Price of used vehicle soar in Nigeria over freight, clearing charges, FX

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Ibom Deep Seaport Set To Begin Operations
  •  As Clearing of vehicles in Nigeria is cheap in Ghana, Benin, Togo

Prices of imported secondhand automobiles, popularly known as Tokunbo vehicles, have gone out of the reach of average income earners.

The Guardian learnt that prices of Tokunbo and new cars in the country have tripled due to high clearing fees and processing, high duty, freight rate, security surcharges, insurance on Nigeria-bound cargoes, unfriendly ports environment, continuous border closure and illegal charges of government agencies, now worsened by high exchange rate.
A survey of current prices of vehicles show that Toyota Camry 2004, which should ordinarily go for N1.6 million now sells for between N1.9 million and N2.1 million; Toyota Camry 1999/2001 sold before at N1.4 million presently cost N1.8 million; Honda EOD, which sold for N1.4 million before is now N1.9 million to N2 million; Toyota Corolla 04/05 sold for N1.9 million is currently between N2.4 million and N2.5 million.

Toyota Sienna 1999/2000 before was N1.3 million but presently goes for N1.8 million to N2 million; Toyota Corolla 09/10, which was going for N2.4 million is now sold for N3 million; Lexus 330 2005 is now N2.4 million from its earlier price of N1.9 million and Lexus 350 06/07 is now N4 million as against N3.5 million.

Comparatively, prices of cars in neighbouring Benin Republic, Ghana and Togo have remained low and affordable to the average income earners, reason Nigerians throng these countries to purchase cars.

Also, Nigerian importers and foreigners divert their vessels to those countries due to the ease of doing business at their ports as well as cheap clearing fees, freight rates and affordable insurance.

For instance, in Benin Republic and Ghana, the prices of the aforementioned vehicles are cheaper. Toyota Camry 2000 is CFA 1,900,000 (N1,398,658.27); Honda EOD – CFA 1,400,000 (N1,030,590.30); Toyota Corolla 05 – CFA 1,800,000 (N1,325,044.67); Toyota Sienna 2000 – CFA 1,300,000 (N956,976.71); and Toyota Corolla 09/10 – CFA 3,500,000 (N2,576,475.76).

A car dealer and Chief Executive Officer, Mrpossible Automobile Limited, Saheed Adeola, said the Nigerian Customs is taking advantage of the continuous closure of land borders, which has contributed to the high cost of vehicles in the country.

Adeola said cars in the Benin Republic are cheap because importers take their vessels there directly from the United States, unlike Nigeria where the vehicles are brought in from neighbouring countries.

Another car dealer, who is the Chief Executive Officer, Ifeseun and Associate, Ibukun Ifedayo, blamed the rising cost of vehicles on hike in clearing and offloading fees at the ports.

He said the offloading fee of a container with four cars that was initially N120,000 has risen to N300,000.

Another car dealer, Eddy Akwaeke, said for a long time, the cost of clearing in Benin, Togo and Ghana has always been lower than in Nigeria. He tipped Ghana as the best country in West Africa with respect to the clearing of vehicles.

“By next year, the cost of vehicles in Nigeria will not be something any poor man will think of. Anybody who is earning his living through legitimate business and planning to buy a car should do so this year because, by next year, the situation will get worse. Even if a new government comes in 2023, it will still take a long time before things will normalise due to several policy inconsistencies.”

ANOTHER reason why the cost of used vehicles may spike in the coming months is due to imported inflation. Imported inflation is a rise in the cost of raw materials or finished goods imported from a country of origin that is experiencing high inflation.

The rising inflation on consumer goods in the United States is on the verge of triggering a wave of imported inflation into Nigeria, with a focus on used cars, a major imported item from the world’s largest economy.

Over 20 per cent of Nigeria’s imports from the U.S. are used vehicles. On annual basis, Nigeria spends roughly N600 billion or $1.2 billion importing used cars from the United States alone, which is 90 per cent of its total used vehicle imports.

Deputy National President, Air Logistics, National Association of Government Approved Freight Forwarders (NAGAFF), Dr Segun Musa, said the rise in the cost of vehicles is due to an increase in freight rate, shipping charges and unfriendly port operations.

He said to clear any item at the ports, one is forced to pay through his or her nose. “The way we clear goods at our ports is highly unethical. You have to bribe your way through, else your goods would be delayed and accruing demurrage.”

