The Nigerian automobile industry has been declining since the first recession in 2016, and consumers are living a hand-to-mouth life, making it almost impossible to purchase new vehicles. Therefore, Tokunbo cars, i.e., used cars, are imported from other countries and make their way into countries like Nigeria.
This was when an ad hoc committee was made in Nigeria to give its finding on the industry's downfall and how to make it prosper in the future. Soon, the government imposed the Nigerian Automotive policy in 2013, which enabled the local automobile manufacturers to import spare parts and completely knocked down vehicles at 0% to 5% duty. But, on the other hand, used cars could still be imported at a 70% duty.
This bill was passed in order to discourage used vehicles and promote brand new, locally manufactured vehicles. However, the luck of the draw had it that this bill did not cause the prices of the vehicles to fall. Instead, it rose due to the weakened exchange rates of the Naira.
There were approximately 40 automobile plants in Nigeria that were using just 3% of the total install capacity of their land, allowing for less demand for brand-new local vehicles. Soon the government realized this and tried to strike its policy by imposing a ban on any land importation of automobiles in 2017 to lessen the influx of Tokunbo cars. This was done to increase sales of locally assembled vehicles.
However, it couldn’t work like this for long due to the government had plans to ease up on the bans by 2019. Also, as per a clause in Nigerian Finance bill, the government would eventually have to reduce the duties on the importation of vehicles from 35% to 5%.
Here the local manufacturers made themselves clear to the government, informing them that if these implications were lifted, it would lead to the eradication of local car manufacturing firms. As they had invested huge capital funds there, they would not want to lose it all if the ban and duties were to be revoked.
However, due to a huge Nigerian population being middle class and trying to meet ends. It is hard to say that locally manufactured automobile firms could flourish as people would yet want to purchase Tokunbo cars cheaper than new cars. If only the population of Nigeria was thriving at a faster pace, there were still chances for this industry to grow.
