• Sunday, May 26, 2024
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BusinessDay

@63: Nigerians ‘break bank’ to buy cars as naira tanks

Africa’s new vehicle sales see 32% recovery

In the 70s and 80s when Peugeot saloon cars and Volkswagen Beetles were kings that ruled Nigerian roads, brand new cars were sold for between N3,000 and N4,000.

This does not mean that N3,000 or even N4,000 was easy to come by in Nigeria at that time, but it was because Nigeria’s Naira was stronger against the dollar.

In 1974, exactly 14 years after Nigeria gained independence from the British colonial master, a Ford Escort car was sold for N2,290, according to a Daily Times report.
Also, a Peugeot 404 was sold in Nigeria for N4,290 in 1977. Then, Nigerians only needed about 0.647 kobo to exchange one dollar, which means that the Naira was stronger than the dollar in those days.

Today, for a Nigerian to buy a brand-new mini-SUV in the category of Suzuki Grand Vitara and Hyundai Creta, such a person must have between N22 million and N23 million.

This is aside from going for the high-end luxury cars such as the Toyota Highlander which currently goes for about N72 million, the Toyota Land Cruiser which goes for about N130 million and the Toyota Land Cruiser Sport GR which sells for about N150 million. These prices represent how much Nigeria’s Naira has lost its value in recent times.

This is why many Nigerians now depend on bank loans to fund the purchase of their cars of choice due to high market prices.
“The prices of cars are up because of the devaluation of the naira, and we buy a lot of FX from the banks to import these cars and their spare parts,” Aissatou Diouf, general manager of Suzuki by CFAO, told BusinessDay in a recent interview.

There are other factors that add to the prices of cars in Nigeria in addition to the FX rates. For instance, in the early 80s, when PAN was fully functional in Nigeria, it was not just a car assembly plant but a manufacturing company that sourced most of its spare parts locally.
Presently, the opposite is the case as most of the cars sold in Nigeria are imported as either brand new or used cars popularly known as tokunbo cars. Only a few new cars are assembled in Nigeria and most of their parts are imported into the country as well.

Read also: Naira’s race to bottom erases cheer on independence day

BusinessDay discovered that the constant adjustment of the exchange rate for clearing imported cars and spare parts at the nation’s seaports by the Nigeria Customs Service (NCS) is also resulting in a rise in the prices of new and used cars in the Nigerian market.
Citing an example, Diouf said that before, the Customs exchange rate was around N422.3/$ in 2022, and in 2023, the exchange rate for clearing imports was again adjusted upward.
Aside from new cars, Nigerians are also paying a premium to buy foreign-used cars because the price has also skyrocketed.

For instance, a foreign-used Toyota Camry car that was sold for between N600,000 and N700,000 about 10 years ago goes for between N4.8 million and N7 million depending on the age and the model of the car.

As Nigeria’s currency continues to weaken against the dollar, the tariff paid by importers of new and used cars in Nigeria will continue to be on the high side as Nigeria Customs continues to adjust its exchange rate for calculating import duties.

Just recently, the exchange rate for calculating import duties was adjusted to N757.023/$.

“40 years ago, a car used to cost less than N5,000 but now inflation and the weak Naira have pushed the prices of vehicles in Nigeria on the upward trend. Today, it has become extremely difficult to get a foreign used vehicle that costs less than N4 million in the used car market,” said Joseph Adebayo, a 76-year-old retiree.

Read also:Naira’s race to bottom erases cheer on independence day

Adebayo described Nigeria as an importing nation with money that has no value because the country only exports crude oil to the West where it is refined into petrol, diesel and others, and sold back to Nigeria.

He said the situation puts the country under pressure to always source for the dollar to buy refined petroleum products for local energy use, which is one of the reasons the dollar is always scarce.

Auto experts believe that it would be difficult for the prices of cars in the Nigerian market to drop from their present value. This is because paying high Customs tariffs on imported cars, inflation and FX rates will always have a huge impact on the prices of imported cars.