In the first half of 2024, Nigeria witnessed a remarkable decline in its import bill for used vehicles, commonly referred to as tokunbo. According to the National Bureau of Statistics (NBS), the import bill plummeted by 83%, falling to N138.62 billion from N819.15 billion during the same period last year. This drastic decrease raises questions about the factors contributing to this trend and its implications for the automotive market in Nigeria.
Analyzing the statistics reveals significant changes in vehicle imports over the past year. In the first quarter of 2024, Nigeria imported no used vehicles at all, a stark contrast to the N69.23 billion worth of imports in the first quarter of 2023. This represents a significant shift in consumer behavior and market dynamics.
In the second quarter of 2024, however, the value of imported used vehicles rebounded to N138.62 billion. Despite this rebound, it still reflects an 81.5% decline compared to the N749.92 billion worth of used vehicles imported in the second quarter of 2023. The data suggests that while there was some activity in the second quarter, the overall market for used vehicle imports remains significantly reduced.
The NBS report highlights that the majority of imported used vehicles were sourced from the United States. In the second quarter of 2024, Nigeria’s total imports from the U.S. reached N971.84 billion, indicating that the U.S. remains a crucial market for Nigerian vehicle imports. However, the sharp decline in used vehicle imports suggests that consumers may be rethinking their purchasing decisions amid rising costs.
A key factor contributing to the decline in used vehicle imports is the introduction of new tax regulations by the Nigerian government last year. The new tax laws impose significant financial burdens on importers. Specifically, vehicles with engine capacities between 2.0 and 3.9 liters are subject to an additional Import Adjustment Tax (IAT) of 2%. For larger vehicles with capacities of 4.0 liters and above, the IAT rises to 4%. These new taxes are in addition to the existing 35% import duty and a 35% levy.
Importantly, vehicles with engine capacities below 2.0 liters, mass transit buses, electric vehicles, and locally manufactured vehicles are exempt from the IAT levy. This exemption is aimed at promoting local manufacturing and encouraging the use of environmentally friendly vehicles. However, the burden of taxation on larger used vehicles has led many consumers to reconsider their purchasing options.
The significant drop in used vehicle imports signals a shifting landscape in Nigeria’s automotive market. Higher costs associated with importation may drive consumers toward alternative options, such as locally manufactured vehicles or smaller, more fuel-efficient models that are exempt from the new taxes. Additionally, this decline could have broader economic implications, affecting employment in the automotive sector and related industries.
As the market adjusts to the new tax regime, stakeholders—including consumers, importers, and manufacturers—will need to navigate these changes carefully. It remains to be seen how these dynamics will play out in the coming months and whether the government will reconsider its tax policies to encourage a more robust automotive market.
The sharp decline in Nigeria’s import bill for used vehicles is a clear indication of the challenges facing the automotive industry. With new tax regulations reshaping the landscape, consumers are forced to reevaluate their choices, which could lead to lasting changes in the market. As Nigeria continues to navigate these challenges, the focus will be on finding a balance between generating revenue for the government and fostering a healthy automotive industry that meets the needs of its citizens.
