The recent 40 per cent hike in the exchange rate for cargo clearance at the seaports and the increase in tariff on imported cars by a terminal operator, Ports & Terminal Multipurpose Limited, has led to about 70 per cent drop in the sale of second-hand imported cars.
it was reported last week that the Central Bank of Nigeria and the Nigeria Customs Service had taken the ongoing foreign exchange reforms to the maritime sector with a 40 per cent increase in the exchange rate used for calculating the import duty.
The NCS had a few weeks ago raised the exchange rate used for the calculation of import duty from N422.30/dollar to N589/dollar.
The development, which has led to a corresponding 40 per cent increase in import duties on imported cargoes, including vehicles, has caused anxiety among operators in the maritime sector with clearing agents, freight forwarders and importers calling for an immediate reversal of the policy.
As that was gradually sinking in, the CBN on Thursday raised the exchange rate for cargo clearance by 31 per cent. The interest rate was moved from N589/$ to N770/$.
The NCS announced this development in a circular dated July 4, 2023, titled, ‘Implementation of the floating foreign exchange rate regime’ and was signed by the Assistant Controller General, IT & Modernisation, K. I. Adeola.
The circular read in part, “The CBN has instituted the floating exchange rate regime, which has given rise to incessant changes in the exchange rate for trade. The policy is to be implemented by all ministries, departments and agencies of the government, including the NCS.”
The service through the circular directed its area controllers to ensure that the information was communicated to relevant stakeholders.
Confirming the development, the Youth Leader of the Association of Nigerian Licensed Customs Agents, Tin Can Island chapter, Remilekun Sikiru, said the directive was communicated to members of the group in the early hours of Thursday.
Sikiru, who is also the Chief Executive Officer of Sikremstar Logistics Limited, explained that a 2004 Toyota Camry that was cleared for N1m before the introduction of the Vehicle Identification Number for clearing of imported vehicles was now being cleared for N1.9m.
Giving details of the new rate for clearing vehicles from 2001 to 2014, Sikiru said, “The actual duty on Toyota Camry is N705,000, while the total duty and clearance cost is N1.7m; for Corolla, the duty is N558,000 and total clearance cost is N1.3m; Sienna duty is N930,000 and total clearance cost is N2.2m; duty on Highlander is N1.1m, bringing the total clearance cost to N2.6m; duty on Venza is N1.2m and total cost is N3m.
“For Lexus RX350, the duty is now N1.5m, bringing the total clearance cost to N3m; duty on Lexus ES350 is N1.3m and the total cost is N3m; for Toyota RAV4, the duty is N831,000 and total cost of clearing it is N1.2m; Honda Pilot’s duty is N966,000 and the total clearance cost is N2.2m; Honda Accord’s duty amounts to N769,000 and total clearance cost is N1.8m; for Toyota Tacoma, the duty is N417,000 and total clearance cost is N818,000. These vehicles are from 2001 to 2014.”
Total duty or total clearance cost means the duty payable on a car plus the surcharge, ECOWAS duty and the seven per cent port development levy.
The development came barely one month after the Federal Government removed the fuel subsidy and floated the naira. It also came at a time electricity distribution firms were considering increasing power tariffs.
The National Public Relations Officer, NCS, Abdullahi Maiwada, who confirmed the new exchange rate on the agency’s portal, said it was only implementing the CBN policy.
“Whatever you see in our system is what has been communicated to us. It is determined by the Central Bank of Nigeria. So whatever we are using is what is obtainable as communicated to us. It is a monetary policy; we only implement what is given to us. It is a monetary policy and anything monetary is not determined by us, it is determined by the CBN. We only use what is communicated to us,” Maiwada stated.
Sikiru had earlier said the new rate had taken effect on the Customs portal and that the customs duty payable on vehicles had increased astronomically.
According to him, this development may lead to cargoes, including vehicles, being trapped at the terminals.
“The customs duty has been increased and it will lead to a heavy increment in duty payment on general goods and cargoes. This will bring hardship on importers,” Sikiru added.
Also speaking, a freight forwarder and Chief Executive Officer, 2B Frank Nigeria Limited, Nwegbe Frankypaul, said, “Freight forwarders woke up on Saturday to realise that the dollar rate had been increased from about N423 per dollar to about N590 per dollar.”
Nwegbe pleaded with President Bola Tinubu to ensure the depreciation of the value of older vehicles.
The Founder of the National Council of Managing Directors of Licensed Customs Agents, Mr Lucky Amiwero, said, “The moment you allow the naira to float freely in terms of exchange that is what you get. And it is going to affect the prices of goods. It is going to take a lot of licensed customs agents out of work because most of them are going to lose their customers.”
The Vice-President of the National Association of Government Approved Freight Forwarders, Nnadi Ugochukwu, said, “It will affect businesses; there is a container I have for someone, before now, we used to clear that container for N4.3m. With the new exchange rate, the clearing cost is now N6.5m.”
A licensed Customs agent, Mr Festus Ukwu, said, “Even if the Federal Government wants to do exchange rate harmonization, they should know how to go about it. This increase is a very big one.”
However, while the agents were still lamenting the increased exchange rate, the PTML slammed a 36 per cent tariff on imported used cars.
