Alhaji Ahmed Mamudu is an importer and an auto trader who has been in the business for over 15years. In this interview, he spoke with Roland Ekama on the challenges of importing vehicles into Nigerian through the nation’s seaport and other sundry issues.
Tell us about yourself?
Alhaji Ahmed Mamudu is an importer and an auto trader who has been in the business for over 15years. In this interview, he spoke with Roland Ekama on the challenges of importing vehicles into Nigerian through the nation’s seaport and other sundry issues.
Tell us about yourself?
My name is Mohammed Mamudu; I am a graduate Management and Accounting from Obafemi Awolowo University in Ile –Ife, I have been in the auto business for about 15 years, I started out as a stevedore with Nigeria Port Authority before going into the auto business. I import and sell old and new vehicles.
What is the difference between an auto dealer and an auto trader?
An auto dealer is essentially somebody that stock vehicles, he is the dealer for example we have the likes of Elizade Nigeria, Vaswanni brothers, Coscharis and so on. Those are auto dealers because they have direct links to manufacturers all over the world, that is, they have the franchises; they have the dealership. A dealer is backed up with support from the companies that manufactures those vehicles, for example Honda and Toyota, that is they have sales ,advertising ,training for staff, seminar that educates them on the current vehicle model, the performance and plans, while the auto trader on the other hand is someone that trade in vehicles that is, his means of livelihood is essentially to take these vehicles from one point to the other, so the vehicle is more or less an item of sale because it is a commodity ,he sourced for the person that needs a vehicle ,find the person that has that brand if he doesn’t have and that is just the basic difference between both.
But in Nigeria, most people term themselves as dealers, what is your perception about that?
Most Nigerians in the auto business understand dealer to be people that deals in the vehicle. So it is actually a misconception of the concept of what a dealer is. To my own understanding, a dealers is the person or company that has direct link with the manufactures abroad .In America for example, the term for most car traders is more of a dealership for instance the 2012 model of an Honda Accord comes out, a dealer might collect 500 units of that vehicle without having to pay for the vehicles at the moment because there is an arrangement on ground between the individual or the company with the manufacturer of Honda. In the arrangement, there is discount rate, support from Honda as the manufacturer, there is advertising and other kinds of assistance from the manufacturer because he has established a relationship as a dealer with the manufacturer whereby he has a franchise and perhaps deposited a certain amount that allows him get some credit facilities, so he has this large volume of stock and the manufacturer uses him to push those vehicles out, so that is a dealer for you in my own interpretation, but the people here, when they talk about dealer they are talking about those that deal in the vehicle, so it is the language and the term of the language. For example when you say a man is a Honda dealer ,you are referring to the man who deals with Honda, but in Nigeria when you say a vehicle dealer ,it automatically means he deals in vehicles. However most people practice what we call traders and not dealers.
With the rising foreign exchange rate of a dollar to naira, don’t you think it will surely lead to the increase in sales of vehicle?
The problem is that the prices of these vehicles are more or less fixed, I will not say regimented because as the vehicle gets older the value depreciates and in a market which is also a buyers’ market where you have several options the buyer is king and there are so many of these vehicles that are available, there are so many options and varieties that you can more or less decide and play with the options that you have when you want to buy a vehicle. And having said that, before you even bring in a vehicle you have to factor in the local cost, the local value of the vehicle, what the current selling price is, how much it will cost you to ship it and how much is the cost to clear, before talking about how much you will buy it from the beginning. So all these will factor in before you arrive at whatever your own selling price is and there are several factors that will make that dollar to naira issue difficult and one of them is government policy; we all experience the unrest at the port as a result of the benchmark which customs introduced as the unified tariff that does not discriminate between the size or capacity of the vehicles as a result, there is a uniform price on imports, so somebody who has already figured in what he is going to clear his vehicles with and what his profit will be, can be easily be affected by such a policy than the dollar issue. The dollar policy only comes to effect if there is a long term shift between when you bought the vehicle and when you are selling it. For example, from January to June that is six month the price of dollar remained relatively stable at say N160 and you are able to do two shipments for maybe January to March then from March again to June ,the variation in the dollar will really affect you that much because they are calculations you can make and put into the items that you are shipping- in this case, a vehicle and when there is a serious fluctuation that is where you have problems because you will start the import process maybe in January and by the time the vehicle is getting here when you bought the dollar maybe for N160 and the vehicle gets here when a dollar goes for N150, obviously it does seems as if you are getting more money but you are actually losing and vice versa, if it increases because it takes after the sale of the vehicle more money to buy the same amount of dollar that you bought before. For example A 2010 Honda Accord equivalent is $10,000 at the time you bought it in Nigeria which could be like N1.6million.Now you ship it and by the time it gets here, dollar is exchanging for N1.7 million ,that is N170,obviously before you can get your $10000 back you have lost about a N100,000 which is a simple illustration on how it can affect you ,so these are the ways the fluctuation of the currency can affect the business but it is not a direct thing and it usual come overtime with a little amount .Government policies, market demand and supply and availability of the vehicles have more of a direct impact than the exchange rate.
Please tell us the challenges faced by importers when shipping vehicles into the country?
