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Nigeria’s decision to lower car import tariffs to 40 percent under its latest fiscal policy measures promised a breakthrough for consumers, but the reality is proving far more stagnant. While the federal government’s cut suggests a downward trend, car prices are unlikely to see a meaningful drop as the weight of foreign exchange volatility, port charges, and dealer markups keeps costs high.

This shift has also rattled the domestic automotive industry, forcing a tense re-evaluation of the gains for importers against the potential losses for local assemblers. Analysts suggest that the combination of new import levies and the looming green surcharge effectively neutralises the tariff reduction, offering only a marginal reprieve. Rather than the transformational price crash many hoped for, the policy currently looks more like a modest adjustment in a market still struggling under heavy structural overheads.

Muda Yusuf, chief executive officer, Centre for the Promotion of Private Enterprise, told BusinessDay that the recent tariff adjustment is less drastic, noting that before this, the import duty dropped from 70 percent three years ago to 45 percent, making the current 40 percent less impactful.

Yusuf also pointed out that the introduction of a two percent green tax on vehicles with engine capacity of 2,000cc and above could push the effective rate higher: “By the time you add the two percent, it will go up again to 42 percent.”

According to a report by Carlots, titled, ‘The true costs of importing a car to Nigeria in 2025: Duties, Clearing & Hidden fees,’ importing a car into Nigeria is far more expensive than just paying customs duty; it includes import duty and levy (for used vehicles), VAT (Value Added Tax), ECOWAS Trade Levy (ETL), Port Development Levy (PDL), Terminal Handling & Shipping, and Clearing Agent Fees & Misc.

Despite policy changes over the years, car prices continue to rise due to the FX rate and other fees in the customs import duty.

The price of cars in Nigeria has surged from roughly N1.9 million in 2023 to N10 million for popular used models in 2026, depending on the brand and type. Additionally, it rose from N9 million to N47 million for similar models by early 2026, for different brands and types ranging from sedans, compact SUVs, to pickup trucks, amongst others.

For foreign used cars like the Toyota Corolla, prices for older models (2010–2015) rose from approximately N4.5 million to N8 million in early 2023, to over N9.5 million to N15 million by 2026.

Brand new cars as of early 2026, new sedans (Toyota Corolla) start around N18 million to N35 million, while SUVs can range from N25 million to over N120 million.

Yusuf added that the policy does not significantly threaten local assembly, stating that a wide gap still exists between fully built imports and locally assembled vehicles.

According to Yusuf, Completely Knocked Down (CKD) kits remain at zero percent duty, while Semi Knocked Down (SKD) kits attract about 10 percent, maintaining incentives for local assemblers.

He, however, suggested that further support could come from reducing SKD duties to zero, as many assemblers rely more on SKD than CKD due to technical and operational limitations.

Ayodeji Alao, a car importer, said that the reduction may not significantly lower costs for consumers, as the tariff line item is just one component of a layered cost structure, pointing to exchange rate volatility, shipping costs, and port charges as major factors.

“Whether buyers actually benefit depends heavily on how much competition the tariff cut unleashes and how quickly,” Alao said.

Oloruntoba Anate, CEO & co-founder of Automat Hub Ltd., reiterated what Alao said, that the tariff reduction is only one component of the final price, noting that the weak naira, freight and clearing costs, and dealer margins in Nigeria are historically high.

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“A vehicle that costs $20,000 CIF might save a buyer N800,000 – N1.2 million at best, meaningful, but not the transformational price drop many consumers are hoping for,” Anate said.

Tariff cut pressures local auto industry

In 2025, the Local Automotive Industry Patronage Bill, passed through second reading, setting the stage for legislation that would compel Government Ministries, Departments, and Agencies (MDAs) to give preference to vehicles produced within the country.

While Nigeria has been pushing for the patronage of made-in-Nigeria goods, especially in the automotive space as part of its industrial policy (Nigeria First Policy), the recent tariff adjustment could undermine such vision.

Anate noted that reducing import tariffs sends the opposite signal to potential investors in that space. The risk of an import surge is real, particularly for used vehicles from China, the UAE, the UK, and the US, which already dominate the market.

The policy could work if it is paired with mandatory inspection standards and a vehicle condition registry. Without that, it is a discount on a broken market.

Obiora Madu, an export consultant and chief executive officer of Multimix Group, said the tariff will weaken the protection of the local industry, as it narrows the gap between imported vehicles and locally assembled ones, exposing assemblers to stronger competition.

Madu added that while importers, dealers, logistics operators, and consumers may benefit, mainly in the short term, local assemblers, component suppliers, and investors in backward integration could lose out.

“Their competitiveness will depend on tariff differentials, policy stability, access to forex for components, and economies of scale. Reducing tariffs definitely narrows the gap,” he said.

Madu warned that policy shifts could discourage investment in the sector, noting that the industry is capital-intensive and policy-sensitive, and that investors may interpret such changes as signals about the government’s long-term commitment.

He further described the policy as an anti-inflationary mobility intervention that requires careful implementation, stressing that it must be complemented with stronger incentives for local assembly.

Alao also noted that while the tariff cut exposes local assembly plants, the situation is more nuanced than ‘cut tariffs, kill assembly,’ explaining that many assemblers were already struggling with structural issues.

He stressed that tariff protection alone cannot sustain the industry without real investment in manufacturing infrastructure, noting that the two conversations need to happen together.

Anate said that the tariff cut will put serious pressure on Nigeria’s local assemblers, who have always relied on tariff protection as a buffer against cheaper fully-built imports.

“With that buffer reduced, their cost advantage shrinks considerably. The real question is whether they can compete on quality and after-sales support rather than price alone,” he said.

Madu recommended a dual-track strategy involving lower tariffs to improve affordability, alongside targeted support such as CKD incentives, localisation policies, and public procurement measures to sustain domestic production.