Naira Depreciation: Nigeria’s Importation of Foreign used cars dropped by 51.2%

• Nigeria’s Importation of Foreign used cars dropped by 51.2%
• Auto dealers frantically seeking FX at a higher rate
• What auto dealers have to say

Based on an analysis of statistics from Nigeria’s international trade given by the National Bureau of Statistics (NBS), In the first half of 2022, Nigerians imported secondhand cars from abroad valued at N169.1 billion. This marks a 51.2% fall from the N346.29 billion reported in the equivalent time of 2021 and a 37.7% decrease from the N271.2 billion spent in the second half of last year.

Additionally, between January and June 2022, Nigerians imported motorbikes and cycles worth N122.39 billion, which is a 31.1% decrease from the prior quarter (N177.6 billion – H2 2021).

Nigeria’s Importation of Foreign used cars dropped by 51.2%

Dealers have scaled back their orders due to the rising cost of importing used cars from abroad, despite the fact that the cost of the vehicles as a whole has climbed by about 50% in the past year. Nairametrics Research found that a Toyota Camry 2007 to 2009 model, which was sold for an average of N3.3 million last year, now costs at least N4.1 million.

Additionally, the average price of a Lexus ES 350 (2007 to 2013 model) is currently N5.3 million. As of this time last year, it was selling for an average price of N3.5 million. The cost of a Toyota Corolla also jumped, going from N2 million to nearly N3.5 million.

Foreign used automobile prices have increased significantly recently, which car sellers in the nation ascribe to both the sharp loss in the value of the dollar and the rise in costs for clearing the vehicles from the ports.

On the other hand, statistics show that the rate of motorcycle sales has significantly decreased in recent months despite the fact that most local governments in the Lagos metropolis have banned the movement of motorcycles.

Auto dealers frantically seeking FX at a higher rate

The persistent lack of foreign currency in the nation has prompted car sellers to compete for USD at higher prices on the underground market. Following several recent CBN measures, including the proposal to redesign the N200, N500, and N1,000 denominations, the exchange rate between the naira and the USD has been falling precipitously.

The naira, which began the year at an average exchange rate of N565 to the US dollar, has been plagued by currency hoarders’ actions, speculatively induced demand, strong demand for international education, and a reduction in FX inflows falling as low as N820 to the dollar. As a result, vehicle dealers now pay high naira values for comparable autos.

According to Nigerian auto dealers, they can exchange their naira on the illicit market for up to N840 per $1, which has an impact on the automobiles’ selling prices.
It’s also important to remember that the Russia-Ukraine war has resulted in global inflation that is currently in effect. This has additionally contributed to the cost increase.

What auto dealers have to say

A car merchant in Lagos State named Mrs. Enitan claims that the rising cost of clearing goods from the ports has increased in tandem with the dropping value of the naira.

She claims that a car that was once approved for an average of N600,000 has now increased to as much as N1,000,000, making it impossible to sell low-budget vehicles because Nigerians would not be ready to pay a premium for early model vehicles.

Although the price of old foreign cars has increased, some wealthy Nigerians are still buying them, she pointed out. Only merchants with links to these wealthy few, though, conduct such sales.

“Based on your level of connection and location, you can easily sell cars like Benz to high-net-worth people and make good profit,” she said.

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Additionally, Mr. Murphy of YMG Auto Sales, an automobile dealer in Ikorodu, Lagos State, revealed that due to price increases, common Nigerians are no longer able to afford to purchase foreign-made used automobiles. Instead, they purchase used cars from Nigeria.

“The cost of foreign cars has almost doubled due to the cost of clearing from the ports as well as the exchange rate problem we are currently facing,
“N100 million worth of vehicles sell faster than N5 million vehicles because the source of the funds is often illegal. You will find the buyer of such vehicle among these set of people: fraudsters, politicians, big government workers, etc,” he said.

He ended by noting that those in the auto industry are currently having a difficult time as sales have fallen sharply as a result of an increase in selling price, which is mostly due to an increase in the cost of clearing automobiles and naira depreciation.

Another dealer, Mr. Kazeem Sulaimon, lamented the rising expense of moving vehicles from the port in Nigeria. According to his opinion, the price of clearing an automobile has increased from N500,000 to N1,000,000.

The demand for used automobiles from Nigeria has increased recently, he continued, and Nigerians are now wanting to purchase them. He said that a Nigerian car may now be purchased for as little as N3.5 million, up from N1.5 million previously.

With dismay, he said.“It has become very hard to make sales now, it takes about three to four months to sell a single car, due to the increase in the price and Nigerians prioritizing their needs”.

Source: Nairametrics.com