Soaring Prices Force Nigerians to Buy Used Cars at Home

Nigerians are increasingly turning to locally-used vehicles as soaring prices make imported cars unaffordable in a country facing its worst cost-of-living crisis in decades.

According to multiple car dealers who spoke with BusinessDay, the demand for locally-used cars has surged due to the devaluation of the naira, which has significantly increased the cost of importation.

Since 2015, the naira has weakened by as much as 639%, causing the prices of imported cars to triple. For instance, in 2015, a foreign-used 2005 Toyota Corolla listed on Jiji cost around N1.9 million.

Today, the same car is priced at N6.5 million, marking a 242% increase. Conversely, locally-used cars have also risen in price but not as steeply. A Nigerian-used 2005 Toyota Corolla, which cost N1.2 million in 2015, now sells for between N3 million and N3.5 million, a 191% increase.

Adedayo Oyewole, a car dealer in the Sango-Ota area of Ogun State, reported shifting exclusively to selling Nigerian-used cars due to the high costs of imported vehicles and reduced consumer demand. “Foreign used cars are expensive and even we dealers are not buying anymore because they stay longer in the showroom,” Oyewole said. He added that the high cost of clearing cars at the ports and the volatile exchange rate for calculating Customs duties have made imported cars less attractive.

Ojurongbe Damilola, head of Technical Services at Cars45, confirmed the surge in demand for Nigerian-used cars, attributing it to the foreign exchange crisis. “The shift in demand towards Nigerian used cars shows the impact of the FX crisis on consumer preferences within the Nigerian automotive market,” he noted. Government policies, including changes in import tariffs, taxation, and regulations, such as the proposed automation of the clearing process at ports in 2023, have directly impacted vehicle prices.

Before the FX crisis intensified in 2023, a foreign-used Toyota Corolla sold for N4.5 million, while a Nigerian-used version was priced at N2.5 million. Prior to the COVID-19 pandemic, Nigerian consumers predominantly preferred imported foreign-used cars, known as ‘tokunbo,’ due to the high cost of brand-new vehicles.

According to Mordor Intelligence’s 2023 Nigeria’s Used Car Market Analysis, the market size is estimated to be $1.14 billion in 2024 and is expected to reach $1.74 billion by 2029, growing at a compound annual growth rate (CAGR) of 8.90% during the forecast period. The report highlighted that new car prices surged as of July 2023 due to the naira devaluation and increased exchange rates for clearing imports, which had an approximately 15% impact on new car prices.

The rising prices of new vehicles have deterred many customers from purchasing brand-new cars, leading to increased demand for used cars in Nigeria. However, the used car market faces challenges, including rising prices across Nigeria, driven by a tariff hike by the Nigeria Customs Service in 2022. The report estimated that the price of Tokunbo cars increased by nearly 100% in the Nigerian used car market as of July 2023.

Babatunde Kazeem, a Lagos-based ride-hailing driver and part-time car dealer, explained that he sources Nigerian-used cars with engines in good condition, refurbishes them, and sells them at higher prices. “People consider the price of the tokunbo equivalent of the car before fixing the price of the Nigerian-used version,” he said. Kazeem added that one strategy is to buy vehicles previously owned by women, as they typically handle cars more gently. He also helps car owners sell their old cars, adding a markup for his services.

The shift to locally-used vehicles reflects broader economic pressures and changing consumer preferences in Nigeria’s automotive market.