Bucking the system

Guardian Nigeria says that the importation of used vehicles into Nigeria has dropped by 32%, with dealers classifying minorly-dented vehicles as salvaged to benefit from 40 to 60 percent duty rebates. High costs and inflation make clean, used vehicles unaffordable for many Nigerians, leading to a reliance on repaired salvaged cars. The NPCC Port Performance Report noted a decline in imported used vehicles to 132,296 units from the previous year’s 194,550 units. Muhammad Yakubu, the spokesman of the Port and Terminal Multi-Services Limited (PTML) Customs command, said, “most of what we have are dented vehicles, which people declare salvaged.”

In 2022, a 40% drop in importation numbers was reported. From such a low base, a further 32% reduction in 2024 indicates an industry on life support. While Customs reported a 70% jump in the Naira value of imported vehicles in Q2 of 2023, this was driven mainly by the Naira devaluation. This shows how tough things are financially for many Nigerians. The reality is that the industry continues to decline in actual numbers of vehicles imported and then sold. Even more crucial is that the new vehicle market does not seem to fare well. This is why importers are incentivised to explore this loophole: to make vehicles more affordable and the market more profitable. Customs officials, like Muhammad Yakubu, are right to be frustrated about people lying about car damage to get lower fees. However, policymakers would do well to know that fair, empathetic pricing of import tariffs that take proper cognisance of local economic conditions would discourage individuals from cheating in the first place. The Nigerian Customs Service, historically tasked with facilitating trade and regulating imports, has increasingly become synonymous with revenue generation. Instead of adopting pricing mechanisms that reflect local economic conditions and encourage legitimate trade, the Customs Service has resorted to imposing high tariffs that often discourage trade and incentivise illicit activities such as false declarations and smuggling, which deprive the government of much-needed revenue that could be generated through legitimate trade channels. An efficient Customs Service would mean that importers and exporters enjoy seamless trade movement, easing the profits flow. Instead, it raises its revenue target yearly while raising import duties (and adjusting the exchange rate for duties). Nigerians must be able to import newer vehicles, especially for mass transit, for safety, fuel economy, sustainability, etc. Newer vehicles are typically equipped with more advanced engine technology and are designed to be more fuel-efficient compared to older models. By importing newer vehicles for mass transit, we can reduce fuel consumption and lower the overall carbon footprint of public transportation systems. Therefore, the Nigerian Customs Service needs to understand that there are no shortcuts in governance. They must reevaluate their approach to trade regulation and revenue generation to reap lasting benefits.