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By Theodore Opara
Expectations of cheaper cars in Nigeria following the Federal Government’s reduction of import tariffs from 70 per cent to 40 per cent are unlikely to materialise, industry operators have said.
They contended that the policy was not entirely new and that the expected reduction in vehicle prices had already been reflected in automobiles sold before the latest announcement.
They also pointed to a stubborn mix of structural and economic headwinds that continue to keep vehicle prices elevated.
It would be recalled that when the Federal Government, under President Goodluck Jonathan, announced the Auto Policy in 2013, it stated that Fully Built Unit (FBU) cars would attract a 35 per cent duty and a 35 per cent levy, while fully built commercial vehicles would attract a 35 per cent duty without levy.
The policy shift, announced under the National Automotive Industry Development Plan (NAIDP), was designed to ease the cost burden on importers and, ultimately, consumers.
Operators, however, noted that the real-world impact of such policy announcements might not be visible due to factors far beyond the tariff window.
At the heart of the issue is the persistent volatility of the naira, which has significantly eroded whatever gains the tariff cut was meant to deliver.
Since 2022, when the revised duty regime effectively took hold, the local currency has weakened sharply against major trading currencies, pushing up the landing cost of vehicles.
Importers argue that even with a 30-percentage-point drop in duty, the exchange rate shock alone has more than offset any potential savings, leaving showroom prices largely unchanged — or even higher.
Beyond forex pressures, multiple layers of charges across the import value chain continue to inflate costs. Clearing fees, port handling charges, shipping costs, and other statutory levies — many of which are dollar-denominated — have either remained high or risen over the same period.
Industry stakeholders noted that without a holistic review of these ancillary costs, any isolated tariff reduction is unlikely to translate into meaningful price relief for consumers.
Compounding the challenge is the limited capacity of local vehicle assembly plants, which the tariff policy was partly designed to encourage. With domestic production still struggling to meet demand at scale and competitive pricing, Nigeria remains heavily reliant on imports.
In the absence of strong local alternatives and with macroeconomic pressures persisting, analysts say Nigerians should brace for continued high vehicle prices despite the apparent policy relief on paper.
One of the indigenous automakers, who did not want his name in print, told Vanguard that Nigerians should not expect a reduction in prices because the development is not recent.
“The tariff has been in place since 2022. What the government did was harmonise it with the tariff board and Finance Act,” he said.
Also speaking, the Deputy Managing Director of CFAO Mobility, Mr Kunle Jaiyesimi, said there was no fresh reduction in tariff.
He explained that the government’s Medium-Term Plan of 2021 imposed a 35 per cent duty and a 35 per cent levy, bringing the total to 70 per cent.
According to him, when the present administration came in 2023, an executive order reduced it to 40 per cent.
“The 40 per cent executive order, which reduced the 70 per cent duty and levy, is what the government is trying to regularise through the new medium-term planning,” he said.
Contrary to public perception, Jaiyesimi said there had rather been an increase through the green tax imposed on petrol engines, whereby vehicles with 2.0-litre and 4.0-litre engine capacities are made to pay two per cent and four per cent surcharges respectively.
Also speaking, Mr Luqman Mamudu, mobility expert, Managing Partner, Transtech Industrial Consulting, and former adviser to the Nigerian Government on Automotive Industry Development (NADDC), said the tariff differential being adjusted is a central pillar of the Nigeria Automotive Industry Development Plan.
“It was intentionally structured to give locally assembled vehicles a cost advantage over fully built imports, while government simultaneously supports the sector with financing schemes, testing infrastructure, and other critical enablers,” he said.
According to him, reducing the differential, even with good intentions, must be approached with caution.
“In reality, many exporting countries subsidise their automotive industries, meaning lower tariffs in Nigeria can quickly tilt the market back in favour of imports — particularly when key local support programmes under NAIDP remain only partially implemented,” he added.
Mamudu stressed that tariffs are not the primary driver of high vehicle costs in Nigeria.
“If the objective is to reduce vehicle prices, it is important to be clear: tariffs are not the primary driver of high vehicle costs in Nigeria.
Exchange rate depreciation, forex scarcity, port and logistics charges, shipping costs, inflation, and rising global vehicle prices are far more significant factors,” he said.
He added that recent experience supports this position.
“The removal of tariff advantages for commercial vehicle assembly under the Finance Act 2020 did not deliver meaningful or sustained price reductions. What it did achieve, however, was a contraction of local assembly, with several operators reverting to full importation. That outcome should guide current policy thinking,” he stated.
According to him, while the government is understandably trying to balance consumer affordability with industrial growth, weakening the few protective measures supporting local assembly risks reversing the modest gains recorded over the past decade.
“At the same time, industry stakeholders must strengthen their engagement. Associations such as NAMA need to play a more visible and coordinated advocacy role to ensure policy decisions are informed by on-the-ground realities,” he said.
He, however, noted that the tariff reduction alone is unlikely to discourage serious investors.
“Nigeria’s long-term fundamentals remain strong, particularly within the framework of the African Continental Free Trade Area (AfCFTA), which offers a vast regional market for competitive local production,” he added.
Vanguard News
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