Why are the prices of Tokunbo cars still high despite the stronger Naira?

Many individuals who purchase foreign-used cars, popularly known as Tokunbo, are still dissatisfied with the current prices of these cars even though the tax on such cars has been reduced. This is especially frustrating since the value of our naira compared to the US dollar has increased. Car dealers who use Carmart.ng to sell their vehicles have yet to adjust their prices. The cost of Tokunbo cars has surged significantly, more than doubling between May last year and last month. This is mainly due to the naira’s depreciation against the dollar, making it difficult for many people to afford these cars.

Tokunbo cars are highly sought after by the middle class and small business owners in Nigeria. These cars are mainly imported from countries such as the United States of America, Germany, Canada, and Nigeria itself. Recently, there has been a significant shift in the value of the Nigerian currency, the naira, compared to the US dollar. For instance, on March 15, 2024, $1 was equal to N1,615, but by April 14, 2024, it had dropped to N1,200.

Furthermore, there has been a decrease in the customs exchange rate used for calculating import duty from N1,515/$1 in March to N1,200/$1 on April 15, 2024. This means that the naira increased by 25.7% in the official market, and the customs exchange rate rose by 20.5% in just three weeks.

Despite the reduction in costs for importing goods and paying import duties, consumers are still waiting for the prices of imported items, especially vehicles, to go down. They hope that prices will become more favourable in the coming months if the exchange rate remains stable. Chukwu Innocent, a consumer, mentioned that we might start feeling the effect in the next one or two months. However, a check on different marketplaces for vehicle sales in Nigeria revealed that sellers are still keeping prices at the same level as before the naira began to strengthen.

For example, as of the time of writing this article, dealers on carmart.ng have listed the latest prices of cars.

• A Tokunbo 2009 RX 300 still costs N11.5 million,
• while a 2007 RX 350 is priced at N13.8 million.
• Similarly, a 2017 ES 350 is selling for N27 million,
• and a 2012 Lexus 350 is N19.5 million.

Moreover,

• a 2010 Toyota Sienna is priced at N14.4 million,
• and a 2013 Toyota Camry goes for N13.7 million.
• A 2012 Toyota Corolla is N9.3 million,
• a 2010 Toyota Venza is N10.5 million,
• and a 2006 Toyota Corolla still costs N7 million.

Furthermore, Mercedes-Benz models are also pricey:

• a 2007 M-Class is N9.4 million,
• a 2012 GLK 350 sells for N13.5 million,
• a 2004 C230 is N7.2 million,
• a 2016 C300 is N26.5 million,
• and a 2010 C300 is N9.7 million.

Additionally, a secondhand 2013 Honda Pilot costs N14 million, a 2006 Honda Pilot is N5 million, a 2009 Honda Accord is N6.5 million, and a 2011 Honda Accord is N9.5 million.

The president of the Association of Motor Dealers of Nigeria (AMDON), Prince Akinola Adedoyin, mentioned that it will be a while before the prices of imported used vehicles decrease. He explained that because it takes months to import vehicles, dealers need to first sell their existing stock, which they bought when the dollar rate was high before they can import new stock that will be sold at lower prices.

“Well, you know that even if the dollar goes down, the goods bought within this high time needed to be sold before there could be a change. You also know that purchasing power has not been commensurate with the increase since then. Also, when the dollar went up, all vehicles that came in would be sold before the price could be reduced, but people are expecting that once the dollar drops today, the price should drop the next day, but it doesn’t work that way because the dollar rate has been rising since December to mid-March before it started going down, and buyers want the price to reflect immediately. That’s not the way to go,” Adedoyin stated.

Adedoyin said that the fairly used vehicle sector plays a significant role in the economy because it provides accessible road transport to the masses.

“Apart from the three months that it takes to import, even that importation depends on the cash crunch because some importers stopped importation and diverted into other businesses, and our own sector controls the major economy because in this country now, the road is the only available mode of transportation opened to millions of Nigerians, so whatever affects it, affects all the strata of the economy, but we are hopeful that in the next few months, the price will come down.” 

The head of Berger Motor Dealers in Lagos, Chief Metchie Nnadiekwe, agreed with Prince Adedoyin, saying that the cost of Tokunbo cars is likely to decrease within three months. He explained that as old stock bought during the high exchange rate period gets sold, new stock will be brought in at lower prices, thus reducing overall prices, Leadership Newspaper noted

“For me, the dollar rate has come down, but we can’t expect the price to come down immediately because the vehicles on various stands are being bought at the high rate of the dollar. What about the one we bought then? Do we sell at a loss?” he asked rhetorically.

He continued, “We have to sell the way we bought it, and the new one we are buying will lower the price. But I can assure you that gradually, the price will come down. We also want it to come down because we are not enjoying it either. Customers are not buying vehicles now.” 

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“Maybe in three months, when we receive a new shipment that we ordered and after we sell the old one we have bought, the price will drop,” he stated.