The naira has weakened by as much as 639 per cent since 2015, causing the cost of imported cars to triple.
In 2015, a foreign-used 2005 Toyota Corolla on the e-commerce platform, Jiji, cost about N1.9 million, however the price is now N6.5 million, marking a 242 per cent jump.
The locally-used cars also cost more but not as much as their foreign counterparts.
A Nigerian-used 2005 Toyota Corolla, which was priced at N1.2 million back in 2015, has surged 191 per cent and now sells for between N3 and N3.5 million.
Adedayo Oyewole, a car dealer in the Sango-Ota area of Ogun State, said he shifted to selling only Nigerian-used cars because the high cost of imported cars has upended demand.
“Foreign used cars are expensive and even we dealers are not even buying anymore because they stay longer in the showroom,” Oyewole said.
“I had people in America who used to ship cars to Nigeria for me to sell but they no longer bring those cars due to the high cost of clearing at the ports and low consumer demand.
Oyewole said “it is now very expensive to clear cars from the port due to the high and volatile exchange rate for calculating Customs duties and the implementation of the Vehicle Identification Number (VIN) valuation policy both of which makes the tariff on imported cars high,” he said.
The lull in the demand for foreign used cars is not only making cars stay longer in the showroom but also discouraging investors because it ties money down for a longer time.
Ojurongbe Damilola, head of Technical Services at Cars45, confirmed that Nigerian used cars have experienced a surge in demand and have become the biggest beneficiary of the foreign exchange crisis.
“The shift in demand towards Nigerian used cars shows the impact of the FX crisis on consumer preferences within the Nigerian automotive market,” he said.
According to him, government policies including changes in import tariffs, taxation, and regulations such as the proposed automation of the clearing process at ports in 2023, directly impact vehicle prices.
He added that before the FX crisis worsened in 2023, a foreign-used Toyota Corolla was sold for N4.5 million and a Nigerian-used option was sold for N2.5 million.
Before the COVID-19 pandemic, Nigerian consumers’ preference was focused on imported foreign used cars known as ‘tokunbo’ due to the high cost of brand-new vehicles. This major determinant led to the growth of the used car market in Nigeria.
According to Mordor Intelligence’s 2023 Nigeria’s Used Car Market Analysis, Nigeria’s used car market size is estimated at $1.14 billion in 2024 and is expected to reach $1.74 billion by 2029, growing at a compound annual growth rate (CAGR) of 8.90 per cent during the forecast period.
The report stated that prices of new cars shot up extensively as of July 2023 because of the devaluation of the naira, and the increase in exchange rates for clearing imports, which has had approximately a 15 per cent impact on the prices of new cars.
The report further revealed that the spike in new vehicle prices deters some of the customers from purchasing brand-new vehicles, subsequently leading to the surging demand for used cars in Nigeria.
One of the major challenges faced by the used car market is the increasing prices across Nigeria, attributed to the hike in tariff by the Nigeria Customs Service in 2022.
The report estimated that the price of Tokunbo cars increased by almost 100 percent in the Nigerian used car market as of July 2023.
On how the Nigerian used car market operates, Babatunde Kazeem, a Lagos-based ride-hailing driver, who does car business as a side hustle, said he sources Nigerian used cars that the engines are still in good condition, refurbished and sells them to buyers at a higher price.
According to him, people consider the price of the tokunbo equivalent of the car before fixing the price of the Nigerian-used version.
He said the strategy that enables dealers like him to get cars that are still in good condition, is to go for vehicles used by women because the female folks don’t usually use vehicles roughly.
“I also help car owners to sell their old cars. If the owner wants to sell the car for N2.5 million, I can fix the price at between N2.7 and N3 million so that the extra money on top will be mine after selling the car,” he explained. (BusinessDay)
