• Classify vehicles with minor dents as salvaged units to evade high duties
• 80 per cent of imported vehicles classified as ‘accidental’
• Clean vehicles out of reach of middle-class Nigerians
• Poor parts, roadside mechanics contribute to low repair cost
• Weak environmental, safety standards among pull factors
Investigations have revealed how Nigerian automobile dealers conceal vehicles with minor dents as salvage cars to qualify for 40 to 60 per cent duty rebates for such vehicles, a practice that may have become a survival measure against lull in the retail sector, thereby undermining efforts to scale up the revenue profiles of the country’s ports.
Whereas the majority of the dealers have resorted to the importation of badly damaged vehicles as new business strategies as other survival options have been exhausted, The Guardian learnt that a number of the dealers deliberately misclassify slightly-dented cars to benefit from the lower valuation and get away with a significant profit in the face of excruciating business conditions.
Beyond benefitting from lower valuation and duties, rising inflation and currency depreciation have weakened consumers’ capacity to buy imported used vehicles, thereby resorting to keeping their old vehicles or exploring options in Nigerian-used alternatives.
Findings suggest that approximately 80 per cent of vehicles imported into the countries are classified as salvaged with a large percentage coming out of ports with minor dents.
The Nigerian Ports Consultative Council (NPCC) Port Performance Report, last year, put the number of imported used vehicles at 132,296 units, a 32 per cent decline from 194,550 imported the previous year.
Importers reportedly declare most of the cars as salvaged to dodge the standard customs duty of 20 per cent, plus a 15 per cent National Automated Council (NAC) levy, totalling 35 per cent.
According to the Nigeria Customs Service (NCS), a vehicle must have significant chassis damage or airbag deployment to qualify as an accident with the shipping company expected to issue a salvage certificate confirming the vehicle’s status.
The NCS also conducts inspections to assess the damage extent for proper evaluation. But sources said the standards have been compromised in recent years as the cost of clearing hit the roof.
The Guardian had reported that the cheapest cars were being cleared at about N2.5 million in March when the import duty exchange rate was raised to over N1600/$.
High costs including the customs import shipping costs, terminal charges and various other port-related fees, make clearing of vehicles costly.
Consequently, importers misclassify vehicles with minor bumper and backside dents as salvaged to capitalise on the duty rebate, thus reducing clearing costs, sources in NCS and agents disclosed.
The Comptroller General of the NCS, Bashir Adewale Adeniyi, last year, expressed concern over the surge in accident vehicle imports, which have dominated the ports for years.
During a visit by The Guardian to the Roll on Roll off (RoRo) terminals at Tin Can Island Port, most vehicles awaiting clearance were salvaged.
Similarly, at the Ladipo spare parts market, most vehicles unloaded from containers or parked in warehouses were salvaged, with roads nearby littered with such cars awaiting repair.
The Public Relations Officer of the Port and Terminal Multi-Services Limited (PTML) Customs command, Muhammad Yakubu, also confirmed to The Guardian the new trick – importation of predominantly minorly-dented vehicles, which are mis-declared as salvaged to exploit duty rebate.
“Majority of what we have are dented vehicles, but people declare them as salvaged. They arrange a salvage certificate locally and claim it is an accident car, when in fact it is not. True salvaged vehicles have significant chassis damage or airbag deployment, not just a dented bumper”, he explained.
The importation of accident vehicles has surged due to economic hardships and the steep cost of clearing new vehicles, with prices of popular models increasing by about 400 per cent in the last four years.
High import duties and volatile exchange rates have driven Nigerian importers towards accident vehicles.
In terms of costs, clean used vehicles cost between $8,000 to $10,000 on average whereas salvage vehicles range from $500 to $2,500 depending on the extent of damage and vehicle type.
A PwC report highlighted that 63 percent of Nigerian households cannot afford a car without financial assistance, which remains largely inaccessible.