Musa further noted that freight rates have increased by over 200 per cent and that excludes other charges, especially security surcharges, as Nigeria’s ports and its corridors are not secure by international maritime standards. He added that the international community increased insurance surcharges, which the shipping lines added to the freight charge.

“When you bring any commodity from any region of the world, the shipping companies will have to pay security surcharge to the insurance company in case anything happens. When it comes to security, the rates are always very high. We don’t have our indigenous vessels. So, we are at the mercy of foreign shipping lines. It is either we patronise them or we don’t ship anything. We are left with no option,” he lamented.

Musa explained that before, to freight a 20ft container from Dubai to Lagos cost between $2,000 and $3,000, but the cost of freight now is about $9,000, adding that shipping lines and airlines freighting to Nigeria charge for both import and export because they return empty.

“This is why our freight charges are always high, coupled with the port charges by Nigerian Ports Authority (NPA), Nigerian Maritime Administration and Safety Agency (NIMASA) and other agencies. When you add all these together, the prices of vehicles would be expensive because the car dealer would have to make his capital and profit,” he said.

Musa said for Cotonou, Ghana, Togo and other African countries, their freight rates are always low because when vessels and aircraft come in with cargoes, they depart with cargoes, unlike Nigeria where they return empty.

He said the government needs to put mechanism in place that will encourage local capacity, which will in turn boost export as a way of balancing trade relations with other countries.

IN spite of the hassles at the ports, Nigeria spent a total of N601.51 billion on the importation of motor vehicles in the first half of this year. This was contained in the recently released foreign trade report published by the National Bureau of Statistics.

This represents a 15 per cent increase compared to N523.57 billion recorded in the corresponding period of 2020. Vehicle imports accounted for 4.4 per cent of total imports of N13.8 trillion recorded in the period under review.

Meanwhile, a total of N1.09 trillion was spent on vehicle imports in the previous year. Going further, in the second quarter of 2021, imports of passenger cars grew by 14.03 per cent to N311.63 billion compared to the corresponding quarter of 2020 where imports for the same item stood at N273.28 billion.

Over the past three years, Nigeria has steadily increased its import of vehicles by 195 per cent from N371.98 billion in 2018 to N1.09 trillion in 2020. This could be as a result of an increase in cab-hailing services and technologies, like Bolt, Taxify and Uber.

As the imports of motor vehicles increased in Q2,2021, it made up 39 per cent of the total transport equipment and parts imported during the same period, which is N798.51 billion. Nigeria imported used vehicles, otherwise known as ‘Tokunbo’ worth N172.1 billion in the second quarter of the year, being the third highest imported item by value.

Recall that in January 2021, the government revised the import duty tariff for transport vehicles from 35 to 10 per cent as part of the measures to ease the cost of transportation across the country and reduce the impact of coronavirus pandemic in 2020.

However, in June 2021, terminal operators announced a 50 per cent increase in terminal handling charges, which has discouraged importers of vehicles, meaning that importers of cars now have to pay double. As such, the import duty tariff slash by the Federal Government has been greatly subdued by terminal charges and cannot have any positive effect on the operating environment or encourage vehicle imports.

MEANWHILE, importers of vehicles have commenced the payment of N6,000 on clearing of cargoes under the National Vehicle Registration Policy (VREG), which was kick-started at the Tin Can Island Port on October 4. The Guardian learnt that the fees payable on VREG fee is not fixed, but according to the capacity of vehicles, the least being N6,000.

The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, had during the launch of VREG two months ago, said the creation of this registry became necessary to tackle the menace of customs duty evasion, vehicle theft and smuggling, vehicle-related crimes and ineffective vehicle insurance coverage, among other criminal activities.

The Minister explained that the VREG is the centralised database for all vehicles in Nigeria using their unique Vehicle Identification Numbers (VIN), which stores detailed vehicular information such as specifications, ownership, and history of each vehicle in Nigeria.

But importers and car dealers are, however, lamenting that the new fees would further lead to a high cost of cargo clearance.

Reacting, spokesperson of the Nigeria Customs Service (NCS), Tin Can Island Command, Uche Ejesieme, said VREG would put an end to controversies overvaluation of vehicles. “The VREG is simple, it is a repository of all vehicles, so that at the end of the day, all critical stakeholders, including customs, would have access to every information about the vehicle, particularly for value and statistics purposes.”

Credit: The Guardian

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