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Research Analysis

Nigeria imported N1.28 trillion “used vehicles”, motorcycle in one year, up by 42%

During the period under review, used vehicles imported into Nigeria was estimated at N799.5 billion.

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Used vehicles, Nigeria spends N1.08 trillion to import used cars and motorbikes in one year

Africa’s largest economy, Nigeria, recorded a total sum of N1.28 trillion as the value of “used vehicles” (popularly known as Tokunbo) and motorcycles imported in one year (Q3 2019 – Q2 2020). This is according to data obtained from various foreign trade reports released by the National Bureau of statistics.

According to data obtained from the foreign trade reports, Nigeria recorded the sum of N1.28 trillion as the value of imports for used vehicles and motorcycles between Q3 2019 and Q2 2020, compared to N899 billion recorded in the corresponding period (Q3 2018 – Q2 2019), implying an increase of c.42%.

READ: Cutix Plc to pay its shareholders N220.1 million final dividend

Looking at the numbers

The Nigerian economy remains an import-dependent economy and this is largely driven by the importation of manufactured goods.

  • During the period under review, used vehicles imported into Nigeria was estimated at N799.5 billion, compared to N564.9 billion in the corresponding period. This indicates that the importation of used vehicles in Nigeria surged by 42%.
  • Similarly, motorcycles imported into Nigeria during the period was estimated at N477.1 billion, an equally 42% jump when compared to N335 billion recorded in the corresponding period.
  • Basically, most motorbikes imported into the country are completely Knocked Down (CKD), a fully disassembled item parts that are required to be assembled by the end-user or the reseller.
  • A cursory look at the reports showed that used cars were majorly imported from countries like the United States, Netherlands, Italy, Belgium, Germany and Canada.

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The Rising trend

In recent years, the surge in importation of used vehicles and motorcycle in Nigeria has been significantly driven by e-hailing car and bike services, one of the two fastest-growing businesses in Nigeria.

The rising trend of technology adoption by businesses in Nigeria has a trickle-down growth impact on the ride-hailing industry. Today, spread all over major commercial cities across the country are Uber, Bolt, OgaTaxi, GidiCab and many others, all competing in the ride-hailing industry. On the other hand, the bike-hailing platforms are equally worth the mention, with GoKada, Opay, Max.NG and so on.

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In Nigeria, other key factors driving the demand for ride-hailing services include rising urbanisation, growing youth population, surging number of internet and smartphone users and increased investment.

READ: UPDATED: Nigerian economy grows by 2.27% in 2019, post highest quarterly growth since 2016 recession

Automobile industry at the ebb amidst harsh regulatory environment

The Nigerian economy appears to be underpinned by a harsh regulatory environment and policy uncertainty. In the e-hailing industry, investors continue to face what can be regarded as a harsh regulatory environment.

For instance, bike-hailing startups operating in Nigeria’s commercial city, Lagos saw their market evaporate after the government put an end to commercial motorcycling in key areas (15 local government areas) of Lagos State effective February 2020. A decision that was greeted with widespread protests from riders and commuters alike.

READ: UPDATED: Nigeria’s GDP contracts by 6.10% in Q2 2020, as critical sectors plunge

In addition, car-hailing platforms had been tussling with the government for months over licensing fees and disputed levies. Recently, the Lagos state government announced that ride-hailing operators will pay a levy of N20 known as road improvement fund, on each trip their drivers make in a day starting from August 27. Despite the collapse of bike hailing platforms in Lagos, investors continue to explore the country to upscale their operations.

Largely, Nigeria’s automobile industry is still docile. While the increased demand for vehicles and motorcycle in the country is expected to indirectly attract investors and grow the automobile industry, trillions are continually being spent year on year to meet the country’s vehicles demand deficit.

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Despite the attempt of the current administration to lure Toyota and other car manufacturers into the country, the industry is still underpinned by slow growth in the past decade.

Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

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    Exclusives

    Corporate Nigeria spends N31.22 billion on travel expenses in 2020

    According to data obtained by Nairametrics Research, travel expenses of major corporations in Nigeria dipped by 36.97% in 2020.

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    Corporate Nigeria represented by the largest listed companies on the Nigerian Stock Exchange experienced a reduction in business travel expenses in the year 2020.

    According to data obtained from the audited financial statements of the top 30 companies listed on the Nigerian Stock Exchange (NSE) known as the NSE-30 and verified by Nairametrics Research, travel expenses dipped by 36.97% from N49.54 billion recorded in 2019 to N31.22 billion in 2020.

    Travel expenses include flight tickers, hotel expenses, cost of renting and maintaining private jets, local interstate and intrastate transportation etc.