The report indicates that Nigeria has approximately 14 million cars on its roads, with used cars constituting about 70 per cent of vehicle sales. Notably, estimates suggest that over 80 per cent of the used imports were previously damaged.
In-depth checks have highlighted Nigeria as a primary market for vehicles from the United States and Europe, largely because auto dealers struggle to maintain profit margins on undamaged cars.
As Western countries intensify efforts to mitigate environmental impacts by promoting the adoption of newer, eco-friendly vehicles, less desirable cars find their way to developing countries like Nigeria. The vehicles, often deemed irreparable and unsafe in their countries of origin, consistently enter the Nigerian market.
Nigeria ranks third in importation of used vehicles from the U.S., trailing behind the United Arab Emirates and China.
Many of these imports are severely damaged vehicles that were once dismantled for parts. But even those with significant structural damage are repaired and used by owners out of necessity, experts have disclosed.
The Manager of Client Services at Inspired Cars, Iwayeye Olatunji, explained that purchasing a damaged vehicle abroad can cost around $2,500, whereas undamaged cars may go up to $10,000.
He said given the high import duties, opting for a damaged vehicle becomes a more viable economic choice.
Olatunji notes that 60 per cent of the used vehicles imported into Nigeria have been involved in accidents.
According to the National Public Relations Officer for the Association of Registered Freight Forwarders of Nigeria (AREFFN), Taiwo Fatomilola, both damaged and clean used vehicles are subject to the same import duties except that there is a rebate on the former.
He said the high duties, coupled with the depreciation of naira have pushed importers toward damaged vehicles, which are cheaper and create room for profitability after repairs.
A member of the National Association of Government Approved Freight Forwarders (NAGAFF), Chukuemeka Omemma, pointed out that many Nigerians cannot afford new vehicles due to unfavorable exchange rates and the effects of the 2014 benchmark/high duty rates.
In the U.S., insurance companies often auction off irreparable vehicles for as low as $500. The vehicles are then sold to African importers at around $2,000, enabling sellers to make some profit.
Julius Okechukwu Mbah, who is based in Maryland, noted that the pricing of such vehicles varies depending on their make, model and extent of damage.
Mbah said the insurance companies, after seeing that the vehicles cannot be fixed to fit into the system, auction them at a very low rate to individuals around $500 to $1,200, who resell them to importers from Africa for $2,000.
He said Nigerians, take advantage of the cheaper value to get the vehicles and ship them to the country.
The process of repairing these vehicles is expensive abroad, leading to a business model where damaged cars are sold off to automobile importers in Africa.
A mechanic in the UK said because the cost of repairing accident vehicles is high in the West, they are written off and either taken to the scrap yards where they are dismantled or sold to dealers from Africa.
U.S.-based Mbah said repairs depend on the availability and the amount the parts are sold.
He said Toyota and other foreign-made vehicles’ parts are very expensive in the United States, while the cost of parts for Ford and American cars is moderate.
According to checks, a bumper could cost as much as $350, while airbags cost about $500 to $800 depending on the brand.
“It depends on which part you are looking for. For example, if the car is hit from the front, the bumper is gone, the light is bad, the grill is bad, the fender, radiator, condenser and fan are damaged and then you calculate all the parts, it could cost you $3,000 to buy all those parts,” Mbah stated.
According to him, for those that do not have full insurance on their vehicles, after repairing they have to do police and state inspection, as well as other processes that cost a lot, which leave them with the option of selling the vehicles.
Meanwhile, the cost of repairing accident vehicles in Nigeria is much cheaper owing to the flourishing of the second-hand auto part market and roadside mechanics. For instance, the Ladipo Used Part Market in Lagos has become where mechanics from all parts of Africa source parts.
Owing to the duality in the market – in terms of parts and expertise – the differential in the repair of the same car with the same degree of damage could be as high as 100 per cent. Most Nigerians, however, go for the cheap option, which many say does not guarantee the safety of the vehicles.
For the Manager, Client Services, Inspired Cars, Olatunji Fatomilola, the cost of repairing accidental vehicles in Nigeria depends on the level of damage.
