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Falling naira: Dealers reduce Tokunbo vehicle imports

By BusinessNews Staff on February 19, 2015

The anticipated surge in the importation of used vehicles into the country is not manifesting less than two months to the commencement of the payment of 35 per cent levy on such vehicles.

Investigation by our correspondent revealed that the devaluation of the naira and the subsequent free fall of the currency against major world currencies had significantly raised the cost of buying used vehicles and clearing them at the nation’s seaports.

It was learnt that though a lot of Nigerians still desired to buy second-hand vehicles, popularly referred to as Tokunbo vehicles, auto dealers had reduced their volume of importation by over 50 per cent due to escalating costs and the failure of many target buyers to commit huge expenditure outlays at this period.

Our correspondent gathered from dealers at the Berger Yard Auto Market along the Apapa/Oshodi Expressway in Lagos that most of them had resorted to routing their imported vehicles through the Cotonou port in the neighbouring Benin Republic in order to remain in business.

The Central Bank of Nigeria had on November 25, 2014 devalued the naira by eight per cent due to the falling prices of crude oil in the international market, with the currency’s exchange value to the United States dollar moving from 155 to 168.

Ever since the announcement of the devaluation of the currency, the naira has been on a free fall, reaching an all-time low of 200 against the dollar last week Monday at the CBN’s interbank market. In the parallel market, the dollar is currently selling for about N213.

As a result, our correspondent gathered that most auto dealers were holding back on used vehicle importation because it was becoming increasingly difficult for them to raise the requisite foreign exchange, while those who were able to had to come up with more naira.

The dealers complained of poor sales, adding that most people who had shown interest in purchasing the vehicles had to abandon the idea because of the rising prices.

When our correspondent visited the Berger auto market, several vehicles with yellow stickers, indicating that they were imported through Cotonou, were seen among vehicles on display for sale. There was also very little commercial activity going on at the once busy auto market.

The President, Berger Car Dealers Association, Mr. Metche Nnadiekwe, said, “Business has been really slow. We don’t get much patronage from buyers again. We have also been forced to reduce our imports because importing cars has become very expensive due to the present value of the naira. There is no point using all you have to import cars if there are no buyers for them.

“When things were rosy, we could get between 10 and 20 buyers in a day at this park alone. With all the other parks put together, the number was more. Now that things are so tight, we get an average of five buyers daily at this park. When you put figures together from other parks, it is about 50 buyers in the entire market.”

The Federal Government had in September 2013 introduced the new auto policy to encourage Nigerians to use brand new vehicles assembled in the country by raising the duty on imported new and used vehicles from 22 per cent to 70 per cent.

The first phase of the policy involving the payment of 35 per cent duty came into effect in February 2014. The second phase of the policy, which was expected to take effect on July 1, 2014, was postponed to January 1, 2015 after consultations with stakeholders and later to April 30, 2015.

Although Nnadiekwe admitted that more dealers were importing used vehicles through the Cotonou port, he declined to say how cheap the cost of such vehicles were in relation to those imported through the Lagos ports.

He, however, assured buyers that vehicles brought in through the Cotonou port were not smuggled into Nigeria, adding that had been duly cleared at the Seme border. “Even if the difference between the cost of import through Lagos and Cotonou ports is just N5,000 or N10,000, it still means a lot to the car dealers. We are all struggling to remain in business, ” he said.

[Punch]

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