The first challenge is the cost of the commodity you import, in other words you have to maximize your import, so the first pitfall is that your goods are not insured and with that it is a very risky venture, capital intensive and very stressful. Thus for a container to be insured by any reputable insurance company all the four tyres of the vehicles must touch the floor of the container; which is the industry standard, so if you are using a 20- foot container, it should be one vehicle ideally, all the four tyres on the floor before an insurance company will accept to insure it. However any container that has three or four vehicles, it means that insurance company is not involved in it. Secondly because there is no insurance you are bearing the risk of the good in transit all alone, that is from the point of origin to the point of destination, that is the first side of it and the second part is that you have the issue of vandalism and it will be good for you to know that even containers are not completely tamper- proof, because at a time I had a consignment that was containerized, somehow people were able to enter the container and tamper with the vehicles that were inside the container and these guys know the kind of items that they can pick which in turn will disturb you financially. Items like brain boxes, side mirrors radio, stereo and other things that make the car beautiful. However some of the concessionaires have managed to address the issue, but there are still cases that slip by and there is a grey area because you bring in the vehicles, your agent is trying his best to clear them out of the port, but as soon as these issues are highlighted (that is pilfering or theft) and you want the shipping company to be aware of the loss, they will be so reluctant to bear the loss on their part so there is double taxation on the part of the importer which in turn allow the container to stay there and the longer it stays there, the more you continue to pay demurrage and if the issue did not end up in your favour, then you will pay unnecessary demurrage for nothing and you will go back to pay for the loss of those items. So the smart things that people do is that whatever the loss, you bring it out and you handle it, though there are cases of new vehicles and those parts are very expensive and there is no other alternative. Finally there are issues of competition as a result of what importers have to face among themselves, a lot of unscrupulous practices are common by bringing in substandard vehicles that should not actually be on the road, there is also bringing in cars through borders and as well as smuggling of vehicles through the border.
How can these issues be addressed by the terminal operators and shipping companies?
Unfortunately we have a system that is entrenched and it is really built against the importer. The only person that has anything to lose in the system that we currently operate is the importer because the customs has nothing to lose and if you lose your container at the beginning through high demurrage charges or whatever, at the end of the day they can auction it and get their money, the shipping companies will collect their money even if the goods have been auctioned and the agent that you paid to clear your vehicle out of the port sometimes abscond with the huge money given to him to clear your items from the port. In other words, the importer has to start all over again and at the end of it all, the person that has anything to lose is the consignee of the importer and sadly the only person that will not listen to you at that time is also the consignee. But I advise that there should be a little more of sensitivity on issues like the payment of shipping charges, it should be addressed because a lot of these companies want the monies paid in foreign currency at the point of loading and it will not be wrong for consignee to pay with their local currency which is the naira to make it clear and to reduce the cost of trading in foreign currency, exposing people to fluctuation that you have already mentioned as regard foreign exchange rate.
As an importer, will you say that smuggling of vehicles has reduced in Nigeria?
I will say it is on the balance, for example when you import vehicles through Cotonou port, then do compare the cost of a vehicle locally and what obtains in Cotonou ,the only difference is the duty that will be paid by the importer to bring the vehicles to Lagos through the port, thus if you have a year 2000 model Honda Accord, which will go for N800000 in Cotonou and in Lagos it sells for N1million, you find out that the difference is the cost of clearing of that vehicle, thus why the person goes to Cotonou to buy the vehicle for N800000 is because whoever is bringing it will want to avoid customs in order not to pay duty and smuggle this vehicle into the country but a lot of buyers have become aware that allowing yourself to drive a vehicle that is smuggled into the country exposes you to the risk of seizure by customs because customs enforcement has become stringent, even before the new tariff particularly at checkpoint when the vehicle leave Lagos to the east or to the south. And the demand by the customs is however high to know the source of the vehicle in order to know if duty was paid and if not, penalties can be levied, seizures can be made and from the stories other people have heard they become a bit more cautious trying to avoid getting caught in those kind of traps, but most people do not apply it to older vehicles, that is vehicles of 1996 or 1997 which will cost N600000 or N700000, they won’t really care whether the duty is paid or not because you know that the loss won’t be that much and the people in that economic bracket who want that kind of vehicle don’t really care what the dynamic between the price difference is because they just want a cheaper car that they can afford. Obviously, when buying an expensive car ,you will not want to take the risk of having the vehicle seized because it can lead to a lot of problem in order words, smuggling of vehicles has fizzled out which indicate a delicate balance though there are people who buy these cars at Cotonou ,stop at the border then pay the right duty to the customs and it is also a matter of the individual involved.
It is assumed that most people in Festac Town are auto trader, what is your reaction to that effect?
The truth of it is that Festac recently came into being as a result of security on the part of the vehicles ,secondly, it is a closed environment as people feel safer having cars that are not registered ,thirdly the proximity to bigger auto market like Berger auto market, but I will say that Festac Town car traders came as a result of a spillover of the Berger auto market and they started coming to first gate that is, Maza- Maza along the Lagos –Badagry expressway and when they saw that they were vacant places, those car traders started finding their ways into Festac, but even before the arrival of the bigger traders, Festac had already developed a reputation as a place where a lot of the occupants are maybe retired service men who have children in various places abroad and the children in turn send them vehicles as a means of tying down some money, in that regard, when they send the vehicle it goes a long way when compared to raw cash. And the prices of the cars cannot be compared to that of those in places like Berger. Naturally, Festac developed as an alternative for good quality and reliable vehicles from reputable people because when you are selling your car from your place of abode or in a vicinity where you are known, it is different from where you just walked into a car market and you find yourself confused because you don’t really know the right owner of the vehicle you want to buy. Overtime, Festac has developed that reputation where you can get good cars at reasonable and affordable prices. However traders in Berger market come to Festac town to buy and resell to their customers and so a few of them started migrating to Festac Town and suddenly we have the explosion of car traders in Festac Town and the competition is very high.
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