• Monday, March 04, 2024
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Inflation, FX crises put Nigerian-used cars out of reach

Funding options for Nigerians who want to buy cars

Second-hand cars used in Nigeria are going beyond the reach of many following increased demand for them as inflation and foreign exchange crises have made foreign-used ones more expensive.

A Lagos resident who declined to be identified said he sold his 2007 Toyota Corolla for N3.5 million in the Nigerian used car market, four years after he bought it as a foreign-used car, popularly known as ‘Tokunbo’, for less than N2.5 million.

“Cars are now very expensive, and Nigerians are not putting a lot of money into buying foreign-used cars, which is why the majority are now going for Nigerian used cars, which are also very expensive. I bought my Toyota Corolla as a foreign used car in 2020 and I sold it for N3.5 million four years after, which is unbelievable,” he said.

Read also: Customs set to auction 257 cars, other 39 items today

He said buying a car has become an investment and that people only need to keep maintaining their vehicles to ensure that they are in good condition when they are ready to resell.

The continued decline in the value of the naira amid a severe FX scarcity has pushed up the cost of importing cars into the country. The naira, which was around 460 per dollar before the liberalisation of the FX market in June last year, fell to a record high of 1,482 per dollar on Tuesday.

“Nigerians are now selling their used cars years after using them for prices higher than the original purchase price. 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 resulting in the FX crisis,” said Godswill Odoin, a young Nigerian who recently sold his 2004 Toyota Camry.

He said six or seven years ago, Nigerian-used cars were very cheap because most Nigerians buying cars would rather go for foreign-used ones.

“Then, with a little above N1 million or N2 million, one will get quality foreign-used cars of choice. But today, I sold my 2004 Toyota Camry for N2.6 million, after using it for over seven years — a car that I bought for N1.550 million in 2016,” he said.

He said many Nigerians are now holding onto their old cars due to lack of money to buy new ones.

The outbreak of COVID-19 in 2020 impacted negatively on the global economy, resulting in uncontrollable surging inflation.

According to Black Book, an American-based automotive research firm, cars are now holding about 10 percent more of their value after three years than they were before the pandemic.

This, Black Book said, is contrary to the belief that a car loses its value as it graces the road.

According to S&P Global Mobility, it is now common to see people driving cars of 20 years or older.

The rising prices of cars have shattered the plans of many who want to buy.

BusinessDay checked the prices of Nigerian-used cars on Jiji Cars and found that a 2004 Toyota Camry is sold for N2.55 million; 2008 Lexus ES, N6 million; 2011 Toyota Highlander, N12.2 million; 2008 Toyota Rav4, N4.8 million; 2012 Hyundai Sonata, N4.4 million; 2004 Toyota Sienna, N3.55 million.

“I advise my clients to pay serious attention to their cars these days by ensuring that they are well serviced and that broken parts are replaced in due time to avoid serious impact on the vehicle because that is the only way for them to keep their old or ageing cars in good condition,” Kazeem Suraji, an auto mechanic, said.

With the continued rise in the prices of cars in the Nigerian market, demand has declined, leading to a drastic reduction in the volume of cars imported into the country.

Read also: Nigeria’s used car market to see a surge in demand for sedans in 2024 – Report

Ajibola Adedoyin, national president of the Association of Motor Dealers of Nigeria, blamed the crisis in the auto industry on the depreciation of the naira and volatility in the FX market.

He also attributed the crisis to high import duties, the Vehicle Identification Number valuation policy of the Nigeria Customs Service, rising poverty, and weakened purchasing power of consumers.

Adedoyin said many car dealers have abandoned the vehicle dealership business due to the crisis in the sector.