Tariff cuts may not lower vehicle prices, stakeholders warn

By Theodore Opara

Industry operators warn that the recent reduction of import tariffs from 70 % to 40 % will not lead to lower car prices in Nigeria.

They argue that the policy is not new and that the anticipated price drop had already been reflected in vehicles sold before the latest announcement.

Stakeholders also point to persistent structural and economic challenges that keep vehicle prices high.

When the Federal Government, under President Goodluck Jonathan, introduced the Auto Policy in 2013, it set a 35 % duty and a 35 % levy on fully built units (FBUs), while fully built commercial vehicles faced a 35 % duty without a levy.

The policy shift, announced under the National Automotive Industry Development Plan (NAIDP), aimed to reduce the cost burden on importers and, ultimately, consumers.

Operators noted that the real‑world impact of such announcements may be limited by factors beyond the tariff window.

Central to the issue is the naira’s volatility, which has eroded the benefits of the tariff cut.

Since 2022, when the revised duty regime took effect, the local currency has weakened sharply against major trading currencies, raising the landing cost of vehicles.

Importers argue that even with a 30‑percentage‑point drop in duty, the exchange‑rate shock alone offsets potential savings, leaving showroom prices largely unchanged or even higher.

In addition, multiple layers of charges across the import value chain—clearing fees, port handling charges, shipping costs, and other statutory levies—many of which are dollar‑denominated, have either remained high or increased during the same period.

Industry stakeholders say that without a comprehensive review of these ancillary costs, any isolated tariff reduction is unlikely to provide meaningful price relief for consumers.

The limited capacity of local vehicle assembly plants, which the tariff policy was partly designed to encourage, also compounds the problem. Domestic production still struggles to meet demand at scale and competitive pricing, leaving Nigeria heavily reliant on imports.

In the absence of strong local alternatives and with macroeconomic pressures persisting, analysts warn that Nigerians should expect continued high vehicle prices despite the apparent policy relief on paper.

One indigenous automaker, who preferred to remain anonymous, told Vanguard that Nigerians should not expect a price reduction 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, Mr Kunle Jaiyesimi, Deputy Managing Director of CFAO Mobility, said there had been no fresh reduction in tariff.

He explained that the government’s Medium‑Term Plan of 2021 imposed a 35 % duty and a 35 % levy, bringing the total to 70 %.

According to him, when the present administration took office in 2023, an executive order reduced it to 40 %.

“The 40 % executive order, which reduced the 70 % 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 actually been an increase through the green tax imposed on petrol engines, whereby vehicles with 2.0‑litre and 4.0‑litre engine capacities are required to pay two % and four % surcharges respectively.

Mr Luqman Mamudu, mobility expert, Managing Partner of 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 the 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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