15 May 2011

Nigeria: Why We Avoid Importing Through Country Ports - Car Dealers

Nigerian auto importers have continued to prefer importation through seaports of neighbouring African countries even though the federal government has concessioned its seaport terminals since 2006.

Some importers, who spoke to Daily Independent on why they prefer other ports even though the final destination of the vehicles is Nigeria, argued that importation through the nation's seaports is not attractive for local business people because cost of clearing overshadows whatever profit that may accrue.

But officials of the Nigeria Customs Service (NCS) attributed the development to importers' tendency to "cut corners."

Nigeria has six major seaports in different parts of the country. But a dealer in Lagos, who did not want to be named, said more than 80 percent of the cars sold in Lagos, especially in Berger area along the Apapa/Osodi Expressway, were imported from the Cotonou port in Benin Republic.

These cars are brought into the country through the land borders, he added.

Also, 70 percent of that 80 percent did not pay import duty, which makes smuggling more attractive, since it guarantees additional profit for the dealer and makes it cheap enough for the end users to buy.

A report by the World Bank on the level of illegal imports into Nigeria has said that, on the average, goods worth $5billion (N750billion) are smuggled into the country from the Republic of Benin on a yearly basis. Besides, it said up to 15 per cent of Nigeria's total imports are smuggled into the country through Benin.

Titled: "How Nigeria's trade policy facilitates unofficial trade and impacts negatively Nigeria's Customs efficiency and economy," the report was anchored by two leading experts of the World Bank, Gaël Raballand and Edmond Mjekiqi, both of the African Transport Unit.

"Most car importers bring their vehicles through the Cotonou port because it is very efficient and less expensive," said Patrick Obinaju, chairman of Dealers Forum in Sunki Park, Site A in Lagos. He added that if they should import through Nigerian ports, it would be too expensive for the end users to buy.

For instance, a car imported through the Nigerian port could cost N1.2 million but when it comes through Cotonou, it can go for N1 million or less.

While it takes just one day to clear vehicles from the port in Cotonou, it can take several days to clear from Nigerian ports, a situation that also factors in the eventual cost for selling the cars.

Unlike in Nigeria where more than 15 government agencies are involved in cargo clearance, importers only have to deal with the Customs in Cotonou, making cargo clearance as seamless as possible.

According to Obinaju, what comprise high cost of importation include high duty, high clearing charges, delay by Customs and other government agencies and imposition of age limit, which effectively restricts importation to only cars of 10 years and below. But more Nigerians still buy imported cars of more than 20 years old till date.

Other components of high cost include occasional vandalisation of certain parts of the vehicle in the ports and incessant demand for bribes by Customs and other agencies even though an importer possesses genuine papers.

At the Cotonou port, it will cost equivalent of N120, 000 to bring a vehicle out of the port, including all the clearing charges.

But, in Nigeria, import duty alone for a 2002 to 2003 model of Toyota Corolla car is N205, 000 exclusive of clearing charges.

A 2005 model Pathfinder Jeep costs up to N400, 000 for duty alone. Also, it is difficult to predict how much it will cost one to clear a car from the port because what it cost Mr. A, today may be different from Mr. B even though they import the same brand and model of car.

When clearing charges are added to import duty, it pushes the total cost up and makes it very expensive for the end users to buy as the dealer builds all the cost incurred on the final price for the vehicle.

Importers recommend that if the issue of high duty and bottlenecks in Nigeria cargo clearance process are addressed, cars sales will also be cheaper. Also, the issue of age limit, which they recommend should be increased to at least 20 years, should also be addressed.

Obinaju said, "Government should increase age limit of cars to 20 years because Nigerians still use these cars very much." He added that most trucks and tippers being used on Nigeria roads are the 1980s models. He added that a lot of cars being imported and sold in Nigeria are of the 1993, 1994 and other related years models.

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