the business largely unprofitable, adding that vehicle importers have been struggling in the past few years. He said that the high level of volatility in the foreign exchange market (FX) has grossly affected imports in spite of the NBS data.
He also maintained that importing cars is now much more expensive than before, and this has made them less affordable for Nigerians. As a result, the car import business has declined significantly. A few months after President Tinubu was sworn into office and several policies were implemented, there was an upward review of the cost of clearing vehicles at the port, with some being pegged at more than a 50 percent increase. In addition to the FX issue, there is also the problem of smuggling. Many people are now smuggling cars into Nigeria from neighboring countries, where they are cheaper. This is having a negative impact on legitimate car importers.
Unification of FX rates makes it difficult for importers to operate.
Commenting on the issue, Jonathan Nicol, president of the Shippers Association of Nigeria, Lagos chapter, said that the unification of the FX windows and the floating of the naira by the federal government is making it difficult for importers and exporters to operate. He argued that nobody would violate the customs policies or regulations if they were working with a fair import and export duty rate. He said that the depreciation effect in vehicle valuation that is normally used is no longer there.
Further, he said that importers were of the view that the government should put their economic policy in place and nobody will break the laws. “If the economic policy is not in place, you don’t push them to the wall and use the term ‘survival of the fittest’, that’s where importers are at the moment,” he remarked. On the NBS data, Nicol said that he does not believe that the increase in car imports is due to an increase in demand. He rather linked it to the depreciation of the naira against the dollar.
Impression of more spending is due to increase in exchange rate.
According to him, this can also give the impression that more cars are being bought even though this is not the case. It makes imported cars more expensive in naira terms even if the number of cars imported remains the same. He also said that shippers are contributing as much as they can to support the government in the collection of duties and fines. Finally, Nicol said that shippers were not considered by the federal government for palliative measures to cushion the effect of the petrol subsidy removal, adding that the income of Nigerians has been rendered useless with many layers of taxation.
Related Link
Nigeria Trade Hub: Website