This development coming from a terminal operator that specialises mostly in the importation of cars worsened the woes of vehicle importers and sellers.
In a public notice sighted by our correspondent, the terminal operator said the current economic conditions of surging inflation, coupled with the devaluation of the currency and removal of subsidy on petrol had caused its operational cost to increase.
The terminal operator in the notice said its action had received the endorsement of relevant authorities.
The notice read in part, “The PTML would like to bring to the attention of its esteemed customers that the current economic conditions of surging inflation, coupled with the devaluation of currency and removal of fuel subsidy have caused the operational costs to increase multi-fold. Hence, having received the endorsement of the relevant authorities, it has become imperative to restructure our terminal tariffs from the 1st of July 2023.
“The PTML is confident that its esteemed customers will understand the rationale behind this review that will assist us in ensuring our superior level of service, while keeping the competitiveness of its rates.”
Reacting to all these developments, the President of the Berger Motor Dealers Association of Nigeria, Mr Metche Nnadiekwe, said that currently, members of his group were recording about a 70 per cent drop in patronage.
He said, “I don’t know if they think at all before coming up with policies like the increase in tariff or is it that when they wake up in the morning they just come up with policies. There is no need for an increase in the exchange rate for cargo clearance. We are still talking about that and the terminal is coming up with another increase, which has finally killed the business.
“There is a drastic drop in the volume of patronage we get here; there is up to 70 per cent drop in the patronage. The thing is there is no money to buy; people are not coming again to buy from us; we just sit down here and are doing nothing. The last time we checked many of our members are out of business; these are people who have bills to pay and they come out every day looking at their vehicles and no customer is coming to buy as a result of the additional money and all that.”
Also speaking, the Secretary General of the Lagos State Motor Dealers Association, Mr Tai Olaniran, said the dealers now focus more on reselling Nigerian used cars.
Olaniran stated, “It is difficult here and we don’t know the way forward; what they are trying to do is to discourage older vehicles and that is why we are now dealing with reselling Nigerian used vehicles. Because when you are clearing the same 2005 or 2006 model, you will find out that it is the same amount as the 2016 model. So, with the increment, you will see that they want to discourage older vehicles. It is going to affect us quite alright and it will affect the people as well.
“And many of us will go out of business or we will continue dealing in Nigerian used vehicles. So, we prefer Nigerian used vehicles instead of going for Tokunbo cars. With this increase in costs now, we will continue to do it so that we won’t go out of business; the percentage increase is much. At least since the removal of fuel subsidy and all that, most people don’t use cars again, so the volume of vehicle sales has dropped radically and I think the drop is up to 50 per cent, and it may be higher, I am not sure.”
A car dealer in the Alimosho area of Lagos State, Mr Johnpaul Ejiogu, said, “People now prefer to buy Nigerian-used cars to Tokunbo cars. You will find out that even the Nigerian-used cars are not affordable; they are also expensive but just a bit cheaper than the Tokunbo cars. We mostly deal in those ones and it is even very difficult to get buyers now. I will say that there is about 70 per cent drop in car sales now.”
An e-hailing cab driver, Joshua Abbey, said he chose to buy a Nigerian-used car for his e-hailing business because that was what he could afford.
“I wanted to go into the e-hailing transport business and I planned to get a Tokunbo car for that purpose, but when I priced the car, the dealers were quoting almost N4m for a 2004 model of Toyota Camry so I decided to buy a Nigerian-used version; even though it was expensive, it cost less than the Tokunbo one. I know that getting a Tokunbo would have been better for my business, but I have to manage this one like that,” he said.
According to Chibiike Ignatius, the more he tries to save up to buy a small car of his choice, the more the price goes up.
“It’s like I will save my money, because the more I save to buy the vehicle, the more the price goes up,” he stated.
A document obtained from the Customs showed that a total of 117,830 vehicles used vehicles were imported into the country in the first quarter of 2021, while 97,132 vehicles were imported in the same period of 2022. The steady decline was witnessed in the first quarter of this year as a total of 51,782 Tokunbo vehicles were imported.
On Thursday, President Bola Tinubu, signed four Executive Orders deferring and suspending the commencement of certain taxes paid by individuals and companies in the country with the aim of reducing the tax burden.
According to his Special Adviser on Special Duties, Communications and Strategy, Dele Alake, the President signed the Finance Act (Effective Date Variation) Order, 2023, which deferred the commencement date of the changes contained in the Act from May 23, 2023 to September 1, 2023.
He also signed the Customs, Excise Tariff (Variation) Amendment Order, 2023 shifting the commencement date of the tax changes from March 27, 2023 to August 1, 2023 in line with the National Tax Policy.
The President also gave an order suspending the five per cent Excise Tax on telecommunication services, as well as excise duties’ escalation on locally manufactured products. He also ordered the suspension of the Import Tax Adjustment Levy on certain vehicles.
But reacting to the Executive Order concerning importation of vehicles, Amiwero said it would likely lead to an increase in the importation of vehicles by about 15 per cent.
“You know the exchange rate has been affected. So, the boost on car importation won’t be much; we are looking at between 10 per cent and 15 per cent. Because you know that the exchange rate will actually reduce some of the gains. So, we are looking at a 10 per cent to 15 per cent increase in vehicles coming into the country,” he explained.
