With prices of cars soaring beyond many Nigerians’ reach, Anthony Ike plans to keep his seven-year-old Toyota Corolla for at least another five years or more.
The 45-year-old accountant, who works with an IT firm in Lagos, said he has no plan of changing his car in the nearest future if the prices of cars continue to rise.
“I bought my first car, which was a foreign used Volkswagen Golf car, for N350,000 at the age of 30 in 2008. Five years later, I sold it and bought a Toyota Camry for just N750,000. After using the car for four years, I sold it and bought a Toyota Corolla due to its fuel efficiency and ease of maintenance. My plan was to buy a Tokunbo SUV car by the end of this year to serve as a family car but that plan is ‘dead on arrival’ due to the high prices of cars in the Nigerian market,” he said.
“Today, to buy a foreign used Tokunbo mini SUV like Toyota Rav4 will cost at least N5 million unlike five or six years ago when one could buy an SUV of choice for between N2 million and N2.5 million,” he added.
The high cost of buying new or used vehicles in Nigeria is leaving more people with no choice other than to keep the ones they have longer than they previously planned, BusinessDay findings have shown.
Prices of brand-new and foreign used cars, popularly known as Tokunbo, reached a record high in the last four years due to the continuous depreciation of the naira against the dollar.
This has increasingly made purchasing brand-new cars unaffordable and expensive to many Nigerians, especially low-income earners.
“With the speed at which the prices of vehicles are going up, I don’t think that I will be able to buy another car anytime soon. I bought my 2008 Toyota Camry car in 2019 as a Tokunbo for N2.2 million. Four years down the line, the car is now going for between N4 million and N4.5 million,” Christopher Sunday, a Lagos-based civil engineer, said.
Sunday, who is in his mid-50, said he had bought and used more than four vehicles including brand-new ones that were given to him as official cars.
He said he is not planning to go to the market to buy a new car anytime soon, even though he would have loved to upgrade to an SUV.
The naira-dollar exchange rate has significantly impacted the prices of vehicles sold in Nigeria because most of them are imported, and dealers need foreign exchange to bring them into the country.
About two weeks ago, the Central Bank of Nigeria introduced the floating exchange rate regime, which resulted in the devaluation of the naira. The Customs’ exchange rate for clearing imports increased from N422.3/$ to N770/$ in less than a month.
“Since last year, the FX rates we were using for the importation of cars were already high, which ranges from N770 to N800/$ and the rate impacted the prices of brand-new cars,” said Aissatou Diouf, general manager of Suzuki by CFAO.
She said the Customs FX rate for clearing, which was around N440/$ before, has also increased to N770/$ to align with the market rates.
According to her, the adjustment in FX rates has about a 15 percent impact on the prices of brand-new cars.
Explaining further, Diouf said that in 2019 when Suzuki officially launched in Nigeria, none of the Suzuki range of cars was sold for up to N10 million then.
According to her, a brand-new Suzuki Grand Vitara was sold at N9.9 million at that time but from 2019 to October 2022, when the naira was devalued, the price of Grand Vitara more than doubled and was sold at N20 million.
“The prices of cars are up because of the devaluation of the naira, and the Customs increased the exchange rate for clearing imports,” she added.
BusinessDay confirmed that the naira closed at an average of 362.60 against the dollar in 2019, 470/$ at the end of 2020 and 740/$ at the end of 2022.
Nigeria, one of the top producers and exporters of crude, has a population of over 200 million, the majority of whom depend mostly on imported used cars to meet their vehicle needs.
Many Nigerians buy used cars because they are less expensive than imported brand-new or locally assembled ones.
Findings show that the market for brand-new cars in Nigeria is estimated at only about 13,000 per annum while the used cars market is estimated at about 500,000 per annum, according to the average sales over the last two years.
On the current structure of the demand in the Nigerian market, Maxim Makarchuk, chief operating officer of Cars45 and Jiji, told BusinessDay that in the short time, the FX changes will result in the general slowdown of the market because the changes led to an increase in prices and it will take time for the market to adapt to the new pricing.
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“Buyers are now being cautious in buying cars and they tend to make very thoughtful decisions, and take their time to see how it goes because the prices may increase even more or decrease in the long run. The changes in FX have created disbalance because there may be customers who already own cars but want to upgrade but are now being cautious due to the instability in the market,” he said.
Pointing out that the Nigerian market still has cars that were imported under the old import duties, Makarchuk said Nigerians may start seeing the impact of the new imports on the prices of cars relatively soon.
He added that Nigerians are now more interested in buying cars with good fuel consumption or that have fuel efficiency due to the high pump prices of fuel.
