Auto dealers abandon vehicle importation over high clearance costs, FX scarcity

Due to the scarcity of foreign exchange (FX), hike in tariffs, increase in import duty, and other related taxes, automobile dealers have lamented their inability to import fairly used cars into the country.

This is even as they have now resorted to recycling Nigerian used cars, while others have abandoned the automobile business entirely.

Speaking with The Guardian, the President of the Association of Motor Dealers of Nigeria (AMDON), Prince Ajibola Adedoyin, said the hike in taxes, fuel, and tariffs has affected the importation of cars into Nigeria.

Meanwhile, Nigeria’s import bills on used vehicles, popularly known as tokunbo, fell by 83 per cent year-on-year to N138.62 billion in the first half of the year, from N819.15 billion in H1 2023.

Quarter-on-quarter, a breakdown from the National Bureau of Statistics (NBS) for the review period showed that in Q1 2024, no used vehicle was imported, compared to N69.23 billion worth of used vehicles imported in Q1 2023.

In Q2 2024, the value of imported used vehicles stood at N138.62 billion, representing an 81.5 percent decline year-on-year from N749.92 billion in Q2 2023.

The NBS noted that the used vehicles were imported mainly from the United States of America, stating: “On the other hand, total imports from America in Q2 2024 stood at N971.84 billion.”

Recall that last year, the federal government introduced a new set of taxes on imported vehicles, among other things.

The new tax regime stipulates that imported vehicles with engine capacities between 2000cc (two litres) and 3999cc (3.9 litres) will pay an additional charge known as the Import Adjustment Tax (IAT) levy of two percent of the vehicle’s value, while vehicles with engine capacities of 4000cc (four litres) and above will attract an IAT of four percent of their value.

The new levy is in addition to the 35 percent import duty and 35 percent levy already being paid by vehicle importers.

However, vehicles below 2000cc, mass transit buses, electric vehicles, and locally manufactured vehicles are exempted from the IAT levy.

The government also revised the import prohibition list to include used motor vehicles older than 12 years from their year of manufacture.

According to Adedoyin, the situation has driven a lot of importers out of the business.

“The implication of this is that there would be safety related issues because most of what is happening now is recycling of Nigerian used cars.

“Importers can no longer bring in cars due to the high foreign exchange rate. Apart from exchange rate, there is the increase in import duty, which we have made clear to the government, is affecting us negatively and have asked that something be done about it. The hike has had adverse effects on our members because it has chased away some of them away from the business.

“Even when you buy a car and sell it at a profit, you cannot buy another one with the current price we use to import and that is why some people have abandoned the business. The government needs to take urgent steps to address the situation,” he said.

He said if the government fails to do something about it, apart from the transportation that will be badly affected, the safety of Nigerians and the economy will be affected.

“The economy is all about the movement of goods, services and people from one place to another. That is what forms the economy. So, anything that affects transportation affects the economy of the country,” he said.

He warned that the consequences of recycling old Nigerian used vehicles are the possibility of an increase in the rate of accidents because they will suffer from wear and tear, causing them to break down.