In the last few years, especially since the end of the pandemic, it has become gradually difficult for even the average Nigerian to own a car. The prices of cars keep increasing in the market, with prices of new cars way above the purchasing power of many Nigerians, why are the prices of used Tokunbo cars that were considered affordable, skyrocketing?
While used cars have become the norm in Nigeria, still, the average Nigerian cannot afford a used Tokunbo car that’s 10 years old. There are several factors that have contributed to this situation within the country. While the most notable is the high custom duty importers incur through the Nigerian Custom, other factors like the devaluation of the Naira has also contributed to this issue.
According to experts, this situation will only worsen over time, worsening the commuting crisis and increasing poverty in the country. Analysts add that the increase will complicate the inflation outlook, especially as Nigerians still rely mainly on importation for essential consumption.
Speaking on the matter, and the need to increase the purchase and affordability of new cars in Nigeria, the Marketing Manager, of Dana Motors Limited, Jimoh Olawale, stated that for every car-producing company, there is a need for financial institutions to provide loans to help open Letters of Credit [LC] that will aid the importation of knocked-down kits into the country for further production/assembling of cars.
However, Jimoh Olawale noted that over time, there has been a rather downward trend in the readiness of banks to open LCs for companies thereby making it a challenging phase for the industry in its stocking process and production of vehicles in the country.
He noted that this has not only impacted job losses in the Nigerian automobile sector but increased redundancy. Adding to his statement, Olawale noted that the automotive industry is currently gasping for breath as a result of the unchecked importation of used cars and ever decreasing buying power of the consumers, to provide a great leap in the survival of this sector, affordable car financing and favourable monetary policies are apparently the only go-to options for all stakeholders.
Speaking to The Guardian, the Dana Motors Chief included that the monetary policies had over the years impacted the economy, adding “in recent times, the instability of the forex market amongst other factors affected the balance in the economy thereby knocking it off to the pit hole of recession.”
To ensure that many more Nigerians can gain access to vehicles, he added that automobile finance companies in Nigeria will need to rethink their traditional value chain by providing affordable and accessible vehicle finance schemes to customers.
Adding to what Olawale said, Adekunle Jaiyesimi, the Chairman, Automobile and Allied Services Group, LCCI, highlighted that there is nowhere in the advanced economies one will see individuals walking into automobile shops and paying cash or making transfers from their personal accounts for procurement of a car, rather, he said they rely on bank credit schemes.
He went further to say:
““I was in Cote d’Ivoire about two years ago and I saw desks of a bank and insurance company situated in the showroom of a renowned automobile brand and observed the process of the customer obtaining a pro forma invoice from the dealership and turning it to the bank official with the verification of the credit rating of the customer finalised within an hour, the process was completed under three hours with the customer driving the vehicle out of the showroom. I am talking about Cote d’ivoire that is not as sophisticated as Nigeria, the question we should be asking ourselves is where we are getting it wrong.”
Speaking on the matter, Ademola Philip, the Executive Director, of Sales & Marketing, at Elizade Nigeria Limited added that there is no Nigerian that would not opt for a brand-new vehicle if given the choice.
He listed several reasons why the average Nigerian cannot afford a new vehicle including price, custom duties, maintenance, availability and durability.
He stated that why most Nigerians are going for Tokunbo cars is cost. Brand new vehicles can be considered expensive, and the average Nigerian may not be able to afford them, while “Tokunbo” vehicles, on the other hand, seem more affordable and accessible to a wider range of people.
Pointing out the role the Nigerian government could play to make vehicle financing possible for the average Nigerian, General Manager, Autosales, Mandilas, Kemi Koyejo, said there have been several discussions around that. He said the discussion has been ongoing for years and hoped that with this new government, there would be a revisit of various discussions around the issue.
According to Mayokun Fadeyibi, Chief Operating Officer, of Autochek MarketPlace, she highlighted that despite various reports pointing to the economic benefits of vehicle ownership, there are only 44 vehicles per 1,000 people in Africa, compared to the global average of 180. She equally notes that the reason behind this is that the salary of the average Nigerian, is far less compared to the average cost of cars.
