Households cut vehicle fleet on high petrol cost, FX

The surge in petrol prices, foreign exchange crunch and high inflation in Nigeria have forced several households to cut their vehicle fleets.

The situation is reducing the appetite for auto licences, particularly for those having more than one vehicle.

Tunde Dolapo , an engineer, used to drive three cars and maintain them without complaints until recently.

He lives in Mowe, Ogun State, but works in Lagos. For many years, he was driving down to his Lagos office every day from Ogun. However, he is beginning to consider selling one of his luxury cars so that he can survive the current petrol price and economic crunch.

“There is no way I can maintain my three cars this time. Fuelling one now is difficult, let alone fuelling three cars and also maintaining them,” he said.

He has decided to keep just two, one for his daily movements and the other for family outings.

Petrol price jumped from N200/litre to over N600 on May 29, 2023. Petrol price has now settled at N855/litre, after rising to over N1000/litre due to scarcity and crisis in the sector in August, adding to the already mounting pressure on household budgets.

The number of vehicles imported into the country fell sharply by 60.4 percent year-on-year (YoY) to 10,991 in the first half (H1) of 2024, according to the quarterly meeting report of the Nigerian Port Consultative Council (NPCC).

According to the report, vehicle traffic in H1 2024 fell by 60.8 percent to 10,991 units.

Tunde Keshinro, general manager of Ports & Terminal Multipurpose Limited (PTML), had said that data showed that used vehicle importation dropped from 45,000 units in H1 of 2023 to 18, 000 units in H1 2024.

Ken Ubochi, a motor parts dealer at Ladipo, said it used to cost him not less than N20, 000 to fuel his V6 Pilot SUV, but it has tripled.

“Fuelling the cars now has become a big issue. So, most times, I join public transport even when I have two cars in the house. I sell vehicle parts, and I can tell you many people can no longer maintain their vehicles.

“Keeping more than two vehicles at home now is no longer fashionable when you cannot fuel them and maintain them the way it is supposed to,” he said.

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Foreign exchange scarcity has pushed up the cost of importing cars into the country by over 100 percent. The naira has weakened by more than 80 percent since 2023 after market float. This has raised the prices of vehicles, forcing several households to abandon them. However, recent petrol price hikes have worsened the plights of many more households, forcing them to park their vehicles.

“I have parked two of my cars,” said Mohammed Yahaya, an Abuja-based hotelier.

“I need to live within my means,” he added.

Godswill Odoin, a young Nigerian who recently sold his 2004 Toyota Camry, said: “Nigerians are now selling their used cars. This is largely due to the skyrocketing global inflation and scarcity of foreign exchange as well as the high exchange rate of naira to dollar.”

According to Chika Udoh, a vehicle licensing agent at Berger, “With fewer vehicles on the road, insurance companies may be facing reduced premiums on motor business, which is likely to affect their incomes when full-year results start to come by year-end.

“I have noticed that many of my customers that I renew their vehicle papers regularly for are not coming as usual, and those with many vehicles in their houses don’t want to renew them all again.”

The number of insured vehicles in Nigeria dropped by 18.97 percent from 3.70 million in 2022 to 3.11 million at the end of 2023, according to data released by the Nigerian Insurers Association (NIA). The figure hovers around 3 million as at August 2024, according to a senior official of the insurance body.

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Yetunde Ilori, former director general of Nigerian Insurers Association (NIA), had said the sharp increases in petrol prices following the removal of subsidy in 2023 forced some people to pack some vehicles without renewing their papers.

“So, no doubt, inflation and high cost of living affected people’s purchasing power and decision to pay what they need including insurance,” Ilori had said.