Devonomics

Devonomics

It is difficult to answer questions about how Nigeria can and should achieve sustainable economic, social and political growth. This column takes a look at well known development economic theories and applies them to the unique Nigerian context.

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The cost of Nigeria's “Tokunbo” policy

Akinkunmi Akingbade

Akinkunmi Akingbade

Akin is a Freelance Consultant and Writer with a background in Development Economics. He previously worked at Ventures Africa.

When Tola* finally got a job in Lagos, she excitedly moved into her family house in Ojodu, Lagos Mainland.

Unfortunately, Tola’s dream job was in Victoria Island, and after enduring the three-hour daily commute on public transport, she decided to get a car. After surveying her options, a brand new version of the car would have cost up to ₦12.5 million, equivalent to four-years’ salary. Instead, like many Nigerians across the country, she opted for a tokunbo Toyota Yaris 2010 model which cost her ₦1.8 million.

So why have brand new cars become so difficult to afford?

 

The Tear Rubber policy

In 2013, President Goodluck Jonathan introduced a National Automotive Industry Development Plan (NAIDP).

The plan was created to promote the domestic automobile manufacturing industry and reduce the importation of cars. As at 2012, about 700,000 vehicles worth over $6 billion were imported annually into Nigeria. Of these, 50,000 vehicles were brand new.

Import tariffs on completely built-up vehicles (CBU) were increased to 70% while tariffs on semi-knocked down (SKD) and completely knocked down cars were reduced to between 5% and 20%. For CBU units, the tariffs were increased to reduce competition and costs for the local assembly plants, and enable them to grow.

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