• Saturday, July 20, 2024
businessday logo

BusinessDay

Importers dump salvage cars as customs tariff bites

‘Car import has declined over Customs unfriendly policy’

Five months after the Nigeria Customs Service’s new vehicle identification number (VIN) valuation policy reduced the age limit of imported cars to nine years, importers have gradually started shifting attention from importing damaged used cars to newer cars.

The policy, which also increased the import tariff on imported ‘Tokunbo’ cars, has almost defeated the essence of bringing damaged cars, popularly known as ‘accidented cars’, to get rebate on import tariff. Nigerian car dealers opted for damaged cars to cushion the effect of high import tariffs on vehicles caused by the national automotive policy of 2013.

The volume of imported used cars has also declined as vehicle models between 2000 and 2013 now pay the tariff of 2013, according to BusinessDay findings.

Olakunle Oloyede, the area controller of the Tin-Can Island Customs, said, while giving the half-year report of the command, that Nigerian importers are reducing the rate at which they bring in salvage cars in the country.

He said the importation of salvage cars is gradually going out of fashion in Nigeria.

According to him, for several months now, importers and agents have not been putting up requests to Tin-Can Customs, which is a roll-in roll-off terminal, to ask for rebates on salvage cars.

Sunny Ugorji, a stakeholder at PTML Terminal in Lagos, who specialises in vehicle clearing, told BusinessDay that Customs policy, which requires cars from 2013 model to 2000 to pay the same import duty, has automatically resulted in a decline in the importation of used vehicles into the country.

According to him, the import duty is not only high but damaged cars that used to enjoy about 40 to 50 percent rebate in the past now pay the same import duty with cars that are in good condition.

Citing an example, Ugorji said his company is processing a 2005 model of Volkswagen Golf that Customs gave an import duty of over N700,000.

He said dealers used to pay N300,000 and below as import duty on such cars, adding that the money used in clearing vehicles today has become costlier than buying a ‘Tokunbo’ car overseas.

“These were cars dealers used to buy for $1,500 and when the cost of shipment is added. It will amount to about $2,000, which was why Toyota Camry of models from 2005 and below that used to sell for N1.6 million now cost about N3.5 million today. Dealers are leaving the business because of the unfavourable government policies,” Ugorji said.

He however said that volume is declining as ships go to Cotonou Port to discharge about 4,000 vehicles only for the same ship to come to Nigeria, with only about 80 units of cars. But close to 90 percent of the 4,000 units of cars in Cotonou Port would still find their way to Nigeria despite the ban on the importation of cars through the land borders.

“This is the middle of October, about two months to Christmas, and the volume of imports remains low. This goes to show there is a lull in business activities at the port. In the past, this is the time dealers bring in a lot of used cars for buyers who are waiting for Christmas,” Ugorji added.

He, however, said that over 20,000 units of cars have been abandoned at the port since the new Customs Policy, and the government is planning to auction them at “ridiculous prices”.

According to the Foreign Trade in Goods statistics of the National Bureau of Statistics, used vehicles valued at N72.3 billion and N96.7 billion were imported in the first and second quarters of 2022 respectively, totalling N169 billion.

This value represents a decline when compared to the N174.2 billion and N172 billion worth of used cars imported in the first and second quarters of 2021, amounting to N346.2 billion ring the same period of 2021.

Read also: NPA implores Customs to stop detention of containers at Onne Port gate

Ugochukwu Obi, a car dealer in the Berger area of Lagos, told our correspondent that the importation of vehicles has reduced drastically due to the current economic challenges in Nigeria including inflation and weakness of the naira against the dollar.

He said the negative economic situation in the country is impacting the importation of luxury goods such as cars.

“For instance, if a dealer invests about $5,000 to import one car after selling it, the person would not be able to recoup up to $3,000 to buy another. This is why most Nigerians are going for locally assembled cars rather than imported cars,” Obi said on the phone.

On his part, Tony Anakebe, a Lagos-based clearing and forwarding expert, said the VIN policy has led to the payment of high import duties on cars as vehicles that used to pay N700,000 as Customs duties are now paying over N1 million.

He said that the payment of high import duty has led to a rise in the market prices of cars such that more than N5 million is paid as import duty for a 2017 model of cars, and this impacts on dealers’ bottom-line.

According to Anakebe, some countries where Nigerians normally source used cars have reduced the rate at which they sell to Nigerians.

“They prefer to sell to North Americans and South Americans such as Mexicans and Venezuelans due to reports of the questionable behaviours of Nigerians. There is also this report that some Nigerians bring in stolen cars and about five of such vehicles were recently intercepted in Nigeria,” he added.

On the way forward, Ugorji urged the government to look into the complaints of importers by making policies that are business-friendly, and create a window for importers who abandoned vehicles in the ports to clear and take delivery of them.