See when and why Nigerians will start paying more for imported vehicles
Beginning from June 1, 2021, Nigerians with a low budget would be unable to purchase cars while those with a high budget will pay double, as terminal operators have announced a 50 per cent increase in terminal handling charges.
Two Roll On Roll Off (RORO) terminals at the Tin Can Island Port, Ports and Terminal Multipurpose Limited (PTML) as well as Five Star Logistics Terminal had two weeks ago announced an increase in their terminal handling charges by 50 per cent.
According to the circular released by both terminal operators, the increment is expected to take effect from Tuesday next week. However, the terminals have blamed the increment on inflation and huge operational cost due to the nature of Nigerian ports, among others.
In the circular by PTML, one of the biggest vehicle terminal in Nigeria, it states: “PTML would like to bring to the attention of its esteemed customers that the dramatic surge in inflation in 2020 and 2021, as well as the ever-increasing operational expenses incurred because of the particularly challenging port operational environment, which has had a huge impact on the company’s direct cost. PTML tariff has not been adjusted for a number of years now, and it has become impossible for the terminal to provide the same level of service as current prices.”
Nigeria recorded a total sum of N1.28 trillion as of the value of ‘used vehicles,’ popularly known as Tokunbo, and motorcycles imported in one year (Q3 2019 – Q2 2020), showing an increase of 42 per cent, compared to N899 billion recorded in the corresponding period (Q3 2018 – Q2 2019).
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Despite the revised import duty tariff for transport vehicles, which was announced by the government in January, car dealers are still faced with dismal patronage because of the poor economic situation of the country.
The rise in import tariff generally is taking a heavy toll on businesses and the cost of goods and services according to the Nigeria Bureau of Statistics (NBS). According to the report gleaned from the NBS website, imports in Nigeria decreased to N1,759,720.29 in December from N2,397,223.91 in November of 2020.
Under Nigerian law, tax is charged at 7.5 per cent of the value of the taxable goods and services, known as Value Added Tax (VAT). At the moment, import duty varies from 5 per cent to 60 per cent, averaging 12 per cent but all imports are also subject to a 7 per cent port surcharge and a 5 per cent VAT.
Though the Federal Government had announced a slash in import duties for tractors, transport vehicles, among others to cushion current socio-economic conditions in the country, this has not had any positive effect on the operating environment as importers say they still pay huge charges.
Also, the slash on import duties in the 2020 Finance Bill is not yet in force. Though the law became effective on January 1, 2021, the lowered levy has not been implemented.
MEANWHILE, importers, car dealers and freight forwarders have kicked against the 50 per cent increase in the terminal handling charges, saying the development would heighten inflation.
They told The Guardian that the development will further worsen the economy, which is still grappling with aftershocks of two recessions while driving importers and investors to patronise neighbouring countries.
Public Relations Officer of the Association of Nigerian Licensed Customs Agents (ANLCA) at PTML Terminal, Ayokunle Sulaiman, while giving a breakdown of the PTML terminal increased charges, lamented that terminal handling, delivery, documentation and demurrage charges have all been increased.
He said: “There has been a 50 per cent increase in the charges including terminal documentation. For vehicles, terminal documentation was previously N10,000, it has now been increased to N15,000. Terminal handling charges and terminal delivery charges are the core aspects of the job, all other ones like demurrage are avoidable.”
Speaking on the Five Star Logistics Terminal increased charges, Sulaiman said: “For SUVs, we were paying N21,000 as terminal handling charges, now it has been increased to N33,000. For the same SUV, we were paying N3,600 as terminal delivery charges but it has been reviewed upwards to N7,500.”
Sulaiman, however, said that there was no consultation before the terminal operators came up with the hike. Speaking on whether the charges were justifiable, given the explanation of terminals, Sulaiman said the terminal operators were supposed to inform stakeholders before increasing their charges.
“If they were talking about increasing staff salary or employing more hands to enhance efficiency, we would be able to analyse it, we are humans, but you cannot just increase charges without giving us anything in form of efficiency,” he lamented.
The Manager, Client Services, Inspired Cars, Iwayeye Olatunji, said car dealers are having a tough time with car sales. He said the hike would affect car businesses, as buyers would not be able to buy cars beyond their budget.
“I bought a Nigerian used car for N3.7 million, which under the normal circumstance is not supposed to be more than N3.2 million. With this, I cannot sell this car for less and people would not want to buy. Somebody that budgets to buy a car for N3 million and by the time he gets to the car shop, he sees it for N4 million, the person will not be able to buy and this will affect our business, which is based on turnover,” he lamented.
The car dealer said prices of vehicles have risen by more than 15 per cent in a 12-month period. When asked about how government policy was affecting his business, he said: “Due to border closure, cars stopped coming from the borders, which made the prices of available ones go up.”
The dealer added that about this time last year, a used Toyota Corolla (2005 model) sold for N1.2 million but the same car currently sells for about N1.6 million; while models like the 2008 version went from a little over N2 million last year to just over N3 million now.
The Manager, Client Services, Inspired Cars, Iwayeye Olatunji, said car dealers are having a tough time with sales as patronage has been consistently low this year, compared to the pre-COVID-19 period due to prevailing economic challenges that have affected consumers purchasing power. He added that government policy has made it expensive to bring vehicles into the country.
Deputy National President, Air Logistics, National Association of Government Approved Freight Forwarders (NAGAFF), Dr Segun Musa, said the economic situation in the country is critical such that people are struggling to survive due to high inflation and government policies. Musa lamented that terminal operators are cashing in at the ports due to the government’s unfavorable policies.
He said 50 per cent of terminal operators’ charges are from storage cost, which he blamed on the Nigerian Customs Service (NCS) for making containers stay at the port for 30 to 40 days, instead of seven working days. He said all these would affect consumers, as businesses cannot be stopped from increasing their charges.
The National President, African Association of Professional Freight Forwarders and Logistics of Nigeria (APFFLON), Frank Ogunojemite, said while the economy is still reeling from the effect of COVID-19, the reason given by the terminal operators does not justify the increased handling charges.
Ogunojemite said the increment will leave a huge effect on the economy as prices of commodities would go high with the low purchasing power of the people.
MEANWHILE, the Nigerian Shippers’ Council has promised to resist any form of increment that would affect businesses. When The Guardian contacted the Executive Secretary of Nigerian Shippers’ Council, Hassan Bello, he said terminal operators have not increased their charges in a long time due to interventions by the council.
He added that having received the letter from the two-terminal operators on the proposed increase in handling charges, the council would not allow any increase at this time, which is why the council will engage stakeholders and the terminal operators on the issue.