“If you bring a car that does not have high impact, you might be spending maybe between N250,000 to N500,000 for the repairs. If the impact is minor, they will fix that front and repaint it,” he said.
However, despite the skills of Nigerian mechanics, the longevity and safety of these repaired vehicles remain questionable.
Fatomilola points out that while these cars provide an affordable alternative, they often require frequent maintenance and may still pose safety risks.
He also noted that the excitement attached to owning a car makes Nigerians not bother about the conditions of the vehicles while purchasing them.
Speaking on whether there are professionals to fix the vehicles in Nigeria, Fatomilola said: “We have people that fix accident vehicles here. There are a lot of mechanics, the ones that know what they are doing, are very skillful. They are very good at their job. So, if those vehicles are not working accordingly and we don’t have mechanics to repair the vehicles, nobody will go for them.
However, some of these accident vehicles develop problems for the rest of their life cycle, thereby costing the buyer more money to repair, which affects their safety and leads to road crashes.
A mechanic in the United Kingdom, who spoke to The Guardian, said the safety of the accident cars depends on the impact, noting that if the impact affects the chassis, it becomes unsafe even when fixed.
On this, Olatunji, said heavy impact accident vehicles with chassis affected are not safety guaranteed, noting that greedy importers neglect the safety standard and bring them into the country just to be in business.
“The people buying it are not even aware of the dangers they are going into. That is why sometimes when you want to buy a vehicle, you have to go with a professional to help you check the condition of the vehicle,” he said.
Unfortunately, there are currently no regulations specifically addressing the importation of damaged vehicles in Nigeria, allowing such cars to be driven without stringent checks on their roadworthiness or safety.
This lack of regulation and oversight contributes to road safety issues and undermines efforts to establish a more reliable and safe transportation network in the country.
According to the Federal Road Safety Corps (FRSC) road traffic crash dashboard, it recorded a total of 5,700 road traffic crashes in the first half of 2023 and 6,627 in the same period in 2022.
There are strict vehicle inspections abroad by their ministries of transportation to check for roadworthiness and safety standards. Vehicles that fail the inspections are not allowed back into the system and are exported to Africa.
The ministries of transportation of the United Kingdom and the United States take a serious approach to inspection to help maintain these vehicles, keep the roads safe and spot potential problems to avoid and reduce the number of vehicle crashes and deaths.
These ministries subject vehicles to a comprehensive analysis of their entire condition, including their engine, transmission, steering, fenders, brakes, light, tyre, chassis, airbags, wiper, belts, hoses, shocks, struts, battery, filter, bumper, k-frame, fluid levels, suspension, emissions control devices and exhaust system as well as other components. This is to validate that they are in satisfactory condition.
Automobile mechanics in the U.S. and UK confirmed that accident vehicles that are rebuilt or repaired must go through several inspection processes from the Ministry of Transportation, including the police to certify them in good condition for the roads.
Meanwhile, these discarded vehicles find their way into Nigeria, without interference from the Ministry of Transportation and agencies in charge of safety standards despite their mandates to provide a safe, secure, efficient, affordable, convenient, integrated, and seamless inter-modal transport system that is self-sustaining and pivotal to socio-economic growth and enhances the quality of life of the public in line with global best practice.
The agencies under the ministry, which are saddled with the mandate to ensure issuance, technical inspection, test and determination of Road Worthiness Certificates (RWC) to all vehicles as well as investigating and inspecting accident vehicles, are not properly regulating such vehicles.
As Nigeria continues to grapple with these challenges, the need for better enforcement of import standards and improvements in local vehicle production becomes increasingly apparent.
The National Automotive Design and Development Council (NADDC) has yet to effectively implement strategies that would curb the importation of substandard vehicles and promote local manufacturing, leaving the market flooded with potentially hazardous cars.
This situation underscores the critical need for comprehensive policy reform to enhance road safety and encourage automotive industry growth within Nigeria.
