Nigerians import fewer cars amid high inflation, FX
Nigerians imported fewer passenger motor cars in 2024 as rising inflation and the continued naira depreciation made foreign exchange more expensive, driving up the cost of vehicle imports.
The latest data from the foreign trade report of the National Bureau of Statistics showed that the total value of passenger car imports fell by 14.3 per cent to N1.26tn in 2024 from N1.47tn recorded in 2023.
The decline followed a sharp surge in imports the previous year, when vehicle importation more than doubled compared to 2022.
However, the harsh economic realities of 2024 forced businesses and consumers to cut back on non-essential purchases, with imported cars among the most affected.
Over the past five years, Nigeria’s passenger car imports have fluctuated significantly. In 2020, the country imported N546.79bn worth of vehicles, a figure that increased to N695.40bn in 2021.
However, by 2022, imports declined slightly to N655.69bn before soaring by 124.7 per cent to N1.47tn in 2023. The drop to N1.26tn in 2024 marked a reversal of the previous year’s surge, reflecting the impact of worsening economic conditions.
One of the major factors responsible for the decline was the surge in inflation, which eroded consumers’ purchasing power and made high-value goods, such as vehicles, less affordable.
Nigeria’s inflation rate hit a nearly three-decade high in 2024, reaching 34.8 per cent in December, up from 34.6 per cent in November. Also, the average headline inflation rate for 2024 stood at 33.2 per cent, up from the 24.7 per cent recorded in 2023.
The persistent rise in consumer prices forced many Nigerians to focus on essential expenses, with big-ticket items such as cars taking a back seat. Many prospective buyers either delayed purchases or opted for second-hand vehicles as the cost of brand-new and imported used cars became prohibitive.
At the same time, the depreciation of the naira further compounded the challenges in the auto market. The official exchange rate between the naira and the United States dollar ended in 2024 at N1,535/$, according to an analysis of data from the Central Bank of Nigeria.
This was a 40.9 per cent depreciation over the year when compared to the official rate at the close of 2023, which stood at N907.11/$. In the parallel market, the naira depreciated by 26.8 per cent, trading at N1,660/$1 from N1,215/$1 at the close of 2023.
The World Bank listed the naira among the worst-performing currencies in Sub-Saharan Africa in 2024. The depreciation of the naira is attributed to several factors, including surging demand for United States dollars in the parallel market, limited dollar inflows, and delays in foreign exchange disbursements by Nigeria’s central bank.
The World Bank’s report further highlights that demand for dollars, driven by financial institutions, non-financial end-users, and money managers, has exacerbated the pressure on the naira.
The significant depreciation comes amid the CBN’s introduction of several foreign exchange policies aimed at enhancing market transparency and attracting foreign investors.
The steep drop in the value of the naira made foreign exchange significantly more expensive, pushing up the cost of imported vehicles and discouraging many dealers from bringing in new stock.
The PUNCH earlier reported that Ports & Terminal Multipurpose Limited has blamed high import duty and taxes on used vehicles for the 60 per cent drop in vehicle importation it experienced in the first half of 2024.
The General Manager of PTML, Mr Tunde Keshinro, showed that vehicle importation dropped from 45,000 units of vehicle it received in the first half of 2023 to 18, 000 units received in the corresponding period this year.
PTML is a foremost roll-on-roll-off terminal in Nigeria, handling between 60per cent and 70 per cent of vehicles imported into the country.
Keshinro blamed the imposition of import levies on imported vehicles for the drop, saying, “This unprecedented decline in the volume of used vehicles importation into Nigeria can be located around high import duty and taxes for used vehicles, imposition of import levy on used vehicles, restriction of rebate on ex-factory prices used for assessment of import duty to 10 years whereas the law allows importation of 12-year old vehicles.
“Vehicles above 10 years of age are forced to pay higher import duties, and high exchange rates resulting in excessive-high landing costs above the affordable level for the majority of Nigerians, who depend on private vehicles for private and commercial transportation. These are some of the reasons there was a drop.”
Also, the Comptroller-General of the Nigeria Customs Service, Adewale Adeniyi, in a recent chat with Arise Television, said that vehicle importation dropped by 45 per cent in the first quarter of 2024 due to the forex crisis.
Adeniyi disclosed that the period was critical for Nigerians and businesses in general because of the volatility in the exchange rates.
“It affected car dealers. I mean, we had as much as a 45 per cent decrease in the volume of cars that were brought into Nigeria in that period.
“And they were not the kind of cars that fetched optimum revenue for the customs. Not only cars, but even regular imports were also affected because people could no longer import raw materials as they wanted and the volatility did not allow them to plan for tomorrow,” the CGC stated.
A former PTML Chapter Chairman of the Association of Nigerian Licensed Customs Agents, Mr Samuel Obey, said, “The reason is because of the fluctuation in the exchange rate. The policy the government brought is the reason for that. The policy is that for example, if you bring a car of 2009, you have to pay the duty of 2015.”
