Nigeria: Forex Crises, High Import Duty Depress Vehicle, Other Imports

Amidst sustained depreciation of the Naira, Nigeria’s motor vehicle imports recorded a massive 32 per cent decline in 2023 with total imports through the Nigerian ports at 132,293 units, from 194,550 recorded in 2022.

Financial Vanguard findings from the Nigerian Ports Authority, NPA, cargo throughput information also indicated that most other categories of imports recorded significant declines during the period. Other areas of import trade that experienced significant drops last year include ship traffic, cargo traffic, and container traffic as well as berth occupancy.

The Naira had recorded unprecedented depreciation in 2023 with the official exchange rate closing at average N820/ USD1 as against N460/USD1 the previous year while the parallel market rate closed at N1,090/USD1 down from N720/USD1 in 2022.

Stakeholders in the import trade sector said that with a worsening exchange rate situation so far in 2024 at over N1,400/USD1, the trade situation is expected to deteriorate further in 2024.

Vehicle dealers noted that the cost of procurement of the vehicles in Europe and America has remained stable and even gone down in some cases last year.

But, according to them, the cost escalation has been recorded in-country at four points, namely, the Naira equivalent of the purchase price, the customs duty and the clearing cost as well as port charges.

Financial Vanguard learnt that the Nigerian Customs Service, NCS, has frequently jerked up duty rates following persistent rise in exchange rate. The last raise was effected in the fourth quarter of 2023 putting the duty rate at N950/USD1, up from N460/USD1 at the beginning of the year. This is over 110 per cent increase.

Similarly clearing costs and port charges have increased by average 80 per cent during the period.

Consequently, vehicle prices have gone up by a minimum of 45 per cent and in some cases, by 75 per cent.

Dealers said this development worsened the business as patronage dwindled massively, leading to poor sales. The situation, according to them, was compounded by the increasing economic hardship in the country which forced most citizens to reorder their priorities away from ownership of personal vehicles.

On the decline of vehicle import, National President of the Association of Nigerian Licensed Customs Agents, ANLCA, Mr. Emenike Nwokeji, said that continuous downward slide of the value of Naira and high import duty rates on vehicles were responsible for the decline.

He said: “The reason for drop in vehicle importation is very obvious; the scarcity and high cost of forex is the lead issue responsible for the drop in vehicle importation.

“As at today, it is over one thousand and four hundred Naira to one dollar. This is the major reason and it is for the same reason that the cost of vehicles have also gone up in Nigeria; because if you buy a car for $1,000 and without paying for any other thing the value here translate to N1.4million automatically. So a small vehicle that people use for Uber that cost about N3million before, now goes for as much as N5million.

“The high duty rate is another issue at stake because the higher the value, the higher the duty rate.”

Speaking to the issues, Chief Executive Officer of the Center for the Promotion of Private Enterprise, CPPE, Dr. Muda Yusuf, also bemoaned the decline in imports, adding that until the government does something drastic, the situation could get worse.

Yusuf said: “The reasons are very straight forward. The number one is the foreign exchange rate; what was the foreign exchange rate last year and what was it in 2022 and what the exchange rate is today.

“You are talking of an increase of over 80 per cent or more on the exchange rate, now you now have the import duty, they use the prevailing exchange rate to convert and calculate duty.

“There are other costs like VAT, shipping company charges, terminal charges and all that will be calculated based on the same exchange rate. So everything is based on that rate, so the cost has become prohibitive.”

Complaining about the plight of car dealers, a car dealer, Sowole Abiodun, who spoke to Vanguard, said that the exchange rate is the reason why most dealers are not able to bring in vehicles. Abiodun explained that until the Naira stabilizes to an appreciable level, Nigeria will continue to record a significant drop in vehicle import while the cost of available ones will continue to rise.

He said: “It is difficult importing cars now because of the fact that you need to source dollar at a very exorbitant cost and because of the high duty rate, you cannot help but sell with a reasonable profit margin that the average Nigerian may not be able to afford.

“Besides a drop in importation, there has also been a drop in the sales of vehicles in Nigeria because people are now more concern with other issues of life than vehicles which some see as luxury.”

Bleak future

On the future of the vehicle import business the ANLCA boss, stated: “Getting out of this economic situation is beyond any individual, all we can do is to speculate as everything revolves around government. The monetary policy is one thing the government must get right and it also seems that the government is overwhelmed with the economic situation such that it does not even know what to do because we have not seen much they (the government) have done from our side.

“There should be seriousness on the part of government on ways to boost export beyond crude oil other than the lip service they give to export initiatives.

“How can we drive to the seaport and see export consignments hanging on top of trucks for days in this harsh and unfriendly weather and by the time they get to the country of origin, these exports are condemned. It is only in this country that exports will be on a vehicle for days and weeks.

“Then the number of agencies that get involved in every area of transaction in Nigeria is too much causing delays in delivery. But if you go to places like Kenya, at least two aircrafts of fresh flowers leave Nairobi every morning to other parts of the world but you cannot find such thing in Nigeria. There must be seriousness on the part of government. The situation is beyond politics.”

Speaking on the way forward, Muda Yusuf stated: “We need to review some of these import duties so that people can have access to these vehicles and when the duties are reasonable, it stems smuggling. A lot of smuggling is going on because people cannot afford these rates.”

Source:

Leave a Reply

Your email address will not be published. Required fields are marked *