Nigerian middle-class squeezed as used car prices rise 51%

This is not the best of times for the Nigerian middle class as the they grapple with the surge in prices of used cars which increased by 51 percent between January and May, 2016.

The trend signals a clear pricing-out of a larger segment of a population hit by non-payment of salaries and salary cuts and caught in the web of high inflation rate.

Investigation by BusinessDay reporters reveal that a combination of factors including outrageous and discriminatory charges by officers of Nigeria’s border authorities and the scarcity of foreign exchange are largely responsible for the increase.

Former Nigerian President Goodluck Jonathan, in a bid to boost the country’s fledgling auto industry introduced higher taxes on imported cars to support local assembly and production of vehicles.

To prevent continuous importation of an estimated 65,000 brand new vehicles and 250,000 used vehicles annually into the country, the former administration introduced 35 percent levy and 35 percent duty on imported new vehicles.

BusinessDay checks reveal that the Toyota brand account for the largest volume of all the vehicles sold in Nigeria’s used car market.

With the combined effect of scarcity of foreign exchange and transfer of high overhead cost incurred at the point of entry supervised by the Customs Service at the Nigerian borders with other countries, the Toyota Corolla 2004/2005 now sells for N1.5m as against N1m, while Toyota Picnic is currently sold at N1.6m instead of the previous N1.1m.

The price of a Toyota Sequoia 2002 model rose by 51.1 percent to N2.5m from N1.65m, while Forerunner 2007/2008 model now goes for between N4.1m and N4.2m as against N3.1m last year.

The price of Mazda’s new model car increased to N1.5m from N1.25m within the last five months.

Amoaobi Ndudiekwe, vice president, United Berger Motors Dealers Association, said the majority of consumers now buy Toyota products due to their high resale value. “Toyota vehicles are cheaper to maintain with readily available and affordable spare,  consumes less fuel and the technicians are readily available,” Ndudiekwe said.

While outlining the enormous challenges which he says is hurting their businesses, Ezenwaka called on the government to relax some of their policies in the interest of Nigerians.

“We pay very high duties, coupled with other port charges and these make the price of the cars high. Government should work towards making the economy stable for businesses to thrive. Our dealers are now paying duty because we don’t want to deprive government their wages. Banning something we are not producing will tell on the masses,” he said.

According to Ikechukwu Ibe, analysts and managing director of a services and manufacturing firm, MD Services Limited, “Only people that can eat buy cars. This tells you the extent to which the middle-class has felt the economic situation.’’

Nigeria’s economy may enter a recession by the end of the second quarter of 2016, according to the central bank.

Inflation rose to 13.7 percent in April, latest data from the bureau of statistics show.

For Raymond Ezenwaka, chairman, mesal Concept Car  Dealers Forum, “Last year, we used to sell 100 to 150 vehicles  weekly, but from January till date, we have not sold up to 10 vehicles in a week. It is difficult to see parking space here before but now there are spaces everywhere, there are cars but no one is buying. No dealer here is travelling as usual because of the exchange rate. We buy at a higher rate.’’

Odinaka Onyeahialam, MD, Salann Autos, lamented that life has been unbearable for him since the beginning of the year, as he has not been able to make sales. “Last year, I used to sell two or three cars daily, but this year has been terrible. I have a vehicle I bought since January and I’ve not been able to sell that vehicle and it’s Toyota, a brand that is moving very well in the market,” Onyeahialam said.

George Onoriode, MD, George Motors lamented that business has never been this harsh but he’s optimistic things will change for the better soonest. Some operators had to sell a little above cost price to make more sales and meet up with family demands.

“The market is generally dull. I use to sell a minimum of four cars in a month but since the cost of clearing and other logistics shot up, I hardly make sales. To be honest, I’ve not sold a car for three months now. You can see dealers playing around in the market because there is no business; people are not coming to buy. No buyer has even come to price one or two cars today but we believe things will change”, he said.

“The market is competitive and now we have fewer buyers, so I try to sell lower than others. I’ve sold about 15 cars since January because I did not increase the price of my cars as much as others did. Most dealers want to make the same profit they were making last year but once I can make as little as N30, 000 profit, I sell off the vehicle so that I can take care of my family”, Osiebe explained.

MIKE OCHONMA & CHINWE AGBEZE