In a recent conversation held on X (formerly Twitter), the founder and CEO of Nord Automobiles revealed the reason why car financing is challenging to practice in Nigeria. In his words, the CEO of the 6-year-old car brand noted that it’s all due to Nigeria’s poor identity system
During the conversation, the CEO, Ajayi Oluwatobi, noted that it’s not ideal for people to make full car payments. However, operating car financing is challenging in Nigeria. He uses his car brand as an instance where he highlighted the high interest rates of banks they’ve partnered with and the poor identity system in Nigeria, which makes it easy for Nigerians to default payment on financed cars.
During the conversation, the founder stated: “Cars are usually the second most expensive thing; an average person will buy in their lifetime after a house. So, it makes sense to spread payment for cars. Nigerians should not buy cars at once. They should spread it out for as much as five to six years.
“However, we have some problems. I tried to ignore it. Two years ago, on my own, we started a financing program because we tried to get some banks to support us. Some banks supported it, but the interest rate was too high. Most customers are not interested because interest rates are around 28% per annum. So, when you say you are doing car financing, but it is at 28%, it’s almost like you are not doing it. Because it is very difficult to get somebody to buy a car and spread the payment for about 28%. So we tried to do it, and we brought the interest down to around 15%.”
The Nord CEO highlighted that starting a financing system in his company couldn’t work because it came with “defaults and a lot of issues, which are some of the problems plaguing our credit system.”
Ajayi Oluwatobi noted that for financing to work in Nigeria, the government has to address the credit system within the country. Following his inauguration as the President of Nigeria, Bola Tinubu, during the United Nations Assembly in New York, vowed to reset the Nigerian credit system to ensure that cheap credits are made available to help Nigerian workers drive their dream cars.”
It’s this credit system faultiness in Nigeria that brands like NORD have dealt with in the country when it comes to ensuring a transparent and functional financing system within the country. The CEO highlighted this during the conversation: “We had a lot of defaults. People just refusing to pay, people changing addresses, people are moving away, and people changing jobs. It was so much trouble because we don’t really have a good identity system. So, it’s very hard for people to just pay that credit. You have to rely on the person’s morality to pay you back and it is not very reliable.”