    • Of the 30 companies considered, only 3 of them increased their travel expenses in 2020. Notably, Guinness increased its travel expenses by 283.1% from N261.4 million to N1 billion in the review period.
    • Nascon Allied Industries and Presco Plc incurred a sum of N91.8 million and N2.02 billion in travel expenses, representing a 125.2% and 33.7% increase respectively.
    • On the other hand, MTN Nigeria recorded the highest decline in travel expenses, reduced by 79.9% to stand at N964 million as against N4.79 billion recorded in 2019. Stanbic IBTC followed with a decline of 60.95% to stand at N676 million.
    • It is worth noting, that some companies were not included in this study as they did not disclose their travel expenses during the period under review.

    READ: Banks earn N216 billion in E-banking income amidst threat from challenger banks

    Why the drop?

    The drop in travel expenses was expected as the entire private sector experienced a lockdown for most parts of the year due to Covid-19. The Federal Government introduced movement restrictions on land, sea, and air commute in response to the spread of the Covid-19 virus.

    • This resulted in the cancellation of business travel expenses across the commercial and political nerve centres of the country. Bearing the brunt of this cut in expenses were airlines, hotels, and the entire travel industry who suffered massive revenue losses.
    • The travel industry has been one of the worst-hit sectors due to the COVID-19 outbreak with lockdowns, travel bans, restrictions, and quarantines, which have had a severe impact on business travel for corporate entities in Nigeria.
    • High travel cost implications, hotel rates, and reduction of airline services also made companies resort to phasing out in-person meetings and business travel, as it is more affordable and productive to go digital.
    • The deployment of technology has helped companies cut their travel expenses since part of the key reasons for business travel is for conferences, meeting suppliers and customers. Going forward, video calls show strong potential to replace in-person meetings, resulting in fewer business travels.
    • Additionally, business travels that are meant for training and other learning activities can be done through e-learning.
    • The consistency of corporate entities in adopting technology by going digital will likely continue to reduce business travel expenses of corporations in the country.

    READ: Nigerian corporates spend N1 trillion on capital investment in 2020

    Gains and losses

    On the flip side, online virtual work from home tools such as Microsoft Teams and Zoom recorded massive revenue boost as the private sector and even government relied on them to connect with clients, employees and other stakeholders.

    • Unfortunately, Nigerian businesses, particularly the tech sector failed to take advantage of the travails of the hospitality sector losing much of this revenue to the likes of Microsoft, Google, Netflix, and Zoom. Nevertheless, other Nigerian tech companies, especially in the entertainment, payment, savings and loans space all recorded a significant boost in topline revenues.

    The top 5 spenders

    The increase or drop in travel expenses for some of the companies under review suggests the approach management took in response to the Covid-19 lockdown. While some reacted by going completely remote as indicative of their numbers, others continued spending, perhaps due to an inefficient cost structure that could not be scaled down despite the imposed lockdown.

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    Access Bank (N7.15 billion)

    Access Bank Plc spent a total of N7.15 billion on business travel expenses in 2020, representing a reduction of 31.9% compared to N10.5 billion recorded in the previous year.

    • The tier-1 bank accounted for 22.9% of the total travel expenses incurred by the top 30 companies on the NSE.
    • The bank’s total asset as of December 2020, stood at N8.67 trillion, representing the highest on the NSE.

    UBA (N4.94 billion)

    United Bank for Africa incurred a sum of N4.94 billion on business travels in the year 2020. Its travel expenses reduced by 30.1% compared to N7.06 billion recorded in 2019.

    • Its expenses accounted for 15.8% of the total recorded by companies under consideration.
    • UBA recorded a growth of 27.7% in profit after tax from N89.1 billion recorded in 2019 to N113.8 billion in 2020.

    FBN Holdings (N3.51 billion)

    FBN Holdings the parent company of First Bank of Nigeria, one of the major financial institutions in the country, spent a total of N3.51 billion on travel expenses in the year under review.

    • The tier-1 bank reduced its business travel expenses by 48.24% from N6.78 billion recorded in 2019 to N3.51 billion.
    • Also, FBN Holdings accounted for 11.2% of the total business travel expense of the companies under consideration.
    • It is worth noting that FBN Holdings classified its travel expenses as passages and travels.

     

    Dangote Cement (N2.11 billion)

    The most capitalized company on the Nigerian Stock Exchange, valued at N3.7 trillion spent a total of N2.11 billion on business travel expenses in 2020.

    • The foremost cement manufacturer in Nigeria recorded a 13.8% decline in travel expenses from N2.45 billion recorded in 2019 to stand at N2.11 billion in 2020.

    Presco Plc (N2.02 billion)

    Presco Plc, a fully-integrated agro-industrial establishment specializing in the cultivation, extraction, refining, and fractionation of crude palm oil into finished products, spent a total of N2.02 billion on travel expenses in 2020.

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    Its travel expenses in 2020, represent a 33.71% increase compared to N1.51 billion recorded in the previous year.

    • It also accounted for 6.5% of the total travel expenses recorded by the companies under consideration.

