• Thursday, March 28, 2024
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Lagosians register fewer cars in 2021 than peak of COVID

Funding options for Nigerians who want to buy cars

At the peak of the COVID-19 pandemic in 2020 and the economic challenges that came with it, more Nigerians bought and registered cars, at least in Lagos, Nigeria’s largest city. However, by 2021 when the economy performed better, the rate slowed.

Data obtained from the Lagos State Motor Vehicle Administration Agency had showed that 319,550 new car registrations were done in Lagos in 2020 but recent data from the same agency puts it at 323,319, a 6.8 percent increase from 302,700 cars registered in 2019. But while vehicle registrations increased in 2021 like every other year, reaching 328,062, the growth rate was only 1.46 percent when compared to 2020.

From 2020 when the year ended with a negative GDP growth to a rebound of 3.4 percent growth in 2021, it would appear vehicle purchases took a lower position in the priority (or perhaps affordability) scale. To some, it may appear shocking, considering the economy’s seeming improvement, but other factors from lower purchasing power to foreign exchange may have reduced consumers’ appetite.

Ademola Talabi, a car dealer, attested that a lot of people bought more cars (in 2020) because it was relatively affordable and people had money stashed and couldn’t use it during the pandemic.

“Exchange rate is the major reason for the slow change, even I as the car dealer, I don’t keep cars for long, I sell to break even at this time so that I can buy more,” he said.

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The exchange rate, with the naira’s continuously weakening value, dealers say, has made cars more expensive, and for buyers, increasingly out of reach. Officially, the exchange rate for naira to a dollar, officially, has moved from N387 in 2020 to N415 in 2021, but in the parallel market where dealers and importers source their funds, the margin is 30 percent wider.

According to a report by International Trade Administration, passenger cars constituted the largest export items from the United States to Nigeria in 2020 amounting to about $701 million.

Samuel Jacob, CEO of Uelrak Auto ltd also confirmed the increase in car sales at his end during the pandemic and gave credit to the fact that people were home and work-from-home was prevalent. According to him, people spent more money on data and food since there were little or no obscuring bills to pay, people were able to have more money on hand and could afford what they wanted, such as cars.

But after the pandemic, when work-from-home was winding up, more money was spent on transportation, other creeping issues came up, and less money flowed around, thereby decreasing the thought of buying cars after the pandemic and it also affected sales leading to fewer vehicles being registered in 2021.

Jacob reiterated that another factor was the exchange rate, the dollar was cheaper during the pandemic, compared to now and the cost of clearing vehicles has also increased thereby reducing the urge to buy more cars in 2021 and even at present.