Cheaper cars for Nigerians as tariff crashes

Owning a car, something many Nigerians consider a pipe dream, would soon become more of a reality, particularly for low-income earners, when the Federal Government activates implementation of the planned 42 percent reduction in import tariff.

With the planned reduction in levy, car importers would pay 35 percent duty and 5 percent levy (instead of 35%), amounting to a 40-percent tariff on imported vehicles.

The 30 percent deducted from levy represents 42 percent of the total 70 percent tariff. This reduction is expected to have a corresponding reduction in the market prices of vehicles because as what car dealers pay to import is reduced, the individual buyers would be the winners in lower prices.

When the national automotive policy of 2013 came into effect, the tariff on imported vehicles became 35 percent duty and 35 percent levy, amounting to 70 percent tariff. With exchange rate continually increasing to the detriment of the naira, the cost of imported cars, even though used cars, continued increasing until some people had to shift to buying locally used cars. This is apart the role recession, inflation and the shrinking purchasing power of many Nigerians played in straining the ability of Nigerians to own cars.

To commute at their own comfort, many citizens have resorted to “accident vehicles” that are cheaper to bring in and attract rebate of about 30 percent import duty. With the reduction in tariff, it is not certain importation of accident vehicles will reduce, but what is clear is that car importation generally will increase while acquisition becomes cheaper.

“This would be good for low-income Nigerians who may be able to afford imported ‘Tokunbo’ cars rather than depend on Nigerian used cars,” notes Tony Anakebe, managing director of Gold-Link Investment Limited, a Lagos-based clearing and forwarding firm. “It will help in growing the nation’s automobile industry, and may result to increase in the importation of new cars into the country.”

Chukwu Emmanuel, a dealer at Berger Car Mart in Lagos, notes also that it is cheaper to import accident cars, and duty payable on them are also little because it comes with rebate.

He says Nigerians bring in accident vehicles and repair them before putting up the cars for sell.

Seyi Odutun, another Lagos-based car dealer, who points out that importation of accident cars became the delight of importers to bridge the gap created by high prices, says Nigerians are not buying used cars because they prefer them to new cars, but they buy them due to affordability.

“The citizens need vehicles for movement of persons, goods and services. Bringing in accident cars is one of the ways importers try to recoup from the money invested due to the high exchange rate and high tariff, because it is cheaper and profitable to bring in such low-quality cars, repair and sell,” he states.

Findings show that about 70 percent of cars presently imported into Nigerian markets are accident cars, as seven out of 10 vehicles cleared at the PTML Command of the Nigeria Customs Service (NCS) are found to have been involved in an accident.

While the legal backing for this tariff reduction is contained in the Finance Act 2020, implementation is yet to take off as the Nigeria Customs says it is yet to receive authorisation from the Federal Ministry of Finance, its supervisory ministry, giving the Service the ‘go ahead’ to begin implementation.