    Bubbling under

    • Zenith Bank – N1.88 billion
    • Seplat – N1.26 billion
    • Guinness – N1 billion
    • MTN Nigeria – N964 million
    • Fidelity Bank – N964 million

    Note: Fidelity Bank classified its expenses as travelling and accommodation, while MTN Nigeria as Trainings, travels and entertainment cost.

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    Research Analysis

    GSM Telcos lose N1.1 billion to SIM Card registration ban

    Nairametrics Research conducted an analysis of the likely losses incurred by GSM Companies due to the SIM Card registration ban.

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    pre-registered sim cards

    The four major telco players in Nigeria have lost a total of 11.8 million customers since the implementation of NIN-SIM card ban by the federal government in December 2020. This is according to information obtained from the Nigerian Communications Commission.

    Specifically, the total subscriber base of the four major telco firms in Nigeria, reduced from 207.58 million at the end of November 2020 to 195.73 million in February 2021. This represents a 5.71% decline within the space of three months.

    The decline in the number of telco subscribers could be attributed to the suspension of Sim card sales and registration as Nigerians grapple with the stress of registering and obtaining their national identity cards.

    READ: Telecom operators say 21 million subscribers are still without NINs

    Big losers

    Airtel

    • Airtel lost a total of 5.8 million subscribers between December 2020 and February 2021, representing about 10.1% decline in their subscriber base.
    • At the end of November 2020, Airtel had a total mobile subscriber base of 57.23 million, which had dropped to 51.43 million at the end of February 2021.
    • Similarly, the internet subscriber base also reduced by 1.57 million within the same period to stand at 39.9 million subscribers.

    READ: NCC suspends sale of new SIM, activation to audit database

    MTN

    • Between December 2020 and February 2021, MTN Nigeria lost a total of 4.67 million subscribers. This represents a 5.7% reduction in mobile subscribers.
    • At the end of February 2021, MTN had 77.35 million mobile subscribers, which accounts for 39.5% of the total subscriber base in the country.
    • In the same vein, a total of 2.92 million internet subscribers were lost by MTN in the same period.

    The others, 9mobile and Globacom also suffered from the ban on sim registering and sales as they lost a total of 415,170 and 909,955 mobile subscribers within three months, representing 3.1% and 1.7% decline in their customer base respectively.

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    READ: NCC set to probe telcos over N165 billion debt 

    SIM Card Revenue Loses

    Nairametrics Research conducted an analysis of the likely losses incurred by GSM Companies due to the SIM Card registration ban. A cursory look at historic data shows that Nigerian GSM companies recorded an average of 2.32 million additional subscribers each month for the first 10 months of 2020. Assuming the same incremental rate at a selling price of N100 per new sim card, these GSM Telcos may have lost about N1.1 billion in sim card sales between December 2020 and April 2021 due to the ban.

    • However, based on available data from the company’s results, both MTN and Airtel recorded positive growth in gross earnings in 2020 but the decline in customer base and crunch in revenue sources could affect their ability to generate as much revenue in 2021.
    • MTN Nigeria recorded a 15.1% year-on-year increase in its annual gross revenue as it earned a sum of N1.3 trillion in 2020. It also recorded voice sales increase of 5.6% in 2019, while it posted a profit after tax of N205.2 billion in the period under review.
    • On the other hand, Airtel Africa’s 9 months financials, revealed that the telco giant boosted its revenue by 13.01% to stand $2.85 million while profit before tax for the period was $482 million, a 3.79% year-on-year decline.
    • Globacom and 9Mobile are not listed companies so the details of their results are not made public.

    READ: USSD N42 billion debt: Telcos insist banks have to pay, seek CBN, NCC intervention

    What you should know about NIN-SIM ban

    The Minister of Communications and Digital Economy, Dr Isa Pantami, on the 1st of April 2021, announced the further extension for the deadline of NIN-SIM linkage to the 6th of May 2021.

    • However, according to the minister, over 51 million people have been assigned their National Identification Number and many others who have enrolled are in the process of being assigned NINs.
    • The current number of monthly enrolments has increased significantly to about 2.6 million registrations. He also stated that the number of enrollment centres across the country has witnessed a remarkable increase, with 3,800 centres available for enrolment.
    • It is worth noting that the federal government has lifted the ban on new sim card registration. However, only those who have registered for their NIMC and have obtained their National Identity Number can register new sim cards.
    • On the other hand, telco operators in Lagos State, the commercial hub of the country, revealed last week that they are yet to receive approval to commence the registration of new SIM cards, despite the federal government lifting the ban.

    READ: NCC records 95.7m invalid SIM registration, crooked operators to face prosecution

    Bottom line

    It is evident that the NIN-SIM exercise has affected Nigerians, as the process of obtaining the National Identification Number proved stressful and costly in the early stages. However, Nigerian telcos are expected to also bear the brunt, as revenue growth could be hampered as a result of the temporary ban on sim card registration.

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