Rejected abroad, desired in Nigeria — the bittersweet boom of ‘accidented’ vehicles

On a typical day, he goes out in a worn-out shirt on tattered, ripped denim covered in grease. But Sunday Adekunle checks most of the boxes for a ‘decent life’ in Nigeria.

He has acquired a piece of landed property somewhere in Lagos. He owns a car –nothing too fancy –and comfortably takes care of his family. Though his looks do not match his status, Adekunle is a top-shot mechanic in the automobile space.

The mechanic has been in the business for 10 years and runs one of the most famous workshops in Ikorodu, Lagos, where he fixes ‘accidented’ cars imported from developed economies.

Salvaged cars, popularly coined ‘accidented’ cars in Nigerian parlance, are vehicles usually judged to be irreparable by insurance companies in many developed economies like the US and Canada. For a vehicle to earn the ‘accidented’ tag, it must have been badly damaged or involved in an accident, and as such, the estimated cost of repair exceeds or equals the price of a new vehicle.

When these cars are brought into Nigeria, importers usually depend on mechanics like Adekunle to help beat them into shape and make them fit for sale.

Before the COVID-19 pandemic hit, Adekunle said he usually got 15 to 20 ‘accidented’ cars monthly from his client—an importer—and has made a good living from just fixing them.

“I’ve been doing this for 10 years,” he said. “If you want to buy a car… and you want to go into the business, accident cars sell very well in Nigeria. It is also not expensive abroad where it is imported from. Only clearing from Nigerian ports is expensive.”

Adekunle, 38, does not find it difficult to sell off a car once it is fixed. Sometimes, customers pay for them long before repairs are completed.

WHY NIGERIANS PREFER ‘ACCIDENTED’ CARS

Nigeria is the third-highest importer of used vehicles from the US, behind the United Arab Emirates (UAE) and China.

With a huge gap in local vehicle production and the economic situation which has made it impossible for an average Nigerian to afford a brand new car, Nigeria is highly dependent on imports of used cars, popularly called ‘Tokunbo’, to meet its demand.

According to a report by PwC, 63 percent of Nigerian households cannot afford to own a car without some kind of support. The report puts the total number of cars on Nigerian roads at 14 million, while used cars make up about 70 percent of vehicles sold in Nigeria.

PwC reported listed the United States, United Kingdom, and Germany as the major import routes.

In 2013, the federal government established the National Automotive Industry Development Plan (NAIDP) with the aim of attracting foreign direct investment (FDI), curtailing the dependence on the importation of vehicles, and promoting local production of automobiles.

By virtue of the policy, 35 companies were licensed to assemble in Nigeria, while import tariffs on both new and used vehicles were increased to 70 percent.

While the policy showed government interest in improving the sector, it made importers more ‘creative’, as they turned to importing ‘accidented’ cars in order to escape high import duty imposed by the policy, and also to make a profit.

A marketer at a car shop in Lekki told TheCable that car dealers settle for ‘accidented’ cars because of huge profit maximisation and because they can be relatively cheap to fix in Nigeria.

“The parts are readily available. ‘Accidented’ cars are sourced cheaply abroad,” he said.

Another major attraction for dealers is the import duty rebate they enjoy. Usually, a reduction is provided for used cars, but ‘accidented’ cars attract fewer customs duties than accident-free fairly used vehicles.

Legal Notice 30, a customs legislation that allows every used vehicle to enjoy a rebate based on the year of manufacture, stipulates a 10 percent rebate for used cars.

Providing more insight, Kayode Farinto, acting national president, Association of Nigerian Licensed Customs Agents (ANLCA), said any vehicle that is driven more than 3,000 miles is no more a new vehicle — even if it is a 2022 model.

“So, if you have a 2021 vehicle, it should enjoy a 10 percent rebate, if you have a 2020 vehicle it should enjoy 20 percent rebate… down the line like that,” he said.

While the law does not explicitly speak on rebates for ‘accidented’ cars, he said it recognises salvage and ‘accidented’ vehicles.

He said such vehicles can be given more than 40 or 50 percent rebate, but it must be defined to be ‘accidented’, and this is usually based on the degree of damage.

“Ideally, if a normal vehicle goes for, say, $10, an ‘accidented’ vehicle should get at least 50 percent rebate,” he said.

“This is not contained in the Legal Notice 30, but we’re looking at the normal definition of an ‘accidented’ vehicle. If you can give a rebate of 10 percent to a used vehicle, definitely you should know that an ‘accidented’ vehicle is not a normal vehicle.”

As a result, the importation of such vehicles has continued to increase. TheCable had reported that Nigeria imported an average of 400,000 vehicles between 2015 and 2020.

Used vehicles made up 3.27 percent of the total imports in Q4 2020, gulping about N193.57 billion, according to the Nigerian Bureau of Statistics (NBS).

Although the import bill dropped by 55.6 percent to N85.78billion in Q4 2021, used vehicles were still the fourth most imported goods in the period reviewed.

Abdullai Abdulsalam, who has been importing for two years, said he switched to ‘accidented’ cars because of the profitability.

He argued that every business is profit-driven, noting that the cost of spare parts is rising, and this must be considered by automobile importers.

