Review policy on importation of used cars!

By 

Femi Awoniyi

Thousands of used cars are imported into Nigeria each year and some of these are not supposed to be allowed into the country, having passed the age of serviceability.

Many of these vehicles pack up finally only after a few years of service on Nigerian roads. This, in effect, turns the country into a scrap yard. And, without the appropriate recycling facilities, these vehicles degrade our environment.

That such cars are brought into the country is due to lack of enforceable standards which vehicles imported must meet. The federal government‘s decision, announced on 26 September by the Federal Executive Council, to set a standard for imported used cars is in fact long overdue and should normally have been hailed. But that only cars not older than five years could be brought into the country as from 15 January 2002 is too radical a policy which will do far more harm than good to the Nigerian economy.

On what basis did the government arrive at 5 years as the threshold? one would ask. Was the cost implication for car users and taxi operators taken into consideration? How much does government in Nigeria and private companies give to their workers as car loan? Would Nigerians still be able to afford these cars when the policy goes into effect? Did the committee that is said to have recommended the policy consult with the key stakeholders in the used-vehicle trade? (Obviously it did not going by critical voices of dealers, customs officers, clearing agents and associations of commercial transport operators).

Most importantly, the cost implication would be drastic. The reasons being the disproportionate difference in prices of cars built in the last 8 years and those earlier. Recently made cars in the European Union and those destined for its market have expensive technical features that make them meet very stringent environment regulations presently prevailing only in the 15-nation community. This factor combined with others like substantial improvements in interior comfort and engine performance translate into far higher prices.

For example, a used Volkswagen Golf car (I/II model), built between 1986 and 1991, costs between 1,000 and 4,000 deutsche marks (DM) depending on various factors like ‘body quality’, mileage, state of serviceable parts and how recent the road worthiness certificate was issued. The cost of shipping from Germany to Nigeria is 1,100 marks and the car is cleared for about 70,000 naira in Nigeria.

Golf I/II sells for between 250,000 and 400,000 naira in Lagos. If the new policy takes effect, prices will rise by at least 400 percent. This is because there is hardly the same car (called model IV as from August 1997) built after 1997 that costs less than 15,000 DM. Without adding the costs of shipping and clearing in Nigeria, this car costs 900,000 naira already. This means after clearing, no Golf could cost less than 1 million naira in Nigeria. Yet a Golf is not, by any definition, a luxury car. It is, in fact, a worker’s car in Germany where it is renowned for its durability. Would the Nigerian middle-class or taxi operators still be able to afford such cars?

Since it is going to be almost impossible for the market to absorb the ensuing drastic price increases, importers would seek to beat the regulation by shipping their vehicles first, to the ports of the neighbouring countries of Benin and Togo, and then smuggle them into Nigeria. And importers will do this with the active connivance of corrupt Nigerian customs officials.

At the end of the day, Nigerian ports will lose business, Nigerian government will lose revenue, many Nigerian clearing agents and others, including food sellers and hawkers of everything from ‘pure water’ to bread will lose their jobs at ports, public transport will become yet costlier, among other detrimental effects.

Some custom officers will gain, our neighbours’ ports will benefit from increased patronage and their governments from more revenue.

In effect, the big losers would be the Nigerian people. The policy objective of improved quality of imported cars would not be realised.

The problem of unserviceable cars brought into Nigeria could be tackled by demanding that imported vehicles have valid certificates of road worthiness. There is no age barrier in the registration of vehicles in the EU, they are only required to be road worthy. In fact, about 25 percent of vehicles registered in Germany each year are over five years old, according to official statistics.

A well-maintained Golf I/II made in 1986 with a valid road worthiness certificate could perform better on our roads than South Korean models of only five years. Hence, the age of a used vehicle is not the only indicator of its quality.

The other objective of the new policy, according to the government, is to decongest our ports. This can only be achieved by better management, including the introduction of modern inspection equipment like scanners, and streamlining operations. It is known that ports in Benin, Ghana and Togo are far more efficient than ours.

Nigeria should not seek to decongest ports by reducing the volume of goods coming in, but improving their capability to handle more goods. Since it is a main objective of government to increase economic activities, our ports should be expected to deal with a higher volume of goods.

In the spirit of the times, it is also important to democratise public policy formulation in Nigeria. The committee that recommended the new guideline should have made its existence public through paid announcements in the press and liased extensively with key stakeholders in the used-car trade, including workers, commercial-transport operators, clearing agents, car dealers and employers.

It is also time that public policy departed from the with-immediate-effect culture, a carry-over from military rule. It is not proper to change a policy that has been in effect for decades with a notice of only 3 months. This does not give businesses enough time to make the necessary adjustments in their operations.

In view of its possible unfavourable impact on the economy, the federal government should reverse its new policy on the importation of used cars immediately. It should set up a new committee that should publicly sit and liaise with stakeholders, and propose a reasonable policy that will benefit Nigeria and not a few corrupt government officials.

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Femi Awoniyi is a journalist and he lives in Speyer, Germany

October 2001