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From June 1, Nigerians will pay a premium for imported vehicles

Vehicles

  • Increased terminal handling fees entice businesses to relocate to neighbouring countries.
  • Dealers lament rising costs and dwindling demand for used vehicles.
  • This, stakeholders allege, is a ruse to discourage vehicle importation.

Nigerians on a tight budget will be unable to purchase cars beginning June 1, 2021, while those with a larger budget will pay double, as terminal operators have announced a 50% increase in terminal handling charges.

Two weeks ago, the Tin Can Island Port, Ports and Terminal Multipurpose Limited (PTML), and Five Star Logistics Terminal announced a 50% increase in their terminal handling charges.

According to the circulars issued by both terminal operators, the increase is scheduled to take effect next Tuesday. The terminals, on the other hand, have attributed the increase to inflation and the high operational costs associated with Nigerian ports, among other factors.

According to the circular issued by PTML, one of Nigeria’s largest vehicle terminals, “PTML would like to bring to the attention of its esteemed customers that the dramatic increase in inflation in 2020 and 2021, as well as the ever-increasing operational expenses incurred as a result of the particularly challenging port operational environment, have had a significant impact on the company’s direct costs.” The PTML tariff has remained unchanged for several years, and the terminal is unable to maintain the same level of service at current prices.”

Nigeria imported a total of N1.28 trillion worth of ‘used vehicles,’ popularly referred to as Tokunbo, and motorcycles in a single year (Q3 2019 – Q2 2020), a 42 percent increase over the N899 billion imported in the previous year (Q3 2018 – Q2 2019).

Despite the government’s January announcement of a revised import duty tariff on transport vehicles, car dealers continue to face low patronage as a result of the country’s poor economic situation.

According to the Nigeria Bureau of Statistics, the general increase in import tariffs is having a significant impact on businesses and the cost of goods and services (NBS). According to data gathered from the NBS website, Nigeria’s imports decreased to N1,759,720.29 in December from N2,397,223.91 in November 2020.

Under Nigerian law, a tax equal to 7.5 percent of the value of taxable goods and services is levied, referred to as Value Added Tax (VAT). At the moment, import duty ranges from 5% to 60%, with an average of 12%, but all imports are also subject to a 7% port surcharge and a 5% VAT.

Though the Federal Government announced a reduction in import duties on tractors, transport vehicles, and other items to alleviate the country’s current socioeconomic conditions, this has had no positive effect on the operating environment, as importers claim they continue to pay exorbitant fees.

Additionally, the 2020 Finance Bill’s duty reduction is not yet in effect. While the law took effect on January 1, 2021, the reduced levy has yet to be implemented.

Meanwhile, importers, automobile dealers, and freight forwarders have lobbied against a 50% increase in terminal handling charges, claiming that the move would exacerbate inflation.

They told The Guardian that the development will exacerbate the economy, which is still reeling from the aftershocks of two recessions, and will drive importers and investors to seek refuge in neighbouring countries.

Ayokunle Sulaiman, Public Relations Officer of the Association of Nigerian Licensed Customs Agents (ANLCA) at the PTML Terminal, lamented that the PTML terminal’s handling, delivery, documentation, and demurrage charges have all been increased.

“There has been a 50% increase in charges, including terminal documentation,” he explained. Terminal documentation for vehicles was previously N10,000; it has been increased to N15,000. Terminal handling and delivery charges are essential components of the job; all other charges, such as demurrage, are avoidable.”

Sulaiman commented on the increased charges at the Five Star Logistics Terminal, saying: “Previously, we paid N21,000 in terminal handling fees for SUVs; now, the fee has been increased to N33,000. We were paying N3,600 in terminal delivery charges for the same SUV, but that has been increased to N7,500.”

Sulaiman, on the other hand, stated that there was no consultation prior to the terminal operators implementing the increase. Concerning whether the charges were justified in light of the terminal’s explanation, Sulaiman stated that terminal operators were required to notify stakeholders prior to increasing their charges.

“If they were talking about increasing staff salaries or hiring more hands to improve efficiency, we could analyse it because we are human,” he lamented. “But you cannot just increase charges without providing us with anything in the way of efficiency.”

Iwayeye Olatunji, Manager, Client Services, Inspired Cars, stated that car dealers are having a difficult time selling cars. He stated that the increase would have an effect on the automobile industry, as buyers would be unable to purchase vehicles that exceeded their budget.

“I purchased a used car in Nigeria for N3.7 million, which is supposed to be no more than N3.2 million under normal circumstances. As a result, I am unable to sell this car at a lower price, which would discourage buyers. Someone who budgets for a car at N3 million but finds it at N4 million when he arrives at the car shop will be unable to purchase, affecting our business, which is based on turnover,” he lamented.

The car dealer stated that vehicle prices increased by more than 15% over a 12-month period. When asked how government policy was affecting his business, he stated, “Because the borders were closed, cars were unable to enter, which increased the prices of available vehicles.”

The dealer added that around this time last year, a used Toyota Corolla (2005 model) sold for N1.2 million, but now sells for around N1.6 million; while models such as the 2008 model have increased in price from slightly more than N2 million last year to slightly more than N3 million now.

Iwayeye Olatunji, Manager, Client Services, Inspired Cars, stated that car dealers are struggling with sales this year as patronage has remained consistently low compared to the pre-COVID-19 period due to prevailing economic challenges affecting consumers’ purchasing power. He added that government policy has made it prohibitively expensive to import vehicles.

Dr Segun Musa, Deputy National President, Air Logistics, National Association of Government Approved Freight Forwarders (NAGAFF), stated that the country’s economic situation is dire, with citizens struggling to survive as a result of high inflation and government policies. Musa lamented that terminal operators are benefiting from the government’s unfavourable policies at the ports.

He stated that 50% of terminal operators’ fees are derived from storage costs, which he attributed to the Nigerian Customs Service (NCS) for requiring containers to remain at the port for 30 to 40 days rather than the normal seven working days. All of these, he stated, would have an effect on consumers, as businesses cannot be prevented from increasing their prices.

According to Frank Ogunojemite, National President of the African Association of Professional Freight Forwarders and Logistics in Nigeria (APFFLON), while the economy is still reeling from the effects of COVID-19, the reason given by terminal operators does not justify the increased handling charges.

According to Ogunojemite, the increase will have a significant effect on the economy, as commodity prices will rise due to the people’s low purchasing power.

MEANWHILE, the Nigerian Shippers’ Council has pledged to oppose any increase that would negatively impact businesses. When The Guardian contacted Hassan Bello, Executive Secretary of the Nigerian Shippers’ Council, he stated that due to the council’s interventions, terminal operators have not increased their charges in a long time.

He added that after receiving the letter from the two terminal operators regarding the proposed increase in handling charges, the council would not approve any increase at this time, which is why the council will engage stakeholders and terminal operators on the matter.

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