Importers blame decline in vehicle import on FX volatility, high duty

(Last Updated On: July 10, 2024)By Steve Agbota, styvenchy@yahoo.com 
Due to worsening foreign exchange rates, importers and clearing agents operating at various seaports are reporting a significant decline in vehicle imoprts. Currently, the importation of vehicles into the country has dropped by 25 per cent while other general imports have also nosedived due to the high import duty, volatility in foreign exchange rate accentuated by naira crash.
Daily Sun also learnt that the unprecedented decline in the volume of pre-owned  vehicle import also stems from high import duty and taxes, imposition of import levy on used vehicles, restriction of rebate on ex-factory prices used for assessment of import duty to 10 years (whereas the law allows importation of 12-year old vehicles).
The Ports & Terminal Multipurpose Limited (PTML), which is the foremost roll-on-roll-off terminal in Nigeria, handling between 60 per cent and 70 per cent of vehicles imported into the country confirmed the sharp drop in the importation of vehicles into its terminal.
In a document sighted by Daily Sun, PTML blamed high import duty and taxes on used vehicles for the 60 per cent drop in vehicle importation it experienced in the first half of 2024.
Due to the sharp drop in importation, most of clearing agents have remained idle because of less activities in the port, while some of them have lost their lives due to the accompanyinghardship. Stakeholders lamented that in the last one year, the Central Bank of Nigeria (CBN) has adjusted the Customs import duty more than 40 times, which forced some importers to leave the nation’s ports for the neigbouring ports to search for stable exchange rate to do business.
“This is part of the reason a large chunk of Nigerian cargoes have been diverted to neighbouring countries such as Ghana, Togo, Benin Republic and Cameroon due to the current economic situation in the country”, a port operator who craved anonymity told Daily Sun.
Stakeholders lament that it is not only vehicles that are affected, even regular imports were affected because people could no longer import raw materials as they want and the volatility did not allow them to plan for the rainy day.
“The rate can be X today and tomorrow it is X plus 25 and things like that, according”, another agent told Daily Sun.
In his interventionn on the issue, an importer and President General, United Berger Motor Dealers Association (UBMDA), Metche Nnadiekwe, confirmed that the volume of vehicles import into the country has reduced drastically due to foreign exchange volatility and high import duty.
According to him, so many people are no longer in the business, adding; “these are people that were doing well without taking part in any crime but today they are out of business.
“It is unfortunate that some of these people might have doing something crime related because for somebody to leave what is doing here because of the harsh business operating environment, they may go into crime out of frustration.
“We are appealing to the Federal government to do something about the high rate of foreign exchange and harsh business operating environment. The cost of clearing is too high. For instance, the vehicle we are clearing with N2.5 million or N3.5 million before is almost N12 million now. This is wrong. Who is going to buy the vehicle at that rate? People that can buy it are crime related business people or people who have stole money from the government,” he lamented.
He said an ordinary trader cannot afford to buy such vehicles at that rate with their lifetime savings.
Meanwhile, General Manager of PTML, Mr Tunde Keshinro, revealed that vehicle importation dropped from 45,000 units in the first half of 2023 to 18, 000 units in the corresponding period this year.
He, however, blamed the imposition of import levies on imported vehicles for the drop.
“Vehicles above 10 years of age are forced to pay higher import duties, and high exchange rates resulting in excessive-high landing costs above the affordable level for the majority of Nigerians, who depend on private vehicles for private and commercial transportation. These are some of the reasons there was a drop,” he explained.
Speaking with Daily Sun, the former acting National President of Association National Licensed Customs Agents (ANLCA), Dr. Farinto Kayode, said that the exchange rate fluctuation has actually reduced the level of importation into the nation’s ports.
According to him, the vehicle importation has dropped by 25 per cent and it will continue to be like that until government considers predictive exchange rate.
He said at the same time, it has really affected the importers and clearing agents tremendously, adding that it has not been very good for people in the industry, particularly freight forwarders.
“We have three categories of imports. We have bulk cargo, we have containerized goods and we have vehicles. The level of import on vehicles has dropped by about 25 per cent, while the level of import on containers has dropped by about 30 per cent, the level of import on bulk cargo, also dropped by about 20 per cent, so we are not really winning the war,” he added.
He said that Government has not come out categorically to address the issue as it relates to cargo clearance.
“And that is why within four days in a week, we have more than five different exchange rates and that is not too good for the economy and that is why the economy is not moving. I have subjected severally that there is need for government to look inwardly and let us have predictive exchange rate and these are not really being addressed,” he added.
Conversely, the maritime industry is actually dead and stagnated, is not moving while the volume of import is drastically dropping on a daily basis, saying this the courtesy of the fact that government is not really looking inwardly or addressing the issues of the maritime industry.
“When I saw the CBN’s letter recently suspending the price verification, I laughed.
Because I am one of those who wrote to the National Assembly that it is not their responsibility. I have the letter here. I can give it to you. In line with the valuation act, it is the responsibility of Customs.
“But because we don’t have people who are advocates, and that is why the CBN thinks whatever they are doing, they have been helping us. We have a CBN governor that is very, very heady. Very heady and stubborn. He doesn’t listen to our advice. And this has not really helped the economy.
“And I keep wondering who are the economic policy formulators of this country. The only beautiful thing about this country that I noticed, that our economy has defiled all economic theories. I remember my little economic in the secondary school.
“It has defiled all the economic theory. That is why we are still good to go. But that’s why we should not celebrate too much because everything has its level of elasticity. Get to a level where it will reach, it will collapse,” he lamented.
He said the only solution is to have predictive exchange rate for Customs purposes alone, saying it’s not out of place and it is not something that Nigeria cannot do.
“What do I mean by that? If they have pegged our exchange rate for import purposes alone at N1, 000 since January; number one, importers will be able to predict. They know that even if I’m bringing my cargo by July-August, the exchange rate will be N1,000. They will still want to import,” he explained.
He hinted that they are a lot of importers that are not importing now because they cannot predict it.
“Yesterday, I was seeing it was N1,174, this morning now, I think it has changed again by about a few cents. A cent is important in every business, man. Because if you are using bank loan, you have to put all this into consideration. We had a week where we have more than five exchange rates. That’s not too good for the economy. So, freight forwarders are not doing well in this era. We are not happy,” he added.
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