“Cutting cost is a major factor,” he said. “Some importers ship to neighbouring countries in other to avoid customs duty. The lowest customs clearing you pay on any car is N550,000 and that is for a regular Corolla, Camry of 2005 to 2008.”

Giving a different perspective, Afolabi Adeleke of Afomot Auto Services said Nigeria lacks a financial system that can support people to seamlessly get vehicles on credit, hence the rise of ‘accidented’ cars.

“Because of this, people go for what they can afford,” he said.

TROUBLES FACED BY IMPORTERS

As attractive as the business seems on paper, importing comes with challenges that could significantly sink profit. Problems could arise from neglected pieces of information that constitute the intricate processes involved in importing ‘accidented’ cars from the US.

For instance, the tyres of a car might not be rolling or the chassis could be damaged. When this happens, it will be shipped as a non-running and forklift cargo.

For the dealer, this means additional cost, different from the regular freight charges.

Adeleke, who is also an importer, said there are usually delays in shipping non-running cargoes and forklift cargoes in US ports because of their conditions. Also, truckers sometimes refuse to deliver cars to the ports if the tyres or engines are bad.

“[They] might decide to stress you or frustrate you because of little challenges,” Adeleke told TheCable.

But none of these compare to the challenges encountered when the goods eventually arrive at Nigerian ports after three months.

THE PORTS RATS

Besides clearing-related setbacks, car parts thieves called ‘port rats’ make business difficult for importers like Abdulsalam and Adeleke.

Port rats are unidentified Nigerians who eke a living by stealing critical car parts and potentially selling them off. Even though used cars are on their menu, ‘accidented’ cars are targeted the most.

If a vehicle arrives with either minor or major damage and the shipping company tags it a ‘non-running vehicle’, the port rats steal vital parts like the car key or the sensor.

Adeleke explained that while this has morphed into some form of business for them, without the keys, they are forced to do a forklift which could go bad and cause scratches on the car — and that would attract another cost for a full body spray.

Perturbed about the avoidable expenses incurred as a result of their activities, the importer noted that the port rats have never been caught despite their daily operation. He, therefore, poured the blame on the absence of a proper system at the ports.

“All these things continue to form part of your cost. Unfortunately, if these things have been properly taken care of at the port, these costs would have been avoided,” he said.

“But because we lack a proper system flow in Nigeria these are the challenges we continue to face. We will continue to face it till when probably things are going to change.”

REVENUE LOSS, POLLUTION, HIGH RATE OF ACCIDENTS

But despite the challenges, ‘accidented’ cars are still finding their way into Nigeria.

Olajide Timothy, a clearing and forwarding agent, said at least 2000 of the 3000 vehicles in a vessel are usually ‘accidented.’

“The reason is that the price of clearing is high, if they buy accident-free and add clearing cost, the price will go higher and profit might not come,” Timothy said.

What has become a money-spinning venture for importers driven by profit is hurting Nigeria’s economy and has remained so for years. Nigeria spent N1.8 trillion on the importation of used vehicles between October 2018 and September 2019, according to Zainab Ahmed, minister of finance, budget, and national planning.

Revenue aside, trading in used/’accidented’ cars also harms the environment.

Millions of cars exported from Europe, the US, and Japan are of poor quality, contributing significantly to air pollution and climate change, according to a report by the UN Environment Programme (UNEP).

The report noted that most of these vehicles lacked valid roadworthiness certificates at the time of export, and were between 16 and 20 years old, while most fell below EURO4 European Union vehicles emission standards.

According to the UNEP report, a significant number of ‘accidented’ vehicles were tampered with and had important equipment removed from importing countries.

Poor quality second-hand vehicles also lead to more road accidents, and countries with “very weak” or “weak” used vehicles regulations, including Malawi, Nigeria, Zimbabwe, and Burundi, were found to have very high road traffic death rates.

Nigeria recorded 13, 027 cases of road accidents in 2021, according to data from the Nigerian Bureau of Statistics (NBS).

A WEAK NADDC

Experts recommend stronger vehicle regulations to trade in used cars. But the National Automotive Design and Development Council (NADDC) is said to be facing challenges. Nigeria lacks a vehicle credit scheme to assist working-class citizens to afford new, locally-assembled cars.

The NADDC mandates are not fully implemented at the ports to prevent vehicles beyond a certain age (10 years) from entering the country, and the Nigerian Customs is still struggling to curb smuggling.

This is why seamless importation of such vehicles has persisted in Nigeria and efforts must be made to address these issues, a NADDC source told TheCable.

The source said the government, in its effort to boost local production, has mandated all ministries, departments and agencies (MDAs) to patronise local assemblers listed with the Bureau of Public Procurement (BPP).

“The government through the CBN is willing to approve intervention funds to add up for the vehicle credit scheme, the government is also is looking at achieving a better ports administration and border control for quick cargo clearance and check smuggling activities respectively,” he said.

Vice-President Yemi Osinbajo, at a summit in 2020, said the demand for vehicles in Nigeria currently stands at about 720,000. But as long as local production cannot meet this demand, Nigerians will continue to rely on the services of the likes of Abdulsalam, Adeleke, and Adekunle.