Prices of Tokunbo Cars Show Continuous Increase
On the 1st of January 2015, Nigeria waited for the commencement of the 70% increase in tariff on second hand vehicle importation. This was supposed to be the second phase of the national automotive policy which was announced in 2013. According to government officials, the policy was introduced to encourage local automobile manufacturing. This increase was later postponed to 30th of April 2015 after which the policy took effect.
According to shipping position online Nigeria pays more on importation duties than neighboring countries like Ghana and Benin republic. Others such as China, USA and Germany pay import duties between 1-12%. This makes Nigeria’s importation tariff the most expensive in the world.
We decided to seek the reactions of Automobile business owners, car buyers and auto mechanics on the impact of the policy so far.
A car dealer from the United Berger Automobile market Uche said that the number of cars imported by him and his colleagues had reduced by 50% due to the increase in tariff. He added that they had to increase the price of tokunbo cars due to the increase in custom duties reducing the amount of cars sold in the market on a daily basis.
Kayode Akinola, an automobile mechanic who operates out of Ikeja said that more people now service their cars regularly to prevent breakdown and more people ask him to pre inspect more Nigerian used cars than before showing a rising preference for such cars which may be due to the increase in price of tokunbo cars.
A potential car buyer Chijoke Okafor happened to be visiting a car dealership in Surulere when we interviewed him. He said that he had searched for months online viewing over 50 cars and finally decided to inspect two of the cars from one of the online car site Carmudi Nigeria. He noted that the prices of the vehicles reflected the increase in custom duties and wished he had bought a car early this year.
From another angle, while the increase in tariff has discourage large importation of tokunbo vehicles, it has opened partnering opportunities for local manufacturers and financing institutions providing car loans for the purchase of brand new made in Nigeria cars.
A staff of one of the FMCG who didn’t want his name in print said that he bought his brand new made in Nigeria car when a leading bank in Nigeria offered the company staff car loan service with a flexible monthly payment plan. He mentioned that although the interest rates were high he did not regret his decision to buy a brand new car. He called on the Federal government to provide interest free loans adding that making car loans available and accessible to car buyers will go a long way in improving sales of made in Nigeria cars and the local automobile manufacturing sector.