As Nigeria continues to exist without a law guiding the automotive sector to attract investors and enable citizens to purchase new cars with ease and affordable prices, data from the National Bureau of Statistics (NBS) has shown that Nigerians have continued to rely on used cars from the United States of America (USA) as cheaper alternatives.
Analysis of data on foreign trade reports conducted by the NBS from 2017 to 2022 indicates that Nigerians prefer cars from the US, as from the N2.5trn of the commodity imported into the country, N1.8trn was imported from the US alone.
A breakdown of the figure for the commodity labelled “Used Vehicles, with diesel or semi-diesel engine, of cylinder capacity >2500cc” indicate that in 2017, N96bn of it was imported from the US out of a total of N145bn.
In 2018, from the N269bn imported into the country, N180bn was from the US. The figure further rose to N455bn in 2019 from a total of N580bn during the year.
In 2020, N529bn of the commodity was imported from the US, out of the total of N718bn imported. But the figure dropped to N399bn in 2021 for the commodity imported from the US, while the total was N617bn.
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From January to September of 2022, N205bn of the commodities came from the US out of the N235bn imported.
Experts attributed the trend in the rise and fall of the importation of the commodity to the policy of the government. Notably, is the lack of a law guiding the resuscitation of the moribund automobile industry that was once vibrant in the 1970s. With the few cars produced in the country out of the reach of ordinary Nigerians, the importation of used cars became the alternative for many.
This development led to the development of the National Automotive Industry Development Plan (NAIDP) in 2013, which seeks to among others enable local assembly plants to import completely knocked-down vehicles at 0% duty and semi-knocked-down vehicles at 5% duty, while importers pay a 70% duty on new and previously owned vehicles.
The plan which was to run from 2014 to 2024 has been passed by both chambers of the National Assembly but is yet to be assented to by President Muhammadu Buhari. Stakeholders in the country have expressed fears that the non-availability of an extant law has made foreign investors shy away from the country.
Despite this, the Director General of the National Automotive Design and Development Council (NADDC), Jelani Aliyu, stated that the sector attracted $1bn investments in 2022 even though the few local assembly plants in the country are not operating up to the 400,000 yearly production capacity they have.
Why Nigerians go for used cars from US
Speaking on why the US is the major importing hub of used cars into the country, the Managing Partner at Transtech Industrial Consulting and former Director of Policy and Planning at NADDC, Luqman Mamudu, stated that the used vehicles market in the US offered a wider stock of vehicle varieties and public auctions.
Mamudu said there was a huge stock of salvage vehicles that Nigerians cheaply refurbished locally and a penchant for American standard, fondly called American Spec.
He said, “These factors and a few others like the high population of the Nigerian diaspora in America that make home remittances in the form of vehicles, account for observed dominance in the Nigeria market.”
On the trend of the import during the period under review, Mamudu said this might be due to several reasons: “On the whole, it is a reflection of the gradual reversal of the NAIDP. It had inbuilt protective and incentive measures which tended to discourage importation; especially of used vehicles. For instance, an import tariff of 35 per cent was placed on fully built commercial vehicle imports whereas 0 per cent and 10 per cent only were charged on imported Complete Knocked Down (CKD) and Semi-Knocked Down (SKD) respectively.
“By 2020/21 this was crashed to 10 per cent for all Fully Built Vehicles (FBU) for all commercial vehicles including used ones. Similar measures were taken for cars. Import duties for fully built cars crashed from 70 per cent to 25 per cent. The result was that licensed assemblers laid off their workers and abandoned their factories to join jubilant traders to import massively. The traders, including the association of licensed clearing agencies, have never liked the NAIDP anyway.
“Government’s excuse for this action at the time was to make used vehicles affordable to the masses but prices continued to soar because the NAIDP never exclusively restricted the import of used vehicles. It was a lie sold to the government to open up the borders for imports.”
He added that the reopening of the land borders in 2021 made imports to peaked at N529bn, while the drastic drop in 2021/22 from N399 by end of 2021 can largely be ascribed to “a weakened economy, the naira crash against other currencies, very large inventory during previous years; and perhaps effect of improved customs evaluation techniques including demand for vehicles VIN which tended to eliminate under-invoicing.”
He pointed out that the reason Nigeria’s automotive industry development programme was failing more than seven years into its 10-year tenure is multidimensional and all limitations could be ascribed to non-implementation of the program.
“Up to 2016/17, the program had gained a foothold with an installed capacity to assemble over 500, 000 vehicles per annum from less than 60, 000 in 2013 but only 10 percent capacity utilisation was achieved by this time. Capacity did not grow due to several constraining factors.
“For one the business investment assurance bill which was meant to sustain the foreign investment pipeline already established suffered a setback. It passed through the two chambers of the legislature but couldn’t get presidential assent due to very little observation. It only required quick correction and resubmission to the National assembly but till date, it never happened. Rather all I’ve heard in the last three years is a contract to review NAIDP as a whole.”
He noted that a very critical component of the NAIDP which was to guarantee patronage and demand for locally assembled vehicles was discarded.
He said, “This was the automotive asset credit acquisition scheme for which CBN had granted a provisional license in 2016. It was to allow Nigerians, especially fleet owners and bus operators, to buy vehicles in installments at cheap interest rates. Other critical components of the program like Quality assurance projects were equally downgraded in terms of priority.”
He said if Nigeria truly desires an automotive industry with the import bill and potential strain on the balance of payment position, the NAIDP should be revisited as it is going to be a massive employer of labour and value addition platform besides.
“What seems to be vexing to importers of fully built vehicles is the protective tariffs. This can be de-emphasized without undermining the industry but the credit purchase scheme is a must. Countries that aspire to grow a local automotive industry must make them affordable to their populace in prices and terms. Otherwise, the imported used vehicles will continue to undermine the industry. New vehicles cannot compete,” he added.