I was once told by my parents that during the days of their youth (the early twenties), a car was sold for N5,000 in this same Nigeria and I find that really hard to believe because the current prices of cars are not in any way close to N5,000. In fact, you cannot fix your car for N5,000 and you’d wonder what really went wrong. Well, this phenomenon doesn’t only happen in Nigeria. Sadly it’s a global issue. Over the past 10 years, we’ve seen a ridiculous spike in the prices of automobiles and I’ll be giving you reasons why that has happened.

Higher Cost Of Import Duty
Every car that comes into Nigeria must be cleared at the seaports by the Nigerian Customs Service and all cars except Innoson Motors which are made in Nigeria are imported into the country. Clearing a car at the seaports isn’t free. You must pay the officers and due to the economic situation of the country which is affected by the naira to dollar rates, the cost of clearing a car at the seaports has increased significantly over the years. And, the more recent the model of the car you are clearing is, the more money you will pay because they believe you actually have a lot of money. Let’s not even talk about the money you have to pay on the side to ensure that your car is cleared quickly.

High Demand And Limited Supplie
Due to an increase in the loss of jobs (courtesy of COVID-19), quite a number of people have taken to becoming Bolt, Uber and taxi drivers so as to provide for their daily needs. Hence, there is a high demand for the purchase of vehicles all around the country and dealers cannot keep up. We all know that inflation of prices happens when we have a high demand and limited supplies.

The Cost Of Naira To Dollar
Once upon a time ago, the Naira was valued higher than the Dollar. Many people preferred Naira to Dollars. Yes, the Nigerian economy was that good. However, as time went on, we experienced a decline in the Naira due to poor economic choices. In 2013, it was about N150 to $1 and that was manageable. But it is 2022 and some days, we see it rise to as much as N500 to $1.

We all know that the dollar is the currency of the world. Hence, all cars are purchased in dollars. Take, for instance, a car that cost $2,500 in 2013 when it was N150 to $1, that car would cost about N375,000 naira. And that’s a very reasonable price. But today, at N500 to $1 the car would cost N1,250,000. Outrageous? Extremely.

However, we should note that even the economic situations in western countries have suffered and due to that, a car priced at $2,500 in 2013 wouldn’t cost the same today. So the prices just keep going up and up.

Shortage Of Computer Chips
Currently, China is under yet another lockdown and if you know China, you’ll know that they are the capital for manufacturing so many things. There is a global computer chip shortage experienced by manufacturers due to the COVID-19 lockdown in China. This means that those who are able to get their hands on any chip will definitely skyrocket the prices of cars.

Covid-19
You may think the Coronavirus was just a sham but trust me, its adverse effects aren’t. You may also think that the pandemic is over but think again because we are still literally in the middle of a pandemic

Also, at the peak of the COVID-19 season globally (2020 to be specific) there was a shortage of jobs which led to an economic meltdown across the world, particularly in the USA. This has eventually led to increased labour and production cost in making cars, hence the spike in the prices of cars.

Strike Action
The Association of Nigerian Licensed Customs Agents (ANLCA) often threaten to embark on strike action over the National Automotive Council (NAC) levy. Strike actions like these often lead to a high price of cars.

Dealership
Due to the high costs of import duty, it is only natural that dealers will increase the prices of the vehicles in order to make a profit.

Government Policy
The policy of the government concerning the importation of cars which is usually reviewed every five years is a major contributor to the ever-rising cost of cars as most of the policies are not favourable.

CONCLUSION

I hope you now understand that the real enemy responsible for the ever-increasing cost of cars is no other person but inflation assisted by COVID-19.

https://www.carmart.ng/public/blog/what-you-should-know-about-the-rising-cost-of-cars-in-nigeria/