The Nigerian motor vehicle import sector experienced a substantial 32% decline in 2023, reflecting the ongoing challenges of a Forex crisis and soaring import duties. Financial Vanguard’s investigation based on Nigerian Ports Authority (NPA) data revealed a drop from 194,550 units in 2022 to 132,293 units in 2023.
The Naira’s unprecedented depreciation in 2023, with an official exchange rate averaging N820/USD1 compared to N460/USD1 in the previous year, has severely impacted various import categories. Ship traffic, cargo traffic, container traffic, and berth occupancy have all witnessed significant declines.
Amidst the challenging economic landscape, the decline in vehicle imports has been attributed to the worsening exchange rate, hitting over N1,400/USD1 in 2024. Dealers note that while the procurement cost of vehicles abroad has remained stable or even decreased, the in-country cost has escalated due to four main factors: the Naira equivalent of the purchase price, customs duty, clearing cost, and port charges.
The Nigerian Customs Service (NCS) has consistently raised duty rates, reaching N950/USD1 by the fourth quarter of 2023 from N460/USD1 at the beginning of the year, marking a more than 110% increase. Clearing costs and port charges also surged by an average of 80% during this period.
Consequently, vehicle prices have surged by a minimum of 45%, with some cases witnessing a staggering 75% increase. This has led to a drastic reduction in patronage and poor sales, compounded by the prevailing economic challenges in Nigeria, forcing citizens to reprioritize away from personal vehicle ownership.
Emenike Nwokeji, the National President of the Association of Nigerian Licensed Customs Agents, attributes the decline to the scarcity and high cost of Forex. He emphasizes that the higher the exchange rate, the higher the duty rate, contributing to the drop in vehicle importation.
Dr. Muda Yusuf, the CEO of the Center for the Promotion of Private Enterprise, echoes concerns about the decline in imports and anticipates a worsening situation unless the government takes decisive action. He highlights the over 80% increase in the exchange rate as a significant factor, making costs prohibitive across the entire import process.
Car dealers, including Sowole Abiodun, emphasize the difficulty in importing cars due to exorbitant sourcing costs for the dollar and high duty rates, making it challenging to maintain reasonable profit margins. The drop in vehicle importation is mirrored by a decline in sales, as Nigerians prioritize other aspects of life amid economic uncertainties.
Looking ahead, stakeholders, including Emenike Nwokeji, call for a review of import duties to make vehicles more accessible and curb smuggling activities. They emphasize the need for a serious government approach to boost exports and streamline bureaucratic processes in the import sector for economic